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Credit cards offer superior protection against unauthorized use

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Recent stories of personal data theft involved leaks from remote computer centers that resulted in the theft of millions of credit card and debit card numbers.  In 2006, fraud losses to existing credit card and debit card accounts totaled $20 billion, according to Javelin Strategy & Research. 

But when it comes to protecting yourself from unauthorized charges, credit cards offer superior protection against unauthorized use when compared to debit cards.

Experts say that paying with a credit card offers greater protection, since purchases are initially paid for by the card issuer.  That means the victim generally does not pay anything before discovering the unauthorized transaction.  Meanwhile, debit card payments come directly out of the cardholder's bank account. 

Additionally, debit card losses can take weeks to recover after being reported to the card issuer.  That could leave the cardholder's bank account empty while the bank investigates.

With a credit card, the maximum a victim of unauthorized charges will pay is $50 if the loss or theft is reported within 60 days.  Since the laws covering debit cards in the event of theft are less protective than for credit cards, a debit card user is on the hook for losses up to $50 if the theft is reported within two days of being discovered. 

And, after two days, the debit card holder could have to pay as much as $500 for unauthorized charges.  If the theft goes unreported for 60 days, they are legally responsible for all the losses after that period.  So debit card losses should always be reported ASAP.

The basic steps for protecting information apply to both credit cards and debits cards.  First, consumers should just carry those credit cards, debit cards, and ID cards they use often -- and should never carry a Social Security card or any document featuring their Social Security number.

Separately, consumers should try and receive credit card, bank, and other statements and invoice in electronic form over the Internet, rather than getting paper versions that could easily get lost in the mail or stolen.  When choosing passwords and IDs for their accounts, consumers should use once that are tough to guess.

Finally, consumers should never provide their credit card, debit card or other sensitive personal information to a party whose identity they cannot verify.   

Published: May 1, 2007


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