Debit Cards Versus Credit Cards: How Secure is Your Money?

by Jessica Sommerfield · 0 comments

Have you heard the news about the latest electronic theft victim? — major retailer Target Corporation. Between Thanksgiving and December 15th, the retailer’s in-store credit card system was breached by hackers, allowing over 40 million accounts to be exposed to theft. The timing of the breach, during one of the busiest shopping seasons of the year, dealt a devastating blow to the retailer’s security perception and its continuing profitability as it faces thousands of lawsuits. While it’s unclear exactly how the hackers retrieved the credit card information, it was most likely accessed by placing compromising software into their point of sale system. The investigation has led to the interception  of counterfeit cards created using the stolen information.

One would think that online shopping is a greater risk, but this incident has many shoppers thinking twice about their purchasing practices. If shopping in a brick-and-mortar store poses just as much of a risk as shopping on the Internet, how can you avoid getting robbed blind? It would be wrong to say anyone is completely immune to becoming a victim of electronic theft, unless of course, you don’t ever use electronic forms of payment. In our society it’s become virtually impossible to do business without ever using a credit card, so there will always be some risk of becoming a victim of electronic theft. There are, however, safer ways to use electronic forms of payment to keep your chances of theft to a minimum, or at least detect it before your accounts are cleared out and your credit history destroyed.

Debit Cards: Better for Budgets, Worse for Security
Debit cards have been heralded as a solution to credit card debt. Because you can only spend what’s in your account, the problems of debt, poor credit scores, and high interest rates are eliminated. However, there is a glaring security flaw to the design of debit cards — they are directly linked to your bank account, and possibly your savings. Nothing can wreak worse havoc with your immediate finances than having your debit card information stolen.  In addition, there are usually few protections built into debit cards to prevent you from permanently losing the money in your personal accounts.

Dealing with Debit
If you prefer to stick with your debit card for electronic spending in spite of the risks, you should find out your bank’s policies about potential theft. Many require you to report the theft within a certain time frame in order to be reimbursed once the incidents are investigated, and may not reimburse you for all overdraft fees. This is why it’s important to keep an eye on your transactions and report anything suspicious immediately.

In response to the Target theft, many banks are setting daily purchase and withdrawal limits on their debit cards to protect themselves as the investigation continues. While this is inconvenient to the card owner, it does keep the impact to both the consumer and the financial institution at a minimum. Even if your bank hasn’t set mandatory limits, you may want to change your own account settings to lower the potential impact of theft on your account.

Credit Cards: Spending Temptation, High Security 
Credit cards are both helpful financial tools and great potential pitfalls. For those who can handle the temptation to spend to the limit, pay off their balances before incurring interest, and use their credit card statements to maintain impeccable records, this is the most secure way to pay electronically. Credit cards allow you up to 60 days to report a potential theft, and won’t directly impact your assets. What’s more, credit card companies often cap the maximum impact at $50 no matter what your situation. There is still, of course, the potential for theft. If you suspect someone is using your card number, you can place a fraud alert on your credit report for up to 90 days before paying for the service.

Again, if you want to be totally safe, no form of electronic payment is a secure as paying with good-old-fashioned cash.

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