Since 2001, the California Office of Privacy Protection has provided individuals and businesses with information and assistance on ever evolving privacy topics such as identity theft, online child safety, financial privacy, cyber security and mobile device privacy.

Credit or Debit

Every time you use a payment card to buy something, you are choosing how much risk you take. As your financial transaction moves through the hands of “custodians” invisible to you, your account number might slip from any one custodian’s grip. If that (a data breach) happens and you used a debit card, your bank account may be open to bad guys. If you used a credit card, your bank account is safe. Your liability in a data breach is greater with debit, than credit.

A recent case shows what we mean: Global Payments is a card transaction processor, a company that moves data between merchants, banks, and networks like Visa and Master Card. In March 2012, cyber gangs hacked Global and got the account data of about seven million cardholders. If you used your debit card, your bank account could have been available to crooks before you learned about the breach.

Debit cards: A closer look

A debit card – with a Visa or Master Card symbol on it – allows you to withdraw money via an ATM, or to charge purchases. A thief can use your debit card number for a non-PIN transaction, getting access to your bank account. When a thief uses a stolen credit card number, your liability is limited to $50. This is not the full story with a debit card.

Balancing risk and convenience is tough for everyone. Our chart helps you weigh your options:

	Credit Card	Debit Card
HOW IT'S USED	• Allows payment over time/can build debt	• Withdraws money from checking account/overdraft fees
WHAT HAPPENS IN A DATA BREACH	• Maximum liability for unauthorized transactions: $50 • Disputed amount can be deducted from payment	• Maximum liability for unauthorized transactions: Total amount after 60 days from statement • Stolen amount missing from account until bank completes investigation

ATM-only cards revisited

In the new world of unseen transaction-handling, you can use an old fashioned ATM card to get cash from an ATM machine and avoid the risk of identity theft in a data breach. The ATM card requires a PIN for the transaction. If your ATM number goes missing, it’s worthless without your PIN. Using an ATM-only card (no Visa or Master Card logo) to get cash and a straight credit card (not debit) when you want to delay payment provides good protection against card number theft.

More:

• Privacy Rights Clearinghouse on credit vs. debit
• Federal Trade Commission on credit, debit, ATM cards
• Los Angeles Times on card breach
• Wall Street Journal update on card breach

SPOTLIGHT

Archive of Past Privacy Tips

Last Updated: Friday, January 27, 2012