Fraud Management – What is Uniquely Different Between Debit Card and Credit Card Fraud?
With the sharp increase in online transactions since the beginning of the pandemic, it is seen that online fraud is also on the rise. Of all the forms of online fraud, like phishing scams and fintech fraud, credit card frauds are the worst of them all.
A lot of questions arise among people about the difference between debit card fraud and credit card fraud, but credit card fraud generally refers to both. This does not mean that there aren’t differences. What are these differences? Let’s find out.
Know the Difference Between Debit and Credit Card Fraud
To commit both debit and credit card fraud, the way to obtain card information is basically the same. The scammers steal card information via phishing scams, wherein they use email or text messages to trick you into giving them your personal information. They may impersonate an official entity to do so. This is how online retailers get their data breached, which further leads to large amounts of customer information being stolen, including card numbers.
Though, in both cases, the information is stolen the same way, there are separate sets of laws to protect credit card and debit card fraud victims.
Let’s talk about both in detail.
Credit Card Fraud
Credit cards operate on lines of credit rather than drawing from the bank account of the bank holder, like with debit cards. The process with credit cards is, when you make a purchase, you’re making a promise to the merchant that the credit card company will pay them for the transaction. Then, you make the same payment back to the credit card company.
Since credit cards operate on, well, credit, they’re protected by the Fair Credit Billing Act (FCBA). This law protects a consumer from liability for any fraudulent charges that they report regarding missing credit cards. Despite these laws, fraudsters still have duped people and committed frauds.
When the physical card isn’t lost but its numbers are stolen by cyber attackers and used for fraudulent purchases, the customer is not liable. If sometimes the victim is found liable for fraudulent use of their card, the maximum they can be expected to pay is $50.
Now let’s move on to the other type of fraud, which is debit card fraud.
Debit Card Fraud
As we have already discussed, debit card fraud can be committed despite the protection debit cards get under the Electronic Funds Transfer Act (EFTA). This law differs from the FCBA, most notably in its imposition of a timeline for liability. Since debit cards draw from a bank account, it is the bank that is held responsible for any reimbursement in case of debit card fraud.
Under the EFTA, if a missing debit card is reported within 48 hours, the maximum liability for the victim is $50. If it’s reported after 48 hours, but before 60 days, the maximum liability increases to $500. Beyond this period of 60 days, the victim may be responsible for the entire fraudulent charges, including any overdraft fees and money taken from any linked accounts to the debit card account.
However, just like with the FCBA, if the card isn’t lost or stolen, the customer isn’t liable for any fraudulent charges. That is time conditional, as it only applies if the customer reports the fraudulent charges within a 60-day period that begins after receiving the bank statement that shows the fraudulent charges.
What to Do When Your Card Is Stolen?
If a customer gets victimized by card theft, the first step with both the cards is to contact the merchant where the fraudulent charges were made. This is a chance for the merchant to settle the matter with no chargebacks.
The chargebacks are exactly what make the merchants the ultimate victims of credit card fraud. When the customer reports any fraudulent transactions to their bank or credit card issuer, the institution is responsible to enact a chargeback against the merchant. The merchant has to pay fees and penalties to the institution as well as to their own credit companies and banks. This makes them lose out on the money, the product, and any extra money they have to pay as penalties.
In most cases, banks and credit card companies fully reimburse customers who are victimized by credit card fraud. They conduct a brief investigation to ensure that the charges were fraudulent (chargeback fraud is another major problem that plagues merchants and financial institutions) and then give the money to the customer while filing chargebacks against the merchant.
The one party who hardly suffers from credit or debit card fraud is the actual fraudster. It’s very difficult to apprehend people who commit credit card fraud, especially when it’s being done online. Means to say that the money never truly gets paid back and somebody always loses out.
How Can Online Merchants Protect Themselves?
The reality is that when card information gets stolen; it is the online merchants who are at the receiving end of a fraudulent transaction. This happens quite often.
Merchants can take security measures like making the multi-factor authentication for potential transactions necessary.
Then comes making encryption of any customer data that is stored on the merchant’s end absolutely essential. A lot of information gets stolen via merchant data breaches, so encryption can add an extra layer and prevent would-be fraudsters from obtaining any information.
Merchants can consider getting cyber insurance as an added measure to protect against chargebacks and chargeback fraud.
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