Keep an Eye on How You Pay for purchases to Limit Risks and Guard Your Cash
Covid-19 changed so many aspects of everyday life—how we shop, how we entertain and even how we pay for groceries. With bank lobbies closed for months last year, an increasing number of account holders turned to mobile banking, and electronic payments. It’s a trend that’s not likely return to pre-coronavirus norms, but consumers need to know that each payment method has its own good and bad features. Some payment methods really have your backs when fraud, overcharges or defective goods become an issue. Others don’t.
Each payment form draws on different laws and rules to determine your consumer protections, so here’s a summary of your rights and responsibilities to guide you on how to pay and protect your finances.
Scope of Protection
Two significant federal laws guard consumers against improper charges. The Fair Credit Billing Act (FCBA) and Electronic Funds Transfer Act (EFTA) were signed into law decades ago, but both still offer broad protection for transactions. These laws are in place to guard your wallet.
The average American adult holds three or four credit cards and FCBA covers credit primarily. The 1974 Act spells out a user’s right to dispute inaccurate charges by notifying the credit issuer within 60 days of the billing statement. After that, you’re on your own so check those statements monthly, OK?
Most disputes can be filed online and bogus charges aren’t your responsibility if you report lost or misused cards promptly. Merchants limit your total lost to $50 if you report promptly, but major insurers like VISA and MasterCard waive that fee.
If you can’t resolve the error for goods not received, misbilled or damaged in transit with the merchant, dispute these charges online and your credit account will be credited for the questioned amount while an investigation progresses.
Debit cards are a different animal, and the EFTA of 1979 protects this payment method. The big difference is that with debit, funds leave your account rapidly. You’ve in essence already paid the bill when you enter your PIN. If the card is accepted as a credit card and displays a VISA logo, the thief doesn’t even need your PIN to run up bills.
EFTA governs disputes, but with debit you could be liable for the first $50 if you report a loss within 48 hours of discovery. That figure jumps to $500 in some cases and rules generally allow the lender 10 business days to replace your cash as they investigate.
If you won’t have rent money at the end of the month, the 10-day hardship is killer. For errors and disputes, credit cards are the way to go if you can. EFTA also does not let users dispute missing shipments or damaged goods; state laws may, however, offer some coverage.
Today, a common pay method is one that’s so rapid it could make your head spin. Fund transfer payments like Venmo, PayPal and Zelle boast instant transfers, which may seem riskier than credit or debit, but these transfer mechanisms finally offer protections too.
EFTA, also called Regulation E, covers most funds tapped via computer or electronic method. The list includes ATM use, funds transfers by phone, direct deposits and debit point-of-sale transactions. Pre-authorized withdrawals from checking or savings accounts are covered too. So Zelle to your heart’s content after you read the service’s terms and conditions. Keep in mind, though, erroneous debits restoration can take weeks, not hours.
Another variant is the pre-paid or reloadable card; you can apply for one and load it up or might receive one in the mail for government benefits like unemployment insurance. Use of pre-paid plastic has soared in recent years. An estimated $116 billion was exchanged with these cards in 2020, so it’s another option to study.
In 2019, the federal Prepaid Accounts Rule took effect; it’s enforced by the Consumer Financial Protection Bureau. The law expanded EFTA coverage to include many pre-paid accounts and address several issues created by digital wallets. Be sure to register the card with the issuing institution to activate coverage.
Credit cards provide additional benefits that other methods may not. Think of credit cards as an emergency fund for income disruptions and a device to offer you the more consumer protections for electronics purchases, etc. The big credit card issues generally dress up their credit products with automatic warranty extensions and, in some instances, item loss coverage for up to 90 days after purchase.
The riskiest method of payment is cash, of course. Get a receipt if you plan to pay with greenbacks because your only recourse in a dispute could be small claims court.
Bank policies control check forgeries and your liability’s usually zero if your signature is faked, but when an institution receives your check and converts it to an electronic one, EFTA kicks in.
Confused? IDShield can monitor all your debit, credit and bank account numbers to alert you to potential theft or fraud. Our alert might be your first clue that data’s been compromised. Faster is better because the sooner a data leak is addressed, the less the damages you’ll experience in the foreseeable future.
IDShield is a product of Pre-Paid Legal Services, Inc. d/b/a LegalShield (“LegalShield”). LegalShield provides access to identity theft protection and restoration services. For complete terms, coverage, and conditions, please see an identity theft plan. All Licensed Private Investigators are licensed in the state of Oklahoma. This is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide any specific recommendations.