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Debit card that matches the protection of a credit card?
So, I'm debating switching to a debit card for daily purchases, since the mental accounting gets confusing with a credit card and it's easier to overspend. The only thing holding me back is the fraud protection that comes with a credit card. Are there any (US) checking accounts/debit cards that match the level of protection you can expect from a credit card? Is such a thing possible?
In the US, debit card fraud liability is limited by federal law.
I’ve never had any issues across multiple banks when filing a fraud dispute. It’s always been the same process no matter if it was a credit card or debit card. Fill out paperwork, get a provisional credit, then wait for the bank to rule on the dispute. Maybe they ask for more information if they need it.
One important difference is that protection only kicks in on a debit card if you notice and report the fraud within 48 hours, then the liability jumps to $500 beyond that - and I don’t know about you, but I could easily go more than two days without checking my balance if I don’t have a specific reason to. Debit cards also have a two month expiry on that $500 liability limit, but I figure that’s a lot less likely to be an issue than the two day limit.
The $50 statutory cap doesn’t have a time limit on a credit card as far as I can see, so that could well make a meaningful difference if things go wrong.
I think the difference is somewhat inherent to credit vs debit, in the sense that if it’s debited out of your checking account that money is “gone”. Does the “provisional credit” allow for spending/withdrawal? Will checks bounce because of the fraudulent activity? Will bank fees get triggered? Even if the provisional credit counts like real money, there’s going to be a chance of the claim not being resolved, a concern that may hang over a persons head and cause anxiety.
I obviously can’t speak for all banks, but I’ve had a large transaction cause other things to bounce and never had any issue with the bank removing any extra charges caused by the fraud.
My bank has always treated provisional credits as “real” money that’s in your account. As for it being taken back, that is a chance with credit cards too.
I hate that it falls on the customers do that though.
The difference is that there’s that extra degree of separation to the credit card bill. Yes you’ll probably have to pay it, but they don’t have a hand in your checking account.
The time it happened to me, I just told them about the other charges when they took my report on the fraudulent charges. It was one phone call for everything. Took maybe an extra 5 minutes, most of that was me on hold while they did some computer magic to remove the charges. But then again, maybe I got lucky and other banks aren’t like that?
The FTC states that you may be held responsible for up to $500 if not reported within two days of discovering the card is missing, and the full amount if not reported within 60 days.
There's a full table of scenarios on the FTC site.
Conceivably the bank could also dispute whether you're being honest about the timing, since you probably don't have proof of when the card was actually lost. There's also the question of stolen debit card numbers being used for purchases without the physical card being missing...
It's legally capped at $50 for a credit card, and most decent cards promise zero liability for fraud.
I'm not aware of any debit cards that offer fraud protections like a credit card but I think privacy.com could be what you're looking for when it comes to credit cards. They let you create virtual credit cards with a strict spending limit. With a free account you can create 12 cards per month, set spending limits either at a transaction level, monthly level, annual level, or set a total spend amount. You can also pause and close cards whenever necessary. With each virtual credit card you create, you can also lock them to certain vendors and have a Netflix card, groceries card, gas card, etc.
I personally haven't tried the service myself but have heard nothing but positive testimonies about it.
I've used it for years with no issues. In fact, I've gotten a few unexpected benefits out of it here or there. I sign up for trials with it, and sometimes the website simply does not cancel my service when their charge fails to go through. For example, the first one I encountered this with was Pandora. I signed up for a trial, and they tried to charge the card and it failed, and I continued to get the premium features but didn't pay anything for at least a year before it stopped working. It was long enough that I lost track of the time I had it for. Another time I signed up for a 7 day trial to NBA's LeaguePass, they attempted to charge my card a couple times and it failed, they sent me an email stating my service was discontinued, but the account still had all the access it did as if I had paid. That only lasted for the one season.
I don't use it for all my purchases, only select things, and I generally set a total spending limit and never actually close the card, and I set the total spending limit for what the charge I want to be is covered and nothing beyond that. So if my charge should be $47.57, then I set the limit to $48 or if I don't feel like doing the math to get the exact figure I might just round it up to $50 so I know the thing I'm trying to purchase will go through. Then I don't cancel or close that card. Then the next time I want to purchase from that service, I increase the total spending limit to the amount for the next charge, so if its $50, I set the limit to $100, because it still has the prior $47 charge on there.
So in this way I can maintain continuity of the card, without risking being charged if I forget about it or don't want the service anymore, which is useful for annual renewals because generally the service you signed up for will email you if the charge fails to go through, so that serves as a reminder and I can re-evaluate if I want the service again without being automatically renewed for something I don't necessarily want.
Privacy is great. Like Grumble said, it's great for when you want to cancel something, but it's impossible to do so. I had one subscription where, while I could pause it, I could never figure out how to cancel it myself. And they were pretty nonresponsive when I tried emailing them. The pauses were only like 2-3mo at a time, so I was constantly having to remember to keep pausing it before I got charged. And there were times I forgot. So I just created a Privacy card, with a limit of like $1, then put those payment details into the system. I effectively cancelled my membership.
I also use it for places where I know I'm never purchasing again. Or very, very rarely will make repeat purchases. Set a limit to the amount, or even set the Privacy card as one-time use, and make my purchase. Then if the store gets breached, big deal. Attackers have a one-time use card, akin to a used Visa/MC gift card.
I'm not from US but this question gets asked around here as well. Many of protections you're thinking of are mandated by Visa, Mastercard etc, regardless of type of card. You can do a charge back on a debit card even though your bank might initially play dumb. That is before they are threatened with escalation to Visa / Mastercard.
What about using the debit card to pay off the credit card? When I purchase something online, I use my credit card, then immediately transfer money from my debit card to the credit card to pay for it. Best of both worlds.