Target Hacked – Credit Cards vs. Debit Cards

The world seems to be going crazy this morning with news that some 40 million credit cards were stolen from Target’s databases. My Twitter feed is aflame, it’s all over my news sites, and I’ve even received email from family members warning me to get all my cards reissued. I’m not going to, though. I only use credit cards, so it’s not my problem.

If my number just happens to be one of the 40 million stolen, and if a thief happens to actually try and use it, and if the credit card companies’ powerful automated anti-fraud systems don’t happen to notice that I couldn’t possibly be buying a new television from Amazon in Kazakhstan while also paying for dinner at Chez Billy, then in that unlikely scenario my total projected costs will be a grand total of $0, plus a minor inconvenience while my card gets re-issued.

How can this be?

In the United States, the law limits consumer liability for credit card fraud to the first $50, so no matter what happens, I’m only out $50. As a bonus, credit card companies nearly always waive that $50 charge, as they would rather not piss me off and lose me as a customer over a another person’s crime.

But if you use debit cards, the story is different. The consumer protection laws are far more lax, with a potential maximum liability of up to $500 – 10x more! And even though most cases of fraud will probably eventually be resolved, in the meantime, the missing money is your money. The bank can take up to 10 days to investigate the fraud, and during that time your checking account will sit empty. When you use a credit card, you’re buying things with somebody else’s money_._ While they investigate the fraud, you’re not out a nickel.

The moral of the story is: Use credit cards instead of debit cards. Or use cash. But either way, cut up your debit cards.

[You can find more information on the legal difference between credit cards and debit cards at US PIRG.]