Credit and Debit card use is on the rise. According to a study completed by the Federal Reserve in 2013, 47 Billion debit card payments were completed in the United States. In 2000, only 8.3 Billion payments were completed with debit cards. With such a massive influx in use, it is no wonder that payment card (Credit, Debit, and Prepayment) fraud has increased dramatically to $21.84 billion in the last year. The simplest measure to protect yourself from fraud is to use a credit card as your primary method of payment if you must use a card.
For this article, the financial side of cards will be substantially ignored to focus on the security impacts.
A debit card is a payment card linked to a bank account. When a payment is processed, the funds are directly taken out of your bank account. While this does provide a streamlined payment experience, it is also incredibly dangerous. With card skimmers on the rise, more and more card information is being released to criminals worldwide.
If your debit card information (all information inside the magnetic bar code on the back) were to fall into the hands of a criminal, they could easily purchase whatever they may want in your name. The payment would be processed and the money removed from your account. What if you needed the money in your account to pay bills or other necessary expenses? You would be out of luck until a case has been processed by your bank which could take weeks. If you were to wait more than two days to report fraud, which is a large risk since most people are not dutifully staring at their online checking account 24/7, then you could be liable up to $500.
With credit cards, however, the money is not immediately removed from your account. Instead, they are marked on your monthly billing statement. Unlike debit card users, credit card users who report fraud are “refunded” almost immediately. I say “refunded” with quotation marks because the card owner would have never been charged for the fraudulent payment in the first place. It is as simple as calling your credit card company as quickly as possible after a fraudulent purchase is made to refute the claim.
According to the Pew Research Center, only 58% of respondents reporting credit cards as a regular expense. Of that 58%, only 24% reported paying in full. The recommended payment method in the modern age of online payments and skimming is to use a credit card frequently and pay off the entire expense every month. In effect, you would use your credit card in the same fashion you used your debit card, except with the added step of paying for the card every month using funds from your bank account instead of using the funds from your bank account for each payment.