More Debit Card Safety Needed

The debit card, that hybrid of ATM card and credit card, is becoming more popular. But some consumers don’t know that legal liability for fraudulent use of a lost or stolen debit card is far more than for a credit card. Two big institutions have voluntarily extended some credit card protections to debit cards, but clearer disclosures of risks and greater security safeguards are still needed.

Banks have sent out millions of these cards, typically branded with credit card logos, to replace ATM cards. Many consumers are plenty confused. Debit cards, unlike credit cards, are linked directly to a bank account from which a deduction is made electronically. When the card is used at an ATM, an ID number is required, but used as a debit card in a store, only a signature is required, as if it were a credit card. A bank account can be cleaned out fast.

When a credit card is lost or stolen, the legal limit for fraud loss is $50. Under current regulations, debit card losses are stopped at $50 only if the loss is reported within two days. After that, liability rises to $500 and is potentially unlimited if unauthorized charges are not reported within 60 days after the card holder receives a bank statement showing the charges. Last month, MasterCard International said users of debit cards with its logo will not be held liable for more than $50 in unauthorized use. Bank of America is doing the same for its cards, with the Visa logo. Good, but BofA is only one member bank of Visa, which has said only that it is considering changes.

Banks save money on debit cards because they don’t have to process paper checks. In return, all users of these cards deserve at least the legal protections and disclosures of credit cards.