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Credit cards are safer than debit cards because under federal law, they provide greater liability protection if you're a victim of fraud. If your credit card is lost or stolen and someone uses it to make unauthorized charges, you'll only be responsible for up to $50. If unauthorized charges are made with a debit card, you could potentially be liable for the full amount stolen, depending on when you report the fraud.
Below is a breakdown of your liability for unauthorized charges made to credit cards and debit cards, according to federal law.
| Credit Card Liability | Debit Card Liability |
|---|---|
If you report a card's loss or theft before fraud occurs: $0 If you report a card's loss or theft after fraud occurs: $50 max, no matter how long after the card loss or theft you report; many credit card issuers limit liability to $0 | If you report a card's loss or theft beforefraud occurs: $0 If you report within 2 days of fraud occurring: $50 max If you report 2 to 60 days after fraud: $500 max If you report more than 60 days after fraud: No liability protection |
Are Credit Cards Safer Than Debit Cards?
Credit cards are generally safer than debit cards because they come with greater fraud protections. Even if you report credit card loss or theft to the issuer after you notice a suspicious transaction, you won't be responsible for more than $50 in unauthorized charges in total. Plus, with a credit card, you're not at risk of losing money immediately from your bank account—in fact, you likely won't have to pay off fraudulent credit card charges at all while they're under investigation.
Debit card fraud, however, pulls your money from a linked checking account, which is already a major inconvenience. Additionally, you may not see that money again, depending on when you report an unauthorized charge.
Credit Card vs. Debit Card Fraud Liability
Here's how credit card and debit card liability protection compares.
Credit Card Fraud Liability
Under the Fair Credit Billing Act (FCBA), no matter the type of credit card you have, the issuer cannot hold you responsible for more than $50 in unauthorized charges. If you report the loss or theft of a credit card before fraud occurs—which you can do within the company's mobile app or by phone with customer service—you're not liable for any subsequent unauthorized charges at all.
Many credit card issuers, including American Express, Discover, MasterCard and Visa, go even further and offer zero liability protection. That means that no matter when or whether you report your card as lost or stolen, you're not responsible for any unauthorized charges. Zero liability protection applies to charges made with both your physical card and your credit card number alone.
Learn more: Steps to Take if Your Credit Card Is Lost or Stolen
Debit Card Fraud Liability
Unlike credit cards, debit cards are not governed by the FCBA. If your card is used fraudulently and money is withdrawn from your account, you are liable for up to $50 in charges if you report the fraud to the bank within two days. That liability increases to $500 if you report fraud between two and 60 days after it occurred. If you report it more than 60 days after the fact, you may be liable for all the money stolen from you.
What's more, you won't have access to that cash while it's under investigation by the bank, which could take up to 10 business days. In the meantime, if you have automatic payments that come out of that account or you made additional charges, you could be at risk of overdrafts. Zero liability protection can also be found on some debit cards, but you may still have to report suspected fraud immediately, and you'll have to confirm the terms with the issuing bank.
When to Use a Credit Card Instead of a Debit Card
Since a credit card's fraud protection is superior to a debit card's, it's wise to use a credit card for:
- Large purchases: When you put a large transaction on a credit card, you often get access to additional consumer protections that debit cards don't typically offer. These include extended warranties, purchase protection and the ability to dispute a charge if the item is not what you expected.
- Online purchases: Shopping online comes with the risk that your personal information, including your credit card number, could be intercepted and stolen. Use a credit card when making online purchases so that, if a thief does get access to your financial data, you won't be at risk of losing any cash as a result of unauthorized charges made to your account.
- Making hotel or rental car deposits: It's more convenient to use a credit card when a merchant, such as a hotel, says it will place a hold on the card, which functions as a deposit until you pay the full charge. When you use a debit card, the merchant will initially take the full amount of the deposit from your bank account, leaving you with less cash until it's returned several days later.
When a Debit Card May Make Sense
In the following circumstances, a debit card may be the stronger choice:
- Making ATM withdrawals: When you need access to cash, a debit card is the way to go. While credit cards offer cash advances, they come with high fees and interest rates, and interest will immediately begin accruing on the amount you've withdrawn.
- Avoiding credit card convenience fees: Sometimes, when a credit card isn't the payment method that a merchant prefers, they'll charge a convenience fee to use one. That means using a debit card or a transfer from your checking account may be the less expensive alternative, particularly when paying rent, taxes, utility bills or sending payments on a peer-to-peer platform like Venmo.
- Sticking to a budget: Using a debit card gives you a real-time understanding of your available cash. When you want to stick to a budget and avoid debt, prioritize using a debit card. Consider choosing a bank that offers a zero liability policy on debit transactions so that you receive close to the same fraud protection as a credit card.
How to Protect Yourself From Credit and Debit Card Fraud
Take these steps to limit your exposure to credit and debit card fraud:
- Secure your physical cards. Keep your cards safe from theft by keeping them with you rather than in your car or gym locker. Using a digital wallet on your phone, such as Apple Pay or Google Pay, can also limit potential loss or theft.
- Use contactless payments whenever possible. Contactless payments are more secure than making a payment with a card's chip or magnetic stripe. If your current debit card or credit card is not capable of contactless payments, your financial institution may be able to provide you with an updated card if requested.
- Watch your accounts. Regularly monitor your bank and credit card accounts to make sure you recognize every purchase, and sign up for fraud alerts from your bank and credit card issuer.
What to Do if Your Card Is Lost, Stolen or Used Fraudulently
Take these steps if you've identified credit card or debit card fraud on your account:
- Contact the card issuer. Contact your credit card issuer or bank immediately and notify them of the loss or theft of your card, or of an unauthorized transaction. You can dispute a charge directly in the company's app or online portal if one was already made, or report the card as lost or stolen. Do so as soon as possible to get access to the highest level of liability protection, particularly if it's a debit card.
- Lock down your account. If you've misplaced your card but expect to find it again, you can lock your credit card or debit card in the meantime. This prevents unauthorized transactions in case your card is in a fraudster's hands, but will allow scheduled bill payments to go through. Use this feature when you notice fraud, too, to prevent further unauthorized transactions while you wait for the issuer to respond.
- Place a fraud alert on your credit report. When a fraudster has access to your sensitive financial and personal information, you're at risk of further fraud or identity theft. You have the right to place a fraud alert or credit freeze on your credit reports.
- Monitor your accounts and credit report. Moving forward, pay special attention to your bank and credit card transaction history and your credit report. You have the right to dispute any suspicious charges or credit report inaccuracies. Consider signing up for credit monitoring, also available for free from Experian, which can provide early detection of potential fraud.
Frequently Asked Questions
Is It Safer to Use a Credit Card or Debit Card Online?
It is safer to use a credit card online. Shopping online can expose your information to scammers and fraudsters. Many credit card issuers offer zero liability protection, which means you won't have to cover any portion of unauthorized charges made. If you use a debit card, you could be liable for all the money lost if you don't report the fraud to the bank within 60 days.
Should I Use a Credit Card or Debit Card at a Gas Station?
Use a credit card rather than a debit card at a gas station. You'll get better fraud protection in case your credit card information is stolen. Also, gas stations typically place a hold of $50 to $150 on your account each visit to prevent potential loss in case customers fill up and drive away. When you use a credit card, you won't feel the loss of that money in your checking account.
Does Using a Credit Card Help Build Credit?
Using a credit card can help build credit by adding positive payment history to your account and demonstrating that you can manage a mix of credit types. It's crucial to make all payments by the due date and use less than 10% of your credit limit at all times in order to enjoy the credit score benefits of credit card usage.
The Bottom Line
Credit cards are far more likely than debit cards to offer zero liability protection in the case of fraud, which generally makes them a safer choice. But no matter which payment method you use, there are ways to dodge potential fraud. Regularly check your accounts and your credit report, which is available for free from Experian, to avoid the stress and inconvenience of unauthorized card usage.