Thanks to the credit crunch, debit cards are increasing in popularity. There is a fundamental difference between debit cards and credit cards — With debit cards, you can only spend what you have. With credit cards, you can get in serious debt. Debit cards also differ in how you are protected from unauthorized charges. Learn how to dispute unauthorized debit card charges with this article.
[ad#Google Adsense]In the U.S., consumers who use debit cards to make purchases are protected by “Regulation E: Electronic Funds Transfers“. The law sets out rules for banks to follow in the event your debit card is used for “unauthorized” or “incorrect” transactions.
If you report an unauthorized or incorrect transaction to your bank within 60 days after the date on which your bank statement was mailed or made available to you, your bank has to follow the rules of Regulation E to fix or investigate the error.
For prepaid debit card transactions, since most prepaid debit card issuers do not mail paper statements, you will need to watch your online bank statements closely to look for potential errors or unauthorized transactions. Report the error as soon as you notice it to make sure that you enjoy the protections of Regulation E.
Here’s the type of information you’ll need to give to your bank if you suspect a fraud or other error (we recommend that you provide the information in writing, but according to Reg. E, “oral” notice is ok as well):
- Clearly identify yourself (by name) and your account (by account number).
- Clearly explain why you believe an error exists and include, to the extent possible, the type, date, and amount of the error.
In some situations, if you give your bank oral notice of the debit card dispute, your bank may respond to you with a request that you give written confirmation of the error within 10 business days of an oral notice. If your bank does this, it needs to tell you about the requirement and must provide you with the address where confirmation must be sent when you give them the oral notification.
If you report the error quickly and properly (as discussed above), the bank must investigate the dispute promptly. In fact, banks are required to resolve the dispute within ten days of receiving your dispute notice. If they aren’t able to resolve it within ten days, they can get extra time if they grant you a provisional credit in the amount of the dispute (plus interest, if any).
So how much protection do you get for unauthorized transactions?
It depends on how quickly you identify the error and notify your bank. Here’s a quote from Reg. E:
If the consumer notifies the financial institution within two business days after learning of the loss or theft of the access device, the consumer’s liability shall not exceed the lesser of $50 or the amount of unauthorized transfers that occur before notice to the financial institution.
If the consumer fails to notify the financial institution within two business days after learning of the loss or theft of the access device, the consumer’s liability shall not exceed the lesser of $500 or the sum of:
(i) $50 or the amount of unauthorized transfers that occur within the two business days, whichever is less; and
(ii) The amount of unauthorized transfers that occur after the close of two business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period.
So, if you are fast with catching an error, your loss is limited to $50. If you are not so fast, you could lose up to $500.
Luckily, Visa and MasterCard and many banks have “Zero Liability” policies that provide added protection.
However, to be safe and to avoid any potential loss, the bottom line is that you need to closely watch your online statement for your prepaid debit card. Catch unauthorized transactions fast, and the protections of Reg. E can help you minimize any losses.