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Why Are Credit Cards Safer Than Debit Cards?

Anyone who holds a bank account in India has a debit card. Despite a large number of debit card and ATM frauds reported in the last few years, their use has been significantly high, thanks to its wide reach and acceptance at a time when the Indian government is pushing digital transactions.

Public and private sector banks and the RBI have been taking several measures to curb debit card frauds, however, as a user, we hold the primary responsibility of taking care of our funds at the bank.

The advancement or rather the wider reach of technology has made it easier for criminals to steal anyone’s identity as there are several ways to find one’s personal details and even your bank account details online.

All that time you spend on Facebook and other social media networks, you are already giving away details on your date of birth, phone number and email address to the fraudsters right on your profile page.

Fraud expert and ex-con artist Frank Abagnale in a CNBC article explained that unlike in the pre-digital age where one needed special printing devices to produce fake cheques, fraudsters today can download bank logos and a company CEO’s signature from an annual report, all available on their respective websites. They can go ahead and make some fake phone calls to the company’s account receivable department and ask for writing instructions, which could then fetch the fraudster their bank account number and name of the bank the business holds an account with, to print a fake cheque with a fake signature.

While there are several creative ways for a fraudster to steal money from banks, the simplest way a common man can protect themselves from potential fraud is by not using a debit card, says Abagnale.

He said that with every use, we are putting our bank account and the money in it at risk. He suggests using a credit card instead, because

  • There is a credit limit set by the issuing bank on credit cards which prevents the fraudster from making large withdrawals if the card is ever stolen.
  • When you use a credit card, you use the bank’s money while your money is resting in your bank account, earning interest.
  • You can pay your credit card dues conveniently at the end of the month without any extra charges.
  • In case of a data breach, the amount that the fraudster charges on your credit card will not be your responsibility. You simply need to report the fraud immediately and cancel the card. In case of debit card frauds, the money that is rightfully yours will be deducted from the bank account and you will have a hard time recovering it from the bank. You will have to go through lengthy claim procedures. If the fraud was caused due to your own carelessness, you will never get the money back.
  • Credit cards are more widely accepted especially if you are making an online purchase at an international website based outside India.
  • Credit cards are also convenient and safe for using when you take a vacation within India or abroad.

Other tips

  • You can use the new ‘tokenisation’ system introduced by the Reserve Bank of India (RBI) where a user can create alternate code to the debit or credit card details while they make a transaction or payment. These tokens can be used to make payments for online transactions, in-app transactions, point of sale terminals, quick response (QR) code-based transactions, near field communication (NFC) and magnetic secure transmission (MST) transaction methods.
  • Keep you cheque usage to the minimum as these are also prone to frauds.
  • Check your bank statements more often to keep track of your balance and transactions.
  • You can also erase the CVV number on your card and memorise it instead to avoid it being misused, if ever stolen.

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