I recently asked a representative from Visa‘s debit card division (site sponsor) several questions about my favorite alternative to the credit card – the debit card. Here’s what the representative stated about debit cards and zero liability protection.
Is there a difference between the protection for a debit card and a credit card?
Despite the popularity of debit cards, consumers are often confused about the security features and consumer protections debit cards offer. Many of the same features and protections provided by credit cards are also offered with debit cards.
It’s important to know that Visa debit cards carry the same protections as Visa credit cards. For example, all Visa cardholders are protected by Visa’s Zero Liability policy. This policy means you pay nothing if unauthorized purchases are made on either a credit card or a Visa Check card when you choose to sign for your transactions. Some financial institutions offer Zero Liability protections for certain PIN debit transactions as well, but the best way to ensure you are protected is to sign for your purchases. Visa’s Zero Liability policy also applies to purchases made on the Internet.
Continually monitor your account and review your monthly statement to identify any unauthorized transactions. If you notice fraudulent activity on your card, you should contact your financial institution as soon as possible and report it – this may help to reduce your liability.
If your account is compromised, Visa is committed to setting things right without further aggravation or inconvenience to you. Visa’s cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss. Many institutions will provide replacement funds even faster, sometimes within 24 to 48 hours.
I highlighted the part about signature-based transactions. When I use my debit card, I usually swipe the card, choose “credit card” when prompted, and then sign my name. For added protection, I use a debit card which is not associated with my primary checking account. Instead, my debit card is associated with a secondary checking account, where I keep a limited amount of cash, at a bank that does not allow overdrafts.
Ask your own financial institution about their liability protection and security procedures. Do not assume you are protected. A few, direct questions about liability protection today might save you thousands of dollars in the future.
That’s very good to know. I usually use my pin when I do a debit card transaction since I like to see the amount taken out of my account immediately. But I might have to rethink that.
Great article – I know from working in a bank a lot of people don’t realize the zero liability coverage extends to debit cards WITH credit based transactions. Some people think that they can dispute a PIN based transaction, but let’s take a moment to think about this.
Only you know your PIN, if a PIN based transaction goes through then either 1. you did it or 2. you gave your PIN out to someone (either willfully or wrote it on your card) either way you authorized the transaction.
It’s sad that there has to be rules like this but if we didn’t then people would take advantage – more than they already do.
I recently posted a video about the comparison analysis of debit card, credit card and charge card at http://credit-card-videos.blogspot.com/2008/12/credit-card-vs-debit-card-vs-charge.html
There is a related issue, disputed charges, which I believe the consumer has more protections for when using a credit card. I may be wrong, but I have heard that might be the case. That there are laws about how credit card companies must respond to disputed credit card charges and those same laws do not apply to debit charges.
The only advantage credit cards hold over debit cards are the consumer protections in place. If you have a problem with a merchant and use a credit card, you can file a dispute and the credit card company will immediately retrieve your money and put it in a separate account until the dispute is settled (either in your favor or the merchant’s). As far as I know, debit cards do not offer this protection.
What makes me antsy about swipe-and-sign transactions is the fact that merchants can reserve an amount of money over the authorized amount, and hold it for up to 3 days to ensure the payment clears. People with limited funds could see subsequent transactions declined if they attempt to charge an amount of money that is already “reserved.” (Correct me if I’m wrong on this, please!)
I do not prefer one over the other, personally 🙂
PIN transactions, on the other hand, clear only the authorized amount of money immediately, which makes them an attractive option.
I have never used the Debit feature on my Check Card because my bank charges a $0.50 fee per transaction. While 50 cents is not a lot of money, I make dozens of such transactions per month because the only plastic I have is this single card. I prefer that money remain with me rather than add to the bank’s profits.
I do have one question about this adrticle. Visa says that the protections apply to transactions where you sign. What about credit transaction where you are not required to sign? Many convenience stores and gas stations do not require a signature for small credit transactions. Would these also have this same protection, or would Visa treat them differently for some reason?
I know they *should* be the same since they are credit charges, but I’d rather not assume anything. With banks looking to increase their profits wherever possible, I’d not be too surprised if they decided to try to claim these transactions are not covered so they can try to avoid the responsibility (and cost) of fraud in these cases.
Merry Christmas!
Great to know info but I would add this:
Visa’s Zero Liability policy is just that their POLICY, meaning they can change it anytime they choose. However, the protections afforded to credit cards are LAW meaning the credit card companies have no choice but to comply.
Don’t get me wrong, I love the convenience of my debit card without the temptation of overspending that credit cards provide me but I’m well aware of the difference in the protections afforded by each.
Merry Christmas!
like you said, I usually just use a pre-paid debit card, which I can withdraw/deposit money in from another card, or from the local post office. it means if that card is duplicated, they cna’t connect/use any of my other cards 🙂
“the zero liability coverage extends to debit cards WITH credit based transactions”
There is one major difference however. When you use your debit card, the money is immediately taken from your checking account. When you use a credit card, the money aren’t taken from your checking account but posted to your credit card.
Let’s say you have a checking account with automatic payment set up for a number of bills – heating, phone, mortgage. Let’s assume somebody stole your card’s info – number, expiration date, etc. – without your being aware of it and used it to charge $5000. Let’s assume this happened in the beginning of the month. With a debit card this amount is taken immediately from your checking. Sure, as soon as you notice the problem, inform your bank, you may get your money back within 24 to 48 hours (if your debit card provides protection). But by that time your automatic payments may have bounced resulting in a score of charges. Sure your bank may refund any overdraft fees, but what about everyone who couldn’t cash your checks or who had automatic payment bounce in the meantime?
With a credit card, even the one set up for automatic payment of the full balance, you have time. Even with automatic payment, you get a statement that lists all the charges 2 weeks to a month before the money is taken from your checking. Your calling a card and dispute the charge causes this charge removed from your bill pending investigation. In the meantime your money are still on your checking and all your bills are fine.
So yes, credit cards are safer then debit cards. Personally, I don’t carry my debit card around. I do have an ATM card that doesn’t double as credit card that is tied to an account with very little money. I take it with me if I go abroad as this account is with credit union that doesn’t charge for currency conversion and use it at foreign ATMs for cash expenses. For other expenses I use credit cards.
In my experiences, my credit card company is much better dealing with fraud than the bank associated with my debit card. For my credit card, I just need to call, say what I’m disputing, and usually the next day the charge will be off, and an investigation will begin. For the debit, you call, they send you a form, send it back, then it takes two more weeks to get your money back, even if you are in the right.
Here in the UK, credit card purchases between £100 and £30,000 are protected by law – even if the credit card is used to make only a fraction of the payment (such as for a deposit on an item). Debit cards have no such protection. Thanks for a great post.
But I seem to remember that certain places, Wal*Mart included, won’t let you sign and process as a credit transaction because the merchant fees are greater on the credit transaction than the debit one.
I think it is important to note that this is Visa’s policy, not federal law, and policy can be changed/revoked at any time. Credit card protections are based upon federal law. I’d be interested in more information on what the laws are regarding liability on signature-based debit card transactions.