Target security breach rekindles credit-versus-debit debate
Will the Target debacle spell the demise of the debit card?
This is the question posed by a recent San Francisco Business Times article, in which author Mark Calvey wonders if this massive breach of security might put people off paying with plastic.
Calvey didn't explore the differences between debit and credit cards, but a glance at the Federal Trade Commission's guidance for consumers on lost and stolen cards and card numbers reveals a startling truth: If you're a victim of plastic fraud, you might be much better off if it's your credit card that's compromised.
Credit cards' statutory protections better
That's because the Fair Credit Billing Act caps your total liability in the event of credit card fraud at $50. And that's it. Providing you did nothing criminal yourself, you can't lose more than that -- by law. And, in reality, the chances of your being charged even $50 by your card issuer are small.
Debit cards are governed in this respect by the Electronic Fund Transfer Act, and this provides much less rigorous protections against liability. True, you're unlikely to suffer significant losses if your debit card is compromised, and many banks voluntarily provide their own protections, but under this law, in extreme circumstances, it's possible you could lose all the money taken from your debit card account, and possibly more, according to the FTC.
Target victims protected
None of this need bother you if you're worried about being a victim of the hacking of Target's systems in December. On its website, the retailer promises, "you have zero liability for any charges that you didn't make."
The company goes on to explain who may be at risk as a result of the data breach: anyone who shopped at Target, using a card, between Nov. 27 and Dec. 15, 2013. However, it says that those affected need take no further action beyond closely monitoring the accounts associated with the plastic used, at least unless and until unauthorized charges start appearing. If that happens, you should call the phone number on the back of your card.
Additionally, Target is setting up a free credit monitoring service for those who may have been affected, so that they can maintain a watch for unauthorized activity, including the opening of fraudulent new accounts. Learn more at target.com/databreach.
Other card scams
Of course, it's not only highly sophisticated hackers who are after your card information. On Jan. 3, the FTC warned of a resurgence of an old scam, one concerning technical support. A con artist calls you with one of two stories (or variations thereon):
- The person says that a destructive virus has been detected on your computer, asks for remote access, and then charges you for fixing a nonexistent problem. By the way, giving remote access to your computer to strangers is always a bad idea, unless you know they work for a reputable company.
- The person says you've been paying for tech support, and asks if you're satisfied. As you haven't really been paying for it, and therefore haven't been using it, you say no. The scammer offers a refund, but, far from putting money into your account, he or she takes it out.
Interestingly, the FTC advises, "If you paid with a credit card, call your credit card company and ask them to reverse the charges." Is the implication there that, if you paid some other way, getting a refund may be more troublesome?
Another scam that's currently popular probably (it's still hard to tell) concerns "gray charges," which IndexCreditCards.com warned of back in August. Watch your card statements for charges of $9.84. According to Krebs on Security, a website operated by former Washington Post journalist Brian Krebs, that strange sum is cropping up on many accounts, and is usually an incorrect -- possibly fraudulent -- charge. If it appears on yours, and you're unfamiliar with the transaction and the company initiating it, call your card issuer, and request a refund.
Using credit cards is smart
If you're nervous about the security implications of using plastic, there's a factor you should consider that's even more important than your statutory protections: If a fraudster drains your bank accounts using your debit card, it's your money that's gone. If the same happens to your credit card account, it's the issuer's money that's disappeared, and you usually don't have to pay a cent, and certainly never more than $50.
Yes, you're likely to get most or all your money back either way. But how long might that take with a debit card? And what would you do in the meantime? Providing you manage your money well, paying with credit cards is safer -- and just plain smarter.
Published 01/20/14 (Modified 01/29/14)