Consumers get fewer protections with debit cards

Debit cards may not add to a consumer's credit card debt, but they carry fewer protections from fraud than do the other options, according to a report from Reuters. While the payment option has grown far more popular, some consumer advocates believe they also greatly increase not only the chances for fraud, but the amount that can be lost to such a crime.

"We are very clear on that matter. We do not recommend that people use debit cards," Beth Givens, director of the Privacy Rights Clearinghouse, told the news agency. "We think they can be dangerous."

For example, while many banks claim their debit cards have the same zero liability protections that credit card debt does, there are legal limits to how much they can provide, the report said. Further, it typically takes far longer to detect fraud with debit than credit.

Research has found that the average amount stolen from debit accounts totaled $3,677 last year, and wasn't discovered for an average of 35 days, the report said. It took far less time to spot bogus credit card debt, and issues related to this type of fraud were typically cleared up more quickly.

In addition, disputing mistakes on your debit card is often more difficult than it is for erroneous credit card debt, Reuters noted. This is because a credit card company will withhold payment from a merchant until a dispute is resolved, but with a debit card, they already have the money, making it tricky to retrieve in some cases, because the burden of proof is on the consumer.

Debit cards are also likely to be hit with higher fees and charges in the near future, the report said. The Federal Reserve Board will soon convene to discuss limits on what payment processing networks can charge businesses for every transaction involving debit. Banks are expected to make up for the lost profits by adding a number of service fees to these accounts.

In addition to turning to debit cards, consumers have also avoided adding to their credit card debt by using cash and prepaid cards more often.