In hard financial times, anyone will tell you to watch your spending and do your best to keep your budget within your means, which is extra difficult during an inflationary economy like we’ve experienced this year.
For many of us, one way we might try to control our spending is to ditch the credit card and only spend money we have using our debit cards.
From a financial advisor position, that might be sound advice, but as an expert in online fraud and cybercrime, I have to advise against it.
While the way we use our debit cards appears to be nearly identical to how we use our credit cards, there are big differences when it comes to fraud.
When using a credit card, you are spending someone else’s money whereas, with a debit card, you are directly spending your money, and if your debit card has been stolen that means someone else is also directly spending your money.
This leaves little recourse to quickly recover any losses.
Have a dispute over a charge? With a credit card, you can dispute the charge but also refuse to pay the bill until you agree with the card issuer.
With a debit card, your money is gone until you can resolve the dispute, which may put you in a situation where you can no longer pay the rent because a criminal has charged a $500 game console to your account.
It’s not that debit cards have no protection, it is because your money is already spent, or at best frozen, while the dispute is being resolved, and banks aren’t exactly famous for being speedy and generous when it comes to settling these situations.
If you use a debit card, be sure to choose a strong, unique PIN, and don’t write it down in the same place where you carry the card.
If the card is lost or stolen, you need to report it to your financial institution as quickly as possible, ideally within 48 hours.
Unfortunately, the protections afforded debit card users are complicated, but they will limit the damage in the end, if fraud does occur.
For online transactions where your physical card is still in your possession, you will only discover if there has been fraud after you check your statements. It is critical to check your statements at least once a month for fraud, if not more frequently when using a debit card.
Many cards on offer include a zero-liability promise, especially when used for online purchases.
Some credit card issuers even offer the ability to generate one-time-use credit card numbers for online transactions to prevent your real card number from being stolen.
For those without easy access to credit, you may wish to consider a prepaid, reloadable credit card.
Many of the options available make it super easy to load additional money directly from an app, allowing you to only load what you need to the card when you need to use it.
This reduces your risk by not putting your entire bank account on the line.
Mr Wisniewski is a principal research scientist at next-generation security leader Sophos.