Are debit cards safe? What about when compared to using cash or a credit card?
The recent rise of "skimmers" has made many consumers think twice about using their debit cards when making purchases. Especially at places like the gas pump, or even online. But the answer to the question is quite simple: Yes, debit cards are secure and have many safety benefits over both cash and credit. Let's dive in, shall we?
Debit cards are safer to carry than cash
This one might seem obvious at first, but debit cards are safer to carry than cash for many reasons. If you lose your cash, or your wallet gets stolen, you're out of luck. Payment cards, and debit cards, in particular, can be canceled and replaced swiftly and remotely.
Debit cards have multi-layers of security
Ever wonder what that fancy little chip does in your debit card? It's called an EMV chip, and paired with a debit card, the two make an EMV card, and the chip provides consumers with additional security when making transactions at stores, points-of-purchase, or ATMs because they're hard to skim. Just like the magnetic stripe you see on the back of your card, the chip contains information about the account associated with the card.
Of course, this added security is in addition to the fraud prevention monitoring already offered by many card providers. The chip makes transactions more secure by encrypting information when used at a chip-enabled terminal. (Debit card chips just became our second favorite chip after tortilla, of course.)
A debit card requires a pin
Unlike cash or a credit card, the use of a debit card requires a PIN or Personal Identification Number.
When you make a purchase with a chip card (for say, a bag of tortilla chips) or you withdraw cash with an ATM card, the card reader must first gather information about the account from the card. Traditionally that's when that magic magnetic strip featuring millions of tiny particles would normally come into play. But now, most cards have EVM chips (as mentioned above), which contain pretty much the same info, except the magnetic strip holds static information, while the EMV chip creates a one-time code with the information needed to access the consumer’s account. But, back to your purchase....
After the information is pulled from the chip by the ATM or point-of-sale (POS) you're using, it sends it to the card issuer's bank, and along with the amount of the transaction. Your PIN, at this point, is considered an additional verification step.
Compared to a credit card, this additional measure of security automatically makes it more difficult for someone else to make a purchase with your card. Credit cards on the other hand? It's just swipe and go. Remember though, whenever you enter your PIN always attempt to conceal the pad as best you can.
A debit card has limit liability if stolen
Many believe that only a credit card can limit your liability if stolen, but federal law covers debit cards as well. The key is timing. The faster you act the better.
If you report an ATM or debit card missing before someone uses it, the EFTA (Electronic Fund Transfer Act) says you are not responsible for any unauthorized transactions. If someone uses your ATM or debit card before you report it lost or stolen, your liability depends on how quickly you report it.
According to the FTC, those time constraints are as follows: If you report your card missing or stolen before any unauthorized charges are made, you're maximum loss is $0 – the lesson here is to report your card as soon as you notice it is missing. If you report your card missing within two business days, your maximum loss will be no more than $50. If you report your card missing more than two business days after you learn about a loss or a theft, but less than 60 calendar days after your statement is sent to you, you could be responsible for up to $500. Beyond that, you can be responsible for all the funds that go missing linked to your debit card.
If your bank or credit union offers you card services that allow you to turn your card on and off, this is the ideal time to use that feature, but it's smart to set it up before you need it.
But what if someone makes an unauthorized transaction with your debit card, but your debit card isn't lost? In that case, you are not liable for those transactions if you report them within 60 days of your statement being sent to you.
Now, we're going to get a little lawyer-y here for a second so excuse us but, if you can convince the card-issuing bank or credit union that your notification failure was due to extenuating circumstances, it must extend the notification timeline for a "reasonable period."
A debit card limits your ability to overspend
The biggest reason many choose a debit card over a credit card is that it helps you avoid overspending. You may have the money in your checking account, but that doesn't mean you can access it. Many debit cards come with a daily spending limit, which is set by the individual bank or credit union that issues your card. Plus, you're more likely to spend within your means when using debit versus racking up debt and paying interest on a credit card.
Your online banking or mobile app might also allow you to set limits. If you want to further protect yourself, set them up and use them. This can help with that slight urge to overspend that sneaks up on you from time to time, as well as get notified if there is account activity you do not expect.
Plus, a debit card can earn awesome rewards
Thanks to community banks and credit unions who offer reward checking accounts and savings accounts, there are many great benefits to be had from using your debit card. Things like high interest, cash-back, iTunes and Amazon refunds, and money to save. Um, yes, please!
But what about online shopping?
After 2020, online shopping isn't going anywhere. In fact, as of this year, there are roughly 7.8 billion people in the world. And just over a quarter (27.6%) of them are online shoppers according to Oberlo.
For most online transactions, there is little difference between using a debit card and a credit card. When you’re making a purchase from a well-known, major online retailer, and you’re confident that it will accept your returns if you aren’t satisfied, the additional protections offered by credit cards might not matter much.
It's a good idea to follow these basic security rules when shopping online with a debit card:
Shop securely: Make sure you’re shopping on a secure website, especially when it’s time to enter your card number. Look for the locked padlock icon in your browser and pay attention to any security warnings that pop up.
Keep tabs on your account: It’s always a good idea to monitor on your money, and it’s especially important if you are sharing account information online. Check your accounts regularly: once per month at a bare minimum, though more often is better. Pro tip: Many accounts allow you to program transaction alerts. Take advantage of these when possible.
Shop from the safety of your own home: However convenient it may be, public wifi and hotspots aren't the most secure. If you're itching to make an online purchase on the go, hit pause and wait until you're back home. Your account will thank you.
Never, we repeat, never provide your debit card information in an email: No company worth doing business with will ever request your debit card information via email, but scammers often do. (Oh and make sure you're extra vigilant during the holiday season).
Additional debit card safety tips
Just because debit cards come with additional safety precautions, doesn't mean you're out of harm's way. Make sure you:
Don't carry your PIN in your wallet, purse, or pocket — or write it on your ATM or debit card. Commit it to memory.
Never write your PIN or debit card number on the outside of a deposit slip, an envelope, or other papers that could be lost or seen by others.
Periodically check your account activity, especially if you're a fan of online banking. Review your balance and transaction history. If you notice anything is off, report those discrepancies to your card issuer immediately.
Only use ATMs at a bank or credit union, because those located at convenience stores, subway stations, and other public places have a greater risk of having a 'skimming' device.
Are debit cards secure? Yes.
Are debit cards rewarding? Well, that depends. Do you Kasasa?