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Target security breach rekindles credit-versus-debit debate

Will the Target debacle spell the demise of the debit card?

This is the question posed by a recent San Francisco Business Times article, in which author Mark Calvey wonders if this massive breach of security might put people off paying with plastic.

Calvey didn't explore the differences between debit and credit cards, but a glance at the Federal Trade Commission's guidance for consumers on lost and stolen cards and card numbers reveals a startling truth: If you're a victim of plastic fraud, you might be much better off if it's your credit card that's compromised.

Credit cards' statutory protections better

That's because the Fair Credit Billing Act caps your total liability in the event of credit card fraud at $50. And that's it. Providing you did nothing criminal yourself, you can't lose more than that -- by law. And, in reality, the chances of your being charged even $50 by your card issuer are small.

Debit cards are governed in this respect by the Electronic Fund Transfer Act, and this provides much less rigorous protections against liability. True, you're unlikely to suffer significant losses if your debit card is compromised, and many banks voluntarily provide their own protections, but under this law, in extreme circumstances, it's possible you could lose all the money taken from your debit card account, and possibly more, according to the FTC.

Target victims protected

None of this need bother you if you're worried about being a victim of the hacking of Target's systems in December. On its website, the retailer promises, "you have zero liability for any charges that you didn't make."

The company goes on to explain who may be at risk as a result of the data breach: anyone who shopped at Target, using a card, between Nov. 27 and Dec. 15, 2013. However, it says that those affected need take no further action beyond closely monitoring the accounts associated with the plastic used, at least unless and until unauthorized charges start appearing. If that happens, you should call the phone number on the back of your card.

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