3 Ways to Protect Yourself Against Debit Card Fraud

3 Ways to Protect Yourself Against Debit Card Fraud

According to a recent FICO report debit card fraud has hit a 20 year high. It is believed that one in 14 people have been affected by debit card fraud within the last 5 years . This type of fraud can range anywhere from a slight annoyance to a major catastrophe. While banks have been putting certain precautions in place (introducing EMV Chip technology) to help combat debit card fraud there are some things you can be doing to help mitigate the risks of this happening to you.

1. Stop using your debit card

The number one, sure fire way to be 100% protected from debit card fraud is to not use your debit card. I know that seems pretty straight forward but it may also not be an option for most people. The problem that I have with debit cards is giving anyone (ATM, retail store, service provider) other than myself direct access to the cash in my bank account. I prefer to use a credit card for all of my daily transaction and then pay off this bill in full at the end of each month. The benefits include better fraud monitoring and protections offered by credit cards, earning credit card rewards points and ease of cash flow management since you are only taking money out of your account one time each month to pay for the entire months’ worth of expenses. With a debit card, fraudsters can completely drain your bank account and you have to wait for the bank to put the money back in your account once you’ve gone through the time consuming process of filing a claim. This could take 7-14 business days, which is sometimes too long to wait if you’ve got bills coming due!

I understand using a credit card is not the right solution for everyone. The freedom and flexibility offered with a credit card can be abused easily. I DO NOT recommend using a credit card if any of the following are true:

  • You do not stick to a monitored and regular monthly budget
  • You find yourself transferring money from your savings account at certain times of the month to cover transactions in your checking account.
  • You have utilized overdraft protection in your checking account
  • You do not have a set process for paying your bills and managing your monthly cash flow
  • You do not track your spending or know how much you spend regularly every month

2. Choose to run your debit card as “credit” instead of entering your pin number

After doing a lot research on this topic I’ve learned that there is only one difference in running your card as debit vs. credit. When you run your card as “Debit” the merchant processes your transaction differently than if it were ran as “Credit”. A debit transaction is like taking cash out of an ATM and appears in your account immediately. A credit transaction shows as a pending transaction in your account for a day (maybe 2) before it clears your bank account. You do not receive the extra fraud protection give to most credit cards if you run your debit card as a credit card; a debit card is still a debit card. I see 2 benefits in running your card as credit instead of debit.

If you monitor your transactions daily, (I would suggest doing so…it take 2 minutes to sign into your online bank account and check) you can verify that the pending transactions are indeed yours and if there is something that is unfamiliar you can get a jump on the process by calling your bank immediately.

You do not have to enter your pin number!  A lot of debit card fraud is linked back to people spying your 4 digit pin code to access your bank account. Not entering the pin is just one less way people can defraud your account!

3. Monitor Your Account and Set Up Account Alerts

Being proactive by monitoring your accounts daily will help you significantly. When fraud strikes time is of the essence. Most banks will allow you to set up account alerts where you can receive text messages or emails if based on certain transaction parameters you set up. You set theses alerts for transaction size or location. If you use location alerts be sure to let your bank know when you will be traveling. Or better yet…use a credit card when you travel instead of your bank linked debit card!

Financial planning and investment advisory services offered through Castlebar Asset Management, LLC a registered investment adviser. 

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