One of the biggest problems with fraud in the U.S. is that most people don’t know how to spot it — not to mention many people aren’t even aware of the fact that they are at risk.
In fact, pretty much all of us are at risk of some type of fraud these days. But the good news is there are ways to protect yourself.
Credit and debit card fraud on the rise in the U.S.
Credit and debit card fraud is expected to reach a record $4.5 billion this year, according to a recent report by iovation, a provider of digital intelligence for fraud prevention. And that number is expected to get even worse before it gets any better — with fraudulent transactions costing an estimated $7.5 billion by the end of 2020.
What about those new cards that are meant to prevent fraud? Well, that’s the idea, but the transition won’t happen overnight. And even when every card in the U.S. does have the chip technology, the payment process also has to be carried out effectively at checkout in order to prevent the risk of fraud.
So there are a lot of moving parts during this transition process, which is why experts say now is when consumers are most vulnerable.
“In other countries that preceded the U.S. in widespread EMV adoption, there was a big increase in counterfeit fraud activity during the time period where people transitioned from stripe to chip cards,” said Michael Thelander, product marketing manager at iovation. “We are seeing that exact scenario play out in the U.S. as criminals realize their window for perpetrating counterfeit card fraud is rapidly closing, so they are working through their vast piles of compromised cards.”
Here’s another reason it’s getting worse: as criminals ramp up their schemes, only 20% of credit cards and 10% of debit cards have implemented the new chip technology at this point — which means there are a whole lot of opportunities for fraud out there.
Protections of debit cards vs. credit cards
Debit cards are not protected like credit cards, which means if your debit card is compromised, the potential damage can be pretty severe.
Since a debit card is linked to your bank account, anyone with your card information can get instant access to all your funds. With a credit card, you’re billed for transactions later, so the damage of theft is handled differently.
When it comes to debit card theft and fraud, different types of situations are treated differently — and under the law, consumers can be held liable for significant losses, especially if it isn’t reported in a timely manner.
According to the FTC and the Consumer Financial Protection Bureau, here’s what happens if your debit card (or the information associated with it) is stolen or compromised:
- If you report the card as lost or stolen within two business days, you won’t be responsible for more than $50 of unauthorized transactions.
- According to the CFPB, “if an unauthorized transaction appears on your statement (but your card or PIN has not been lost or stolen), under federal law you will not be liable for the debit if you report it within 60 days after your account statement is sent to you.”
- If someone uses your physical ATM or debit card without your permission (meaning it was stolen) and you report the fraudulent charges within 60 days after your statement is mailed to you, you could lose as much as, but no more than, $500.
- If someone uses your ATM or debit card without your permission and you don’t report it within 60 days after your statement is mailed to you, the potential damage is unlimited. You could lose all the money in that account, the unused portion of your maximum line of credit established for overdrafts, and even more.
On the other hand, here’s what happens if your credit card or credit card number is stolen:
- If your credit card number is stolen, not the physical card, “you are not responsible for unauthorized charges under federal law,” according to the Consumer Financial Protection Bureau.
- If the actual card is stolen, you are liable for no more than $50 in authorized charges — as long as you report it to your card issuer. Some issuers won’t even charge you the $50.
Read more: 9 places to never use a debit card
The only safe way to use a debit card
The idea of only being able to spend what you have can be appealing, but actually, using a debit card is riskier than carrying cash. It’s not great if someone steals your cash, but if someone steals your debit card, they can get to every cent in your bank account.
If you have to use a debit card, one way to limit the potential damage of theft is by setting up separate accounts. Put only enough money you need for the card in one account and keep the rest of your money — for other expenses like mortgage or rent, car payment, loans etc. — in a separate account so it can’t be compromised.
Read more: Managing your money the old-fashioned way
Other ways to protect your wallet
Ideally, you should only use a debit card when you absolutely have to — like to get money out of the ATM. And even when doing that, you need to take some precautions to protect yourself:
- Only use bank-affiliated ATMs — they offer a higher level of security, which means they’re less likely to be compromised by scammers.
- On the same note, never use independent ATMs, like those at gas stations or in other less-monitored areas.
- Cover the keypad when entering your information — a criminal could be watching.
Here are some other ways to protect yourself:
- Check your accounts and statements daily.
- Report any fraudulent transactions immediately.
- Don’t pay any bill associated with fraudulent charges.
- Never use a debit card at a gas station pay-at-the-pump machine, online or other places where it’s more likely to be compromised.
Read more: How to protect yourself from identity theft