How Credit Card, Debit Card, and Prepaid Card Protect Your Liabilities

Q. What are the differences in liability protection from a credit card, a debit card, and a prepaid card?

A. Below is a brief discussion of the differences on how the three different types of cards limit your liabilities:

Credit Cards

• Have the most robust fraud protections.
• Legally, a credit card holder is responsible for no more than $50 in unauthorized purchases.
• You will have no liability at all if you report a lost or stolen card before a thief uses it.
• Under the Fair Credit Billing Act, if you have a billing problem with a merchant, a credit card issuer is responsible for investigating and resolving your complaint and you can withhold your payment until then.

Debit Cards

• It is tied to a checking account and is subject to a different set of rules.
• You will have no liability if you report a loss or theft of your debit card before unauthorized charges take place.
• If you report the loss or theft within two business days, you are liable for up to $50.
• You could lose up to $500 if you report the problem after two business days but before 60 days have passed.
• You will have unlimited liability if you report after 60 days.
• Visa and MasterCard generally extend their zero-liability protections to signature transactions (vs. punching in your PIN) on debit cards with their logos.

Prepaid Cards

• Generally have no Federal consumer protection against unauthorized transactions.
• Payroll cards that employers use to disburse wages are subject to the debit card rules.
• Many prepaid card issuers will reimburse you for fraudulent activities as long as you report it quickly.