Credit Card Chips | Are They Working to Prevent Fraud?
Credit card fraud drained $24 billion from the global economy in 2018 — and almost half of fraud victims worldwide are Americans.
But there’s another piece of rectangular plastic in your wallet that thieves, hackers, and skimmers want access to — your debit card.
For many consumers, debit card fraud is worse than credit card fraud because it can empty your checking account — and because debit cards don’t always have built-in fraud and identity theft protection like credit cards.
Debit Card Fraud: How Did It Happen To You?
Many cardholders don’t know they’ve been a victim of debit card fraud until fraudulent charges start appearing on their bank statements or online banking platforms.
So how did someone gain access to your checking account through your debit card?
A card skimmer installed on gas pumps, point-of-sale terminals, and ATM machines may have recorded your debit card number.
Retailers and banks have upped their security to fight skimming over the past few years — but cardholders should still be on the lookout for skimmers before they swipe their cards.
If a card payment terminal looks weird, take a closer look. It may have a skimmer attached.
Cards with security chips and RFID frequencies have frustrated skimmers recently.
But we all still come across retailers whose point-of-sale card readers accept only magnetic stripe swipes which are vulnerable to skimming.
Most financial institutions mail your new debit card when your old one expires or when you open a new checking account.
If someone intercepts your new card in the mail you might not notice the card is missing until the unauthorized charges start coming through.
Debit cards normally come in unmarked envelopes, and this helps. But you still never know who’s looking through your mailbox.
The U.S. Postal Service now offers “Informed Delivery.” You’ll get an email every morning letting you know what to expect in your mailbox that day.
This service can help you know when to expect your debit card to arrive in the mail.
If someone stole your debit card via the mail, the thief would still have to activate the card
This extra step can prevent amateur fraudsters, but serious scammers can get over this hurdle.
Shopping online is now part of life for most Americans, especially during the coronavirus pandemic.
When you pay online people near and far could intercept your account number, especially when you’re shopping on a site without cybersecurity measures.
Never shop on a public WiFi network — at the library or at a coffee shop, for example — and make sure your online retailers use secured servers.
Your browser should warn you if they don’t.
A Data Breach
Even when you shop carefully online, look out for skimmers at gas pumps and ATMs, and keep a close eye on your snail mail when you’re expecting a new debit card, your account information could still find its way into the wrong hands.
Data breaches at retailers, universities, government agencies, and firms like Yahoo! and Uber have exposed all sorts of personal financial data to hackers over the years.
In some cases, even Visa and Mastercard pin numbers have been stolen.
Data breaches are particularly attractive to hackers because some companies have sensitive financial data about millions of Americans.
Often, after a data breach, a financial institution or retailer will let you know and offer fraud prevention measures such as free credit monitoring for a year.
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I’m a Victim of Debit Card Fraud. Now What?
If your credit card is lost or stolen, you can’t lose more than $50 in unauthorized transactions.
After all, the money the fraudster spends on your account was never yours, to begin with. It belonged to your credit card company.
What is Identity Theft?
But when a scam artist makes fraudulent charges on your debit card, it’s your money on the line. The theft could empty your bank account.
How can you get the money back?
Report Debit Card Fraud to Your Bank Immediately
Debit card fraud can’t cause too much permanent damage to your monthly budget if you report the theft of your card — or the fraudulent transactions — within two business days.
In fact, the Federal Trade Commission says you have zero liability — that is, you won’t be responsible for any unauthorized transactions — if you report your lost or stolen card before the transactions start happening.
If you discover/report the loss of your debit card within two business days of noticing fraudulent transactions, you could be responsible for up to $50 in charges.
The longer you wait to report the theft of your card, the more responsible you’ll be for the unauthorized charges.
If you report a debit card loss within 60 days of your bank statement being mailed to you, you could lose up to $500 in unauthorized transfers.
If you don’t report the fraud within 60 days, you risk unlimited loss. You could lose all of the money in that account and the unused portion of your maximum line of credit for overdrafts.
The thieves could overdraft your account if you wait more than two months to report it.
At any point, once you report the loss or theft of your debit card to the card issuer, you’re not responsible for additional unauthorized use.
Your Bank May Tell You About the Fraud
Most banks have fraud detection services in place on their debit cards. If your bank notices fraudulent or potentially fraudulent activity on your account, you’ll get an automated phone call.
It’s easy to accidentally trigger a fraud alert if you travel, use your card sporadically, or if you use the same card repeatedly for similar transactions online.
If you miss a phone call from the bank, be sure to return the call ASAP.
Sooner or later the bank will freeze your debit card if you don’t confirm the questionable charges really are yours.
When this happens you can miss automatic payments on your bills which can lower your credit score.
How Credit Card Protections Work
This post is about debit card fraud, but I think it’s interesting to point out the difference between debit card and credit card fraud protections.
If your credit card or credit card number is stolen, federal law offers you simple protection: You’re liable for up to $50 in unauthorized transactions.
This protection comes with one important caveat — you must report your card’s theft to your credit card issuer.
Some credit card companies won’t charge you the $50 and are vigilant about being on the lookout for fraud and alerting customers when they see potential credit card fraud.
How To Prevent Debit Card Fraud
The best insulation from debit card fraud is, of course, to stop using your debit card.
Instead, you could use a credit card for all your regular expenses like groceries, gas, utility bills, and dining out.
But regardless of your card’s credit limit, you should spend only what you can afford to pay off each month.
Along with lessening your exposure to fraud, you can also claim some nice credit card rewards each month.
You could still use your debit card when necessary: to withdraw cash from an ATM for example.
Here are ways to help prevent debit card fraud:
- Monitoring Online Banking: Chances are good your bank has a robust online banking platform or a mobile banking app. If so, your financial institution could send you a text or an email every time a large transaction happens. If you didn’t initiate the transaction, you’ll know to take a closer look.
- Checking for Skimmers: Don’t let your guard down at gas pumps or retailers where card swiping is still the point-of-sale method. If something on the card reader looks odd, let the station attendant or cashier know.
- Declining Saved Account Numbers: Modern web browsers make online shopping so easy. They save your debit card numbers for easy access next time you’re ready to buy something. But unless you’re almost certain your laptop, desktop, tablet, or mobile phone is invulnerable to theft, don’t use this browser feature.
- Avoiding Reading Off Numbers Aloud: I have heard people read off their entire debit card numbers, expiration dates, and security codes over the phone while sitting in a waiting room where anyone could hear. Sure, you don’t expect someone behind a potted plant to be writing down your digits, but you just never know.
- Trying to Keep Your Card Within Sight: Restaurants and drive-thru windows come to mind here. Your server or cashier takes your card and then disappears for several minutes. You can never know for sure what’s happening during that time. So be sure to use a credit card or cash in these situations.
- Ignoring Emails from Retailers: Scam artists often send emails that look like they’ve come from a familiar retailer. But clicking a link to buy a product actually directs you to a phishing site that steals your debit card number.
- Using Only bank-affiliated ATMs: ATMs in gas stations and random parking lots are more likely to have lax security than the ATM outside your local bank branch. If you have an online banking account with no ATM network of its own, opt for the ATMs at leading national banks when you need to withdraw cash. (Many online banking accounts reimburse you for fees at other banks’ ATMs.)
- Shredding Your Card Statements: Some bank statements show debit card information. You should shred these statements after saving them for a year rather than tossing them into recycling. Also, be sure to shred your old debit cards. Often, only the expiration date changes on your new card. A thief could easily guess the new expiration date.
- Changing Your PIN Sometimes: Changing your PIN on your debit card takes a little more effort than changing your email password. You’ll probably have to make a phone call to the bank or credit union to confirm your identity. But if a data breach exposes your debit card number and its PIN, having changed your PIN could save you a lot more trouble.
Checking Your Credit Report Can Provide Early Detection
Not every debit card theft causes immediate fraudulent transactions.
If your credit report starts showing hard inquiries for new credit you didn’t apply for, it’s likely someone has stolen your financial profile.
The same person may also have your debit card information but hasn’t gotten around to shopping yet.
If you detect identity theft, notify law enforcement and put a freeze on your credit and on your credit and debit cards.
How do you check your credit report? The FTC ensures you can get one free credit report each year from all three credit bureaus — Experian, Equifax, and TransUnion. Just visit annualcreditreport.com to access your reports.
You can also monitor your credit using a free app such as Credit Sesame or Credit Karma.
Best Identity Theft Protection