Today I got a voicemail from my credit card company telling me that they suspect fraudulent activity on my account. Of course, I immediately checked the account online and called them back. There were charges at two stores: $500 at Michael Kors and $200 at the Finish Line. There was also an attempt for $400 at the Children’s Place, which was declined. It was odd that the amounts were rounded to even hundreds. It appears they were purchasing gift cards.
The credit card company said that the charges were in the Greenville area. I later realized that they were all in the local mall. My card number was either stolen from a store that I visited or gas station. I guess the mystery will go unsolved.
Credit Cards
The great thing is that the Consumer Financial Protection Bureau (CFPB) says that if your credit-card number – not your credit card - is stolen, you are not responsible for unauthorized charges under federal law. If the actual credit card is stolen you are liable for not more than $50 in unauthorized charges but most card issuers don’t hold you to the $50.
Debit Cards
Using a debit card places funds in a checking account at great risk. Banks usually have some discretion on what transactions are covered. Different types of transactions are treated differently.
If an unauthorized transaction appears on your statement (but your card or PIN has not been lost or stolen), under federal law you will not be liable for the debit if you report it within 60 days after your account statement is sent to you.
The rules are different if the card or PIN has been lost or stolen: Report the problem within two business days and liability is limited to $50 of unauthorized charges. Then the maximum liability rises to $500. If any unauthorized charges go unreported for more than 60 days, your money, and future charges by the same person, could be lost.
BOTTOM LINE: DON’T use Debit Cards. Credit Cards are by far the better alternative. However, be careful with credit cards. You must be disciplined enough not to overspend and can pay off the balance each month.
Sources: Fraud Worries: Debit vs. Credit Cards by Karen Damato, WSJ