Federal law recognizes that banks should have enough safeguards to keep thieves and not-so-good Samaritans from compromising bank cards. Banks must replace stolen funds, even if a real pro hypnotized you and managed to get you to give up your card and reveal your PIN. You just have to make sure you notify the bank on time, and you may have to allow some time for the bank to refund stolen money.
If you let your bank know your card was stolen before anyone unauthorized had a chance to use it, you're completely off the hook. Even if it takes you up to two business days to report the theft, you're only liable for $50. If you wait until 60 days after your statement containing evidence of theft is mailed to you, your liability goes up to $500. Let it go past that, and you lose everything. Report a stolen card, or even a misplaced one, the moment you realize it is gone.
Reporting a loss or theft does not stop charges from appearing. It only stops your liability. Money can continue to disappear from your account, and you still need to read your statements and let the bank know which charges are not yours. If you reported the lost card, your liability is limited according to the rules above. Use the bank's regular error reporting procedures if your account information or the bank website does not list a special procedure for reporting transactions on a stolen or lost card.
Your bank does not have to return your money as soon as you report a suspicious transaction. It can take up to 10 days to reimburse money while it investigates fraudulent ATM or online use, and up to 20 days if the fraudulent transaction took place at a location such as a store or restaurant. In the meantime, your checks will not be covered unless you add enough funds to cover them. However, the moment you tell the bank your card is lost or stolen, the bank will block it. No further transactions will be processed once the card is blocked.
Be careful where you use your debit card. Use your credit card or cash if you're dealing with bars and restaurants, especially if you are traveling abroad. Don't authorize any but the most reliable merchants to charge your debit card on a regular basis. Use only ATMs that are clearly marked with the names of reputable banks or that are located in shops that you know and trust. Be even more careful with ATMs abroad, and find out from locals which banks are reliable if you don't see ATMs from banks whose names you recognize.
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