- Both debit cards and credit cards have safety features that protect you from unauthorized charges when your card is lost or stolen. If a thief uses your credit card to make unauthorized purchases your maximum liability is $50. If you report the card stolen before a thief has the chance to make unauthorized purchases, your liability drops to zero.
Debit cards are a little riskier. According to the Federal Trade Commission, if you report your debit card lost or stolen within 48 hours, your liability is only $50. If, however, you wait longer than 48 hours to report the card missing, your liability increases to $500. If you wait longer than 60 days to report your missing card, the bank can hold you liable for all unauthorized purchases. - If you are a college student, the federal government does not limit your ability to open your own bank account and use a debit card. It does, however, limit your ability to obtain a credit card. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 prohibits credit card companies from issuing credit cards to applicants under age 21 unless the applicant has a cosigner. This protects students from being overwhelmed with credit card offers that lead to them becoming deeply in debt before they learn how to manage a budget.
- The CARD Act requires credit card companies to let consumers “opt-in” to spending beyond their limit. Your credit card provider decides whether it will extend this service to you. If your card provider allows you to make purchases beyond your spending limit, it can no longer charge you a fee for the service. Your debit card’s spending limit depends on the amount of money in your checking account. Your bank cannot simply cover overdrafts and charge you a hefty fee for the service. If you do not “opt-in” to overdraft protection, merchants will reject your debit card payment when your checking account is empty. While embarrassing, this saves you from accruing a series of high overdraft fees.
- Identity thieves have been known to sort through their victims’ trash searching for documents such as credit card and banking statements that contain sensitive financial information. If you don’t want to risk throwing away dangerous data, most credit card companies and banks let you manage your account online. Not only does this perk protect you from identity theft, paperless statements save trees and reduce waste – making them a “greener” alternative to traditional billing and banking statements.
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