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If you’re looking at your bank statement and see a charge you don’t recognize, or if you buy something online with your debit card and never receive it, you may need to dispute a debit card transaction.
While credit cards tend to carry zero liability when it comes to fraud, you still have protections on a debit card. Let’s take a look at what your options are and in what situations you might be able to get your money back.
In this article:
- Debit cards vs. credit cards
- Fraud protections
- When you’re charged the wrong amount
- Merchant disputes
- The bottom line
Debit cards vs. credit cards
The first thing to understand is what part of federal law governs debit cards and credit cards. Debit card transactions fall under the Electronic Fund Transfer Act. Credit card transactions fall under the Fair Credit Billing Act and Truth in Lending Act.
With a credit card, federal law limits your liability for fraudulent transactions to $50 — but many credit card companies will go beyond that and offer $0 fraud liability. With a debit card, you could potentially be liable for a much higher dollar amount. (See the “fraud protections” section of this article for more details.)
When using your debit card to make a purchase, the clerk might ask if you want to run your card as debit or credit. If you say “debit” you’ll probably need to enter your PIN, whereas if you say “credit,” you probably won’t have to enter your PIN and you may need to hit the red “cancel” button on the terminal. It’s important to note that in either case, the amount of the purchase will be deducted directly from your checking account, and you’ll have the legal protections that apply to a debit card. However, processing your transaction as credit on a debit card does not mean you’ll be afforded the same protections as if you had used a credit card.
What steps do you need to take if you notice a debit card transaction on your checking account that you didn’t make? First, you need to report the unauthorized transaction to your bank immediately.
From the time an unauthorized transaction occurs, you have two days to report it. If you catch it in time, your liability will be capped at $50, said Lynnette Khalfani-Cox, a personal finance expert and author known as The Money Coach. If you don’t report it within two days, but report it within 60 days, your liability has a maximum amount of $500. After that, you’re facing potentially unlimited liability.
“Once you’ve gone past 60 days, when something has already been taken out of your checking or savings account, then it’s kind of like all bets are off,” Khalfani-Cox said.
How much you’re liable for
“The bad news for people who are using their debit card — if they have something they want to dispute — is you could potentially be responsible for up to the entire amount of the dispute in question, depending on how long you take to actually notify your bank or card issuer about it,” said Khalfani-Cox.
It’s worth asking what protections your bank offers, since some banks may choose to go above the minimum required by law. For instance, Wells Fargo confirmed via email that its credit cards and debit cards both come with zero liability protection, meaning you won’t be held responsible for promptly reported unauthorized card transactions.
What happens while the bank is investigating
Under the Electronic Fund Transfer Act, a bank has 10 business days to investigate a fraudulent transaction once it’s reported. However, in some circumstances, it can take up to 45 days. If the investigation goes for more than 10 days, the bank should restore your funds until the investigation is complete. However, once the investigation concludes, those funds can be removed if it turns out you’re liable for the transaction.
Though you can expect provisional credit within 10 business days, in some cases, banks are allowed up to 20 days before issuing it. And though most investigations have to wrap up within 45 days, some are allowed up to 90 days to conclude, all of which can leave you in a lurch, depending on how much cash was stolen.
How to file a dispute
“You can file a dispute either orally or in writing,” said Nessa Feddis, senior vice president of the American Bankers Association. “It’s probably better in writing because that means the customer will get provisional credit within 10 business days.”
You should get provisional credit within 10 business days even if you file your dispute orally, Feddis added, but doing so in writing gives more assurance that you will.
If your bank has a way to dispute transactions online, doing this can count as disputing a transaction in writing, Feddis said.
You can often find a phone number on the back of your debit card. Calling your bank can be a good way to start the dispute process, but shouldn’t be the only thing you do.
“A call is OK to begin the process, but it’s certainly not enough,” Khalfani-Cox said.
When mailing a physical letter, Khalfani-Cox suggests to send it by certified mail with a return receipt, in order to establish the timeline of your dispute.
When you’re charged the wrong amount
When you’re accidentally charged the wrong amount on your debit card, the same protections and rules from the Electronic Fund Transfer Act apply as to unauthorized transactions.
Of course, it’s worth reaching out to the merchant when you notice that you were charged incorrectly. If there was an honest mistake and the merchant steps up to remedy it, that can save you both a lot of time and hassle.
A merchant dispute is when you purchased a good or service, but you didn’t receive the goods, or the product or service wasn’t satisfactory. In this situation, your first step should be to contact the merchant — in writing, so you have a record — and make an effort to work things out. If the merchant doesn’t respond to your good faith effort, then you might need to dispute the transaction. This is a case when using a credit card is much preferable to a debit card.
When dealing with a credit card dispute, there are four parties involved. There’s the consumer, the bank issuing the card, the payment processing company (such as Visa or Mastercard) and, of course, the merchant.
“All four of these have to cooperate and play nice to a certain extent because they will all do business again, and again, and again,” Khalfani-Cox said.
In this situation, the bank issuing the credit card can often be expected to act on the cardholder’s behalf, helping them get a chargeback. But with a debit card, there’s no guarantee the bank will do that. It’s entirely up to the bank, Khalfani-Cox said.
It’s also important to note that when using a debit card, you have no way to stop payment for a service or product that has already been provided.
Finally, a key thing to understand is that merchant dispute protections on credit cards only apply within your state or within 100 miles of where you live. (Purchases made online are considered to have been made in your home, Feddis said, so they can qualify for the merchant dispute process.)
Though it’s no guarantee, providing as much documentation as possible can help increase your chances of success with a merchant dispute — both with credit cards, and debit cards. Documentation may include things like correspondence with the merchant, photos of damaged merchandise, screenshots or photos of advertisements for the merchandise and more.
The bottom line
When it comes to fraudulent transactions, both credit cards and debit cards offer cardholders some level of protection.
However, even if you’re a victim of fraud, you can end up being liable for more money if you used a debit card than if you used a credit card. There’s a big difference between a $50 liability cap for a credit card and the $500 liability cap for debit card transactions reported more than two days after the transaction but within 60 days.