How Does Debit Card Fraud Happen? Can You Avoid It?

What Is Debit Card Fraud?

Debit card fraud, in general, happens when someone unlawfully uses your debit card or card information to make purchases or withdrawals. 

For months, customers of the Yellow Springs Federal Credit Union noticed unexplained charges on their debit card accounts [*]. At first, the charges were small and seemed to give their savings accounts a wide berth.

Slowly and incrementally, these charges ballooned to a few thousand dollars. By the time the credit union announced the news of the attack, scammers had siphoned more than $35,000 in fraudulent transactions.

In this case, thieves resorted to generating debit card numbers en masse and attempting test transactions until they were successful.

With a positive match, the thieves then began to make larger purchases until getting caught. Having discovered the fraud early on, the credit union was able to post every dollar of fraud back to member checking accounts.

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What Happens When Your Card Is Fraudulently Used?

Debit card fraud can happen when you lose your wallet, or as a result of a concerted attempt — like what occurred at Yellow Springs Federal Credit Union.

Debit cards and credit cards follow different regulations. When you dispute an unauthorized credit card transaction, card issuers must abide by the Fair Credit Billing Act (FCBA) in response. This provides you with certain protections and may help you recuperate your losses.

When unauthorized debit card transactions take place, your issuer is bound by the Electronic Fund Transfer Act (EFTA), which extends fewer protections. 

This means you may end up shouldering more responsibility for debit card fraud than you would for credit card fraud.

The best way to reduce debit card fraud damages is by acting early. Look out for these warning signs of fraudulent debit card use:

• Unfamiliar transactions on your bank statement. If you notice unusual transactions in your debit account, someone may be using it for their own benefit. This is what happened to an Alabama woman who found $12,000 in DoorDash deliveries posted to her debit account [*].
• Unauthorized withdrawals or transfers. If criminals have stolen your debit card information or hacked into your bank account, they may be able to withdraw your money from an ATM or transfer it directly to a different account.
• A slew of failed attempts to withdraw funds. Scammers may have access to your account, but still be unable to withdraw funds due to security restrictions. If you receive notifications to reset your PIN, update your card, or check your account balance, be on the alert.
• Changes to your online banking account. If someone breaks into your online bank account, you may notice changes to the way your account looks or functions. Scammers may be seeking ways to send themselves money directly from your debit account.
• Receipt of a replacement debit card that you did not request. If you receive a replacement debit card in the mail without requesting one, it might mean someone made that request without your knowledge.
• Unusual delays in receiving your monthly bank statement. If your statement does not arrive on time, it might mean that someone intercepted your mail looking for sensitive data about your bank account.
• You’re unable to use your card at in-store terminals. Scammers may install card skimmers on point-of-sale (POS) terminals in busy stores. If you have trouble inserting your card, be sure to alert the cashier.

⛳️ Related: Help! My Debit Card Was Charged For Something I Didn't Buy! →

How Does Debit Card Fraud Happen?

Scammers have several ways of conducting debit card fraud, including:

• POS skimming. Skimmers are small devices that criminals attach to POS readers in stores or gas stations. When you scan your card to make a payment, the skimmer also scans it and stores the data elsewhere. Scammers can then copy your data to a new card and use it as their own.
• Using the “tap” function. By gluing the card reader slot shut, thieves strong-arm customers into using their debit card’s tap function at the ATM. What most customers overlook is the fact that you stay logged in to your account for more transactions until otherwise canceled [*].
• Eavesdropping attacks. Any time debit card data is in transit, there’s a chance scammers may intercept it. Eavesdropping attacks include everything from scanning insecure transactions made over public Wi-Fi to installing keylogger malware on peoples’ mobile devices.
• Data breaches that expose card information. If you use your debit card to purchase from a retailer that subsequently suffers a data breach, hackers may get access to your debit card information. 
• Stealing physical cards. Stealing a physical debit card is one of the simplest ways to gain access to someone’s debit account. Scammers may also target identification documents and other valuable data, like your bank account number.
• Intercepting mail. Your mail may provide scammers with a great deal of information about you. They may find the banks at which you have accounts, and use that information to target your debit card account.

To Protect Yourself from Debit Card Fraud, Take These Steps Now

1. Set up online banking alerts
2. Choose paperless statements
3. Use your credit card for better consumer protections
4. Use bank ATMs instead of ATMs at public locations
5. Maintain a low account balance
6. Bank with well-known financial institutions
7. Protect your card online
8. Use a password manager
9. Disable overdraft protection‍

1. Set up online banking alerts

Most banks allow customers to set up security warnings when suspicious transactions take place. You may receive these alerts as emails, text messages, or mobile notifications.

We recommend choosing mobile notifications delivered through your banking app. Emails and text messages are easy to spoof — making you vulnerable to phishing scams.

Your bank might offer alerts for ATM withdrawals, direct deposits, and large purchases. Setting up alerts for debit card transactions and balance inquiries could also be options.

2. Choose paperless statements

Receiving paper statements exposes you to mail fraud. If someone can intercept your bank statement in the mail and learn your bank account number, they may be able to break into your bank account or impersonate you at the bank’s physical location.

Consider opting for paperless statements for all of your financial accounts. This way, you receive email statements that require you to log in before any sensitive data is displayed.

3. Use your credit card for better consumer protections

When it comes to security, credit card regulations are notably more rigorous than the rules that  debit card issuers must follow. Credit cards have lower liability limits in comparison to debit cards.

Credit cards also have a chargeback process for unauthorized charges. Better yet, opting for contactless payments (or a service like PayPal) can protect both your debit and credit cards.

4. Use bank ATMs instead of ATMs at public locations

Bank ATMs are among the safest because they invest heavily in surveillance and security. This makes it harder for scammers to conceal card skimming devices at ATMs without getting caught.

Prioritize bank ATMs located inside the bank, especially those that are only accessible during business hours.

⛳️ Related: The 7 Latest Ally Bank Scams (How To Avoid Them) →

5. Maintain a low account balance

Avoid accumulating large sums of money in any single account. This is especially true for debit card accounts frequently used for everyday purchases.

Consider keeping the bulk of your savings in secure, interest-bearing accounts. You can usually transfer spending money to your debit card once a month without incurring penalties.

Money market accounts, term deposits, and other interest-bearing accounts are generally more secure than debit card accounts. They come with restrictions that make them impractical for day-to-day use, limiting their exposure to potential risks.

6. Bank with well-known financial institutions

Newer banks, credit unions, and other financial institutions may not have the security posture that is necessary to protect your account from a wide variety of threats.

For instance, text fraud alerts or instant deactivation for lost or stolen cards may not be available with smaller banks. Further, they may charge you for advice on personal finance, biometric authentication, or other resources that large banks offer free of charge.

7. Protect your card online

Whenever you pay for something online, you have to transmit sensitive card data to a payment processor. 

If the connection is not secure, hackers can intercept the data that you send to the payment processor and use it to commit debit card fraud. Be especially cautious of unsecured public Wi-Fi and websites without SSL certificates.

Using a virtual private network (VPN) to encrypt your connection when you’re online can mask your IP address, location, and identity from unknown third parties.

VPNs can’t, however, protect you against unsecured websites. Connections between your device and the VPN server are encrypted — whereas those between a VPN server and an unsecured website are not. 

If your web browser warns you that a website has an invalid certificate, don’t navigate any farther.

⛳️ Related: What Is VPN on iPhones? Why You Need It & How To Turn It On →

8. Use a password manager

Use a secure password manager — such as Aura’s — to create and store unique passwords for each of your accounts behind a master password. Since password managers only populate your information on websites that match your saved credentials, you’re less likely to be phished.

Aura’s password manager automatically checks for compromised passwords leaked in data breaches. In addition, you will receive alerts in case of weak or reused passwords.

9. Disable overdraft protection

Overdraft protection allows cardholders to spend more money than they have in their account, in exchange for a fee. Based on the type of protection you have, your bank may cover the overdraft by using funds from a line of credit, credit card, or by lending you money.

This may protect you from having insufficient funds at checkout; but it also gives fraudsters access to more money than they would have otherwise.

How To Report Debit Card Fraud

Most (but not all) debit card agreements include a zero liability policy that protects cardholders from losses incurred due to fraud. However, you’ll have to prove that you lost that money due to fraud, often within a very short time frame.

The process of reporting fraud changes — depending on the fraud itself. The extent of the investigation and the likelihood of recovering lost funds also depend on how scammers accessed and misused your debit card data.

If your card was lost or stolen:

If you contact your bank before any fraudulent charges are made, you can cancel the card right away.

Here’s what happens if you delay reporting a lost card until after discovering fraudulent charges to your account:

• If you report the loss within two business days, your bank will deduct up to $50 from reimbursements.
• If you report the loss after two days, but less than sixty days after receiving your last bank statement, you may only be liable for $500 [*]. This bank statement must include the unapproved charges posted to your account.
• If you wait longer than sixty days after receiving your last bank statement, you may have no recourse.

If your card number was used fraudulently:

If your physical debit card was not lost or stolen, you aren’t responsible for any unauthorized transactions as long as you report them within sixty days of receiving a bank statement displaying said transactions. Still contact your bank, and monitor your account to prevent future fraudulent transactions.

Other entities to contact:

• If scammers used your personal information to conduct debit card fraud, report identity theft to the Federal Trade Commission (FTC) at Reportfraud.ftc.gov.
• If you lost any identification documents along with your debit card, contact one of the major credit bureaus — Experian, TransUnion, or Equifax — to issue a fraud alert for your account.
• If you have pre-approved payments on your debit card, cancel them and provide merchants with new card details. If you don’t have another account ready to use, consider temporarily canceling all subscriptions associated with your debit card.

Should you file a police report?

Filing a police report may help you expunge disputed charges from your debit card account. If you lost your physical debit card, file the report in the jurisdiction where you last remember having the card.

If you don’t know who gained access to your debit card account, or where the fraud took place, file a report at your local police station. Bring any government-issued identification, proof of your address, and proof of the theft.

Fraud Is Always a Possibility. Aura Can Help.

Outside of identity theft, most digital crimes tend to revolve around in-person transactions or online purchases. For example, card-not-present transactions account for nearly 70% of all card-related fraud [*].

No matter how diligent you are with your payments, you should always monitor your bank and credit accounts on a regular basis. 

For continuous credit monitoring and financial fraud protection, consider Aura. Lock your Experian credit file with one tap, and receive credit fraud alerts that are 250x faster with Aura.^[3]

It’s surprisingly easy to be more secure online. Try Aura today.