Risk Factors: ATM, Debit and Credit Cards

There’s a lot of confusion about the differences between ATM cards, debit cards and credit cards since all three seem to be used interchangeably. Although these three types of cards are similar, there are some fundamental differences that may be the key to understanding just how safe you really are when you make a purchase.

Defining the Different Cards

1. ATM Cards: Not surprisingly, ATM cards first burst on the scene when ATM machines made their debut. These cards can be used exclusively to withdraw cash from an ATM machine, and they do not bear the Visa or MasterCard logo. They cannot be used to make purchases at any stores. Few people use ATM only cards anymore although they commonly refer to debit cards as ATM cards.

2. Debit Cards: Although many people wrongly believe that ATM and debit cards are the same thing, they are really quite different. Using a debit card is more like using an electronic check. Instead of being restricted to exclusively using your card at ATM machines to withdraw cash, a debit card usually comes with a Visa or MasterCard logo on it that allows you to swipe your card for purchases in all stores that accept those two credit cards. But, a debit card is not a credit card even though it can act like one. As soon as you swipe a debit card, the funds are withdrawn from your checking account immediately.

3. Credit Cards: A classic credit card is issued by a bank or a credit company as an extension of credit available to be borrowed. Simply speaking, it’s a loan that must be paid back with interest if the charged amount is not paid in full at the time of the first billing statement after a purchase is made. Unlike the other two cards, a credit card is not attached to your checking account in any way. And you don’t have to have the cash on hand in order to make a purchase.   
  
The Dangers Behind the Differences

Just as each card has its own unique features that offer an added level of convenience, each card also has its own dangers that may make you more or less vulnerable to identity theft. In regards to identity theft, having an ATM only card that you use only at an actual bank (as opposed to ATM machines serviced by outside companies and placed strategically in public places for an added measure of convenience) is one of the safest things you can do.

The primary danger with an ATM only card lies in having your actual card stolen. If that happens, a thief can travel to the closest ATM machine and withdraw the maximum amount allowed from your bank account.  The risk factor increases when ATM only cards are used at non-bank ATMs. Machines not attached to actual banks are more easily compromised, and thieves can capture key strokes and steal card numbers and pin codes. Thieves then turn around and make fake or imitation cards that they can use at ATM machines to fraudulently pull out cash. If you keep a close eye on your card, or report it missing as soon as you realize it is gone, and you always aim to use bank only ATMs, you should have limited problems with this type of card. 

Debit cards, however, pose more complex problems and higher risks. Because you swipe your card at countless retailers, and your information is stored (at least temporarily) inside of every machine you swipe your card at, you are far more vulnerable to becoming a victim of identity theft. Since you can actually use this type of card to make purchases, in addition to withdrawing cash, all a thief needs in order to commit fraud is your card number.

Since the card can be run as either “credit or debit” (even though funds are deducted from your bank account automatically no matter what you choose) thieves don’t even need your pin code. And, with countless opportunities to shop online, thieves can steal your money and begin spending rapidly without fear that anyone is going to ask them to verify their identities before making a purchase. Since debit cards are typically attached to checking accounts (with some cards being additionally linked to savings accounts to avoid overdraft charges) having this type of crime committed against you can be disastrous. In terms of potential damage that can occur due exclusively to card theft, a debit card puts you at greatest risk.

Although different, credit cards pose their own risks and dangers when it comes to identity theft. Credit card information can be compromised and misused in a similar manner as debit cards. Swiping your card for purchases is what puts you at greatest risk. However, because a credit card isn’t linked to your bank account like a debit card it is considered to carry a significantly lower risk. Thieves can begin making fraudulent charges immediately on your card and spend up to your predetermined credit limit. But funds are not being taken from your bank account so you don’t run a risk of bouncing checks or having to do without cash while the theft (once reported) is being investigated. Because no money is actually taken from you in this type of crime, it creates significantly less of a headache when it comes to resolving it.

How Each Card is Protected

If an ATM or debit card is reported lost or stolen before any fraudulent activity takes place, then you will not be held responsible for any fraudulent charges made to your account. In the event that a card is reported lost or stolen two days after fraudulent purchases are made, you cannot be held responsible for more than $50. But, if it takes between two and sixty days for you to notice the fraudulent activity and report it you may be responsible for up to $500.

But considering that not all fraudulent activity is the result of a stolen card (but is the result of a stolen card number) it might be harder to notice this type of fraud within the two day window unless you check your bank statements every single day. It’s also important to note that banks have eleven days or longer to credit the money back to your account depending on how quickly your investigation moves. So, you might be susceptible to bouncing checks or running out of cash in the interim.

Credit cards, however, seem to have more to offer a victim. As long as the fraudulent activity is noticed within 90 days, the victim cannot be held responsible for more than $50 in purchases. Because cash was not stolen from you, although credit was abused in your name, you don’t have to fight to have actual funds returned to you. And, most people check their credit card statements more consistently than they check their bank statements since credit card bills need to be paid every month, so the theft is easier to detect.

What You Should Do

Using cash only is the safest way to operate in a world where identity theft is the fastest growing crime. But, that’s not realistic. But the next safest method might require some change (and a little more discipline and planning) on your part. Are debit cards unsafe? Not entirely. But no card is completely safe in this technologically driven world, and debit cards pose the highest risk because you have more to lose.

If protecting your identity is your number one priority, then you should contact your bank and ask for an ATM only card so you can continue to have access to cash, and you should only use cash or credit cards when you make purchases in stores. If you like using a debit card because it prevents you from getting in trouble with a credit card, you can write all of your credit card purchases in your checkbook ledger as you would your debit purchases so that you can make sure you don’t overspend even though you are using credit. Then each month you can pay your bill in full while still resting in the peace of mind that comes from knowing that your bank account cannot be drained if your number is somehow stolen.

Is doing away with your debit card absolutely necessary? The jury of experts is still out on that one. So, at this time it’s really a matter of preference once you’ve weighed the consequences and evaluated what card options best suit your spending habits. Just remember, it’s your identity and it’s your job to protect it. Identity theft affects up to 10 million people a year. Don’t become one of them.