All plastic is not created equal: debit card safety tips

It's a good bet you are carrying a debit card in your wallet or purse. After all, more than 520 million debit cards were in use in the United States in 2010, according to research by credit card providers Visa and MasterCard. More than $1 trillion in purchases were made with debit cards in 2010.

And chances are you use that little piece of plastic like it was a credit card (with some comfort knowing that you're not racking up new debt, since the debit card is connected directly to your checking account). More people use debit cards than credit cards when making a purchase.

But what you may not know is your debit card does not carry the same fraud protection as your credit card, specifically because it is tied to your checking or savings account. After all, cash from a credit card comes from the card issuer. Cash from your debit card comes right out of your bank account.

Debit cards are not risk free

It's convenient to swipe that card at the checkout, but folks at the Privacy Rights Clearinghouse (PRC), a nonprofit consumer organization, suggest you think twice before you pull out your debit card to pay for groceries.

First, debit cards and credit cards do not carry similar protection. Like credit cards, the most you can be held liable for in case of card fraud is $50 on a fraudulent transaction, but unlike credit cards, this is only if you notify the bank within two days of the transaction. If not, you remain liable for the full cost of the transaction. You can contest the decision, but either way the money in your bank account is gone.

If you notify the bank in time, you won't be liable for the transaction, the PRC says. But you won't get your money back immediately either. The bank will conduct an investigation of your claim and, until that investigation is complete, you're out whatever money was withdrawn from your account. That could lead to late bill payments, bounced checks or worse.

And though recent federal regulations have helped protect consumers against overdraft fees, they still exist for those users who opted into automatic overdraft protection (allowing you to charge more than the amount in your checking account). So rather than have your card declined when you don't have the cash to cover your coffee, you'll get charged $25 in overdraft fees (more or less) for going over your limit.

Then there's the latest fear of debit card and credit card holders alike: skimming. Using a device that can pull your bank information from a chip in your card--even if the card is still in your wallet and still in your pocket or purse--crooks can "skim" the information as they pass. The information contained in the chip may not be enough to commit fraud, but it's still a scary thought.

How to stay safe

There are several ways you can protect yourself--both from the way debit cards are ruled and regulated and from crooks small and big.

• Safeguard your information. This means keeping your personal identification number (PIN) secret and changing it often (every six months, according to most major card companies). It also means keeping information about your card--your PIN, your account number, recent transactions--to yourself. Don't tell anyone over the phone, by email or by request (i.e., from a video store clerk). No one should have or need this information, and it is unlikely your financial institution will request it.
• Report a lost/stolen card immediately. Think of this as protecting yourself from the two-day time limit to respond to a fraudulent transaction. The bank will cancel the card so that if anyone tries to use the plastic, they'll have no luck.
• Check your account regularly. Regularly means more than once a week. If you use your debit card like cash, monitoring online to make sure there aren't strange transactions will help protect your checking account from fraud. Consider setting up account alerts, for transactions over a certain amount, for example, that might give you a heads up if something funny is going on.
• Don't let your debit card out of your sight. Do you pay with a debit card when the waiter leaves you a bill? Does the waiter take the card and leave for a period of time? One of the more common ways crooks get hold of debit card information is when the card leaves the owner's sight. For moments like these, it's safer to pay with cash or credit card.
• Be secure online. Make sure websites are secure before you use a debit card online. Log off after you make your purchase to ensure that no one else can gain access to your information.

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