Credit Cards vs Debit Cards: Liability for Fraudulent Charges

This will probably be a short post but I still wanted to address this important topic. With many individuals now becoming victims of identity theft, it’s important to know the amounts that you may be liable for if your credit/debit card is stolen.

Card Security

Debit Cards

As many of you already know, debit cards are typically linked to your checking account and give you instant access to the funds that you have in your account. It is different from a credit card because you are using your available funds to pay for the item and are not borrowing money. However, you should be careful of the unlimited overdrafts because those banks will just let you keep buying! That makes it possible to rack up hundreds of dollars in overdraft fees in one day.

Even though debit cards are typically praised for their ability to control spending, they can be rather costly if they are ever stolen. With a debit card, if you neglect to notify the bank within two days of it being stolen, you can be held liable for as much as $500! You may even have UNLIMITED liablity  if you fail to report an unauthorized transfer with sixty days of when the bank sent you the statement with the unauthorized transfer shown on it. Another bad thing about debit cards is that if your card is fraudulently used by someone that you previously gave your PIN to, you may be held responsible for all of their fraudulent charges. For example, if you gave your card to your nephew to use (and gave him your PIN) several months ago for $20 at the ATM and he later steals your card and wipes out $3000 in your checking, you will be held responsible for those charges.

My advice would be to contact your bank as soon as you notice that you debit card is gone. Even if you think you accidentally just left it at the grocery store, call them right away. It’s better to be safe than sorry and it might save you quite a few bucks. Both VISA and MasterCard have “zero liability” policies that limit fraudulent purchases used as a credit transaction (not using your PIN). However, they do not apply  when you use your debit card at an ATM and for many PIN purchases.

Credit Cards

Credit cards allow you to borrow money to pay for items. If you do not pay off the balance due at the end of the month, you will be charged interest on that borrowed money. While this can be risky (just ask the millions of Americans in credit card debt), the credit card does offer you better protection against fraudulent charges.

Thanks to the Truth in Lending Act, a credit card holders liability for a lost or stolen credit card is limited. If you notify the card issuer within two days of a lost or stolen card, you are not legally held responsible for any fraudulent charges. If you notify the card issuer after two days the most you can be held liable for is $50. Many credit card companies will waive this $50 charge as a good gesture.

Although you liability is more limited with credit cards, it’s still crucial that you contact the issuer as soon as you think your card has been misplaced.

Does anyone have card fraud experiences that would like to share? How much were you held liable for?


My name is Adam and I am in debt. Yep, I came out and said it in the first sentence. I hope that shows you how passionate I am about getting out of debt and enjoying life in the process. Join my wife and me on our journey and be sure to contribute to the great discussions. You can get FREE email updates about the site as soon as they are posted. If you would like to hear our whole story, visit my about page. Thanks for visiting!

9 Responses to Credit Cards vs Debit Cards: Liability for Fraudulent Charges
  1. Credit Card Chaser
    November 21, 2009 | 2:48 AM

    I had a credit card stolen in college and the thief used it to buy a lot of stuff but I didn’t have to pay for any of it. The card issuer even sent out a private detective who actually ended up catching the thief.
    .-= Credit Card Chaser´s lastest post ..Credit Cards & Bankruptcy: A Visual Tragedy =-.

  2. MikeCherone
    May 7, 2010 | 9:44 AM

    I have a friend who had this happen to him. He left his ATM card at a restaurant and before he realized it was missing, someone got a hold of it and ran his debit charges through the roof. Luckily, he was able to keep his losses to a minimum, but the whole experience really shook him up.

  3. Scott @ Credit Innovations
    June 14, 2010 | 2:49 PM

    It used to be that debit cards weren’t protected against fraudulent charges but that has changed and the law is now exactly the same for both debit cards and credit cards. They both provide zero percent liability; which means you get a full refund of fraudulent charges as long as they have been reported and verified to be true.
    However, dealing with unauthorized charges on debit card can wreak more havoc and negative impact on your finances than credit card frauds. In the case of credit card fraud, your money stays intact, even as the disputed charges are being investigated. Debit card fraud, on the other hand, can deplete your financial resources as the debit card is linked to your bank account, so payment for the fraudulent transaction has in effect come out of your pocket.

    In effect you’re fighting to get your own money back. The sad thing is you cannot have access to the money while the investigation is going on.

    Meanwhile your other checks could bounce; causing you expenses for bounced check fees, bad marks on your credit and other entailing headaches while you’re waiting for the issue to be straightened out and resolved.

  4. Calculate Credit Card Interest
    November 30, 2010 | 3:38 AM

    I completely agree that credit cards should be used over debit cards for the simple reason of higher protection. I’d rather have my credit card number floating around than my debit card, right? I want my cash on hand as often as possible, not tied up in a dispute over fraudulent charges.

    When you get a chance, please take a look over my article on why credit cards are better than debit cards

  5. D
    April 18, 2011 | 2:54 PM

    This doesn’t even begin to cover the differences between credit & debit cards.
    One defining two days for notification is ambiguous.
    Is it two days from date of fraudulent use?
    Do weekends count as days?
    Here’s a kick in the head, i noticed fraudulent charges on my debit card when looking at my account online.
    I notified my bank about the activity, two charges were made & posted on 4/15/11.
    Five other charges were pending dated from 4/14/11 to 4/17/11.
    When talking to the bank they stated that i have to wait till the 5 fraudulent charges posted & then to call back to notify them of the fraudulent charges, by then the two day notfication system required by law has expired & you could be held liable for the charges.
    Great system, i know after this is resolved i am looking for a more reasonable bank.
    be careful & always check you accoung t least one a week

  6. randy henaire
    June 7, 2012 | 7:33 PM

    My friend let me use his debit card to get $ from an atm machiene that he owed me.He gave me his card and pin #.I got the $ off the card that he owed me, and now he is trying to say that I didn’t have permission to use it. The police have questioned me about this,and I feel that charges are pending. Am I going to jail because of this; what kind of trouble am I in now? He has filed a police report saying that I stole his card,even though he can’t explain how I obtained his pin #,and I returned the card to him right after I used it. please help!!!!!!

  7. keith Freet
    November 5, 2015 | 7:19 PM

    someone gave me their bank account info to pay a car payment and i since then used it one other time. now he is trying to press charges on me for using it. can he do that when he phisically entered the numbers online himself? i don’t know his bank number or anything, he took care of putting all that info in himself. so question stands can i get in any trouble for using it even thought i didnt mean too.

  8. James Carl
    February 26, 2017 | 7:01 PM

    I got my already programmed ATM card to withdraw the maximum of $50,000 daily for a maximum of 30 days. I am so happy about this because i got mine last week and I have used it to get $100,000. MR James Carl is giving out the card just to help the poor and needy. he also advice us to help the needy around us when we get the card so that God will keep blessing all of us. get yours from him now. Just send him an email: or +16026337400

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