This week Sens. Mark Warner (D-Va.) and Mark Kirk (R- Ill.) introduced a bill aimed at extending consumer protections for debit card users. It’s called the Consumer Debit Card Protection Act of 2014, and the idea is to reduce shoppers’ liability for fraudulent charges made with their debit cards.
There are a lot of differences between credit and debit cards, and the gap between consumer protections is large. Under the Truth in Lending Act, credit card users are liable for up to $50 of fraudulent charges made with the card (and nothing if they report the card stolen before it is used or if the physical card is in their possession at the time it is used fraudulently). But if a fraudster gets a hold of your debit card, you could be responsible for up to $500 — or even more — of the fraudulent charges.
Right now, it depends on when you report the unauthorized charge. If you notify your bank within two days of the fraudulent activity, you’re liable for only $50, under the Electronic Fund Transfer Act. But if you wait longer than two business days, your liability could go up. Warner and Kirk’s legislation would cap liability at $50 — the same as credit cards.
Given the slew of data breaches that have been in the news over the past several months, debit card users would likely be relieved by reduced liability for fraudulent charges. In the case of the Target data breach during the holiday season, the company has said no consumers will be responsible for any unauthorized activity on their compromised cards, but it’s often up to consumers to protect their money.
Credit card users also have an advantage when it comes to getting stolen money back. They’ll often see the charges reversed quickly, while debit card users will miss out on the money in their checking accounts for up to 10 business days. In the meantime, they may have bills to pay with that money. The proposed Consumer Debit Card Protection Act would shorten that return time to seven business days.
For the time being, credit cards have superior consumer protections, so keep that in mind when choosing your form of payment. Many people find it easier to control their spending with debit cards, but if you feel you can use a credit card responsibly (paying off the entire balance every month), you can take advantage of rewards offerings.
Credit cards also help you improve your credit standing, unlike debit cards, which have no impact on your credit score. If you want to see where your credit currently stands, you can check two of your credit scores for free at Credit.com.
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