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.

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?