Debit cards are becoming increasingly popular among American consumers, but debit transactions may not safeguard against fraud in the same way that credit cards protect against unauthorized transactions.
Marley Prunty-Lara, the community relations coordinator at Lutheran Social Services of South Dakota Consumer Credit Counseling Service, said that a consumer who signs for a transaction is better protected against fraud than if they enter a PIN number because the consumer is not responsible for fraud involving signed transactions, Fraud-News.com reports.
A consumer’s liability involving a Visa PIN transaction, however, varies based on how the transaction was processed. If Visa processed the transaction, the cardholder is not held responsible for fraud, but if a third party network processes the transaction, the cardholder could be responsible for any fraud. If fraud occurs involving a MasterCard debit card, the cardholder may be held liable for no more than $50 but the unauthorized activity must be reported within two business days.
Prunty-Lara said that liability depends on when the fraudulent activity was reported as well as when the consumer reported the card as lost or stolen. Credit cards offer consumers zero liability protection, thereby eliminating the risk of substantial fees and other penalties. Banks have 10 business days to investigate the fraud, and while the consumer may not be held liable for the unauthorized transaction, a low bank account balance could result in overdraft fees, according to Fraud-News.com.