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Credit Cards, Identity Theft Protection

When Banks Can Refuse to Refund Fraudulent Debit Card Charges

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Typically, debit cards that are used as “credit” are offered the same protections as credit cards. This means that if you use your debit card in a store and choose “credit” instead of entering your PIN number, you should receive the same protections as if you used an actual credit card. However, we do encourage you to double check the fine print your bank provides on this matter before assuming your debit card will receive those protections.

But here’s a scenario where your debit card is riskier than your credit card. If you withdrawal money at an ATM (or any store doing cash back) using your PIN number, you have additional risk. If someone steals your pin number with a skimming device at an ATM, then he has direct access to your money. This isn’t like credit card fraud with obnoxious charges you need to dispute. This is your hard-earned cash being taken directly out of your checking account. And if you aren’t careful, you might not be able to recoup your losses.

So, what can you expect if you are a victim of debit card fraud?

Timeline for Being Able to Get Your Money Back

If you are a victim of debit card fraud, you are responsible for the following:

  • $0 if you report the loss or fraud immediately and the card has not been used,
  • Up to $50 if you notify your bank within 48 hours of your lost or stolen card,
  • Up to $500 if you notify the bank with 48 hours and 60 days of your lost or stolen card, and
  • All of the fraudulent charges if you don’t notify the bank until after 60 days.

It’s important you don’t delay in reporting the fraud to your bank if you want to be able to get all of your money back. If you were the victim of theft because the crook skimmed your info and used your PIN, then you may be on the hook for the $50 because you couldn’t report to the bank before the card was used. You didn’t know it had happened until the strange transaction showed up!

It may seem unfair to be responsible for charges that you did not actually charge yourself, but to avoid that scenario and protect yourself, consider taking the following precautionary actions.

What You Can Do To Protect Yourself

To protect yourself against debit card fraud, you should do the following:

  • Only use an ATM inside a bank (this will lesson the likelihood that a scanner is on an ATM)
  • Cover your hand when you type your pin into an ATM (to protect yourself against any devices attached to the ATM from getting your PIN)
  • Set up text alerts for each transaction over $0.01 on your card. This way you’ll be immediately alerted if a bogus charge is made
  • Monitor your bank on a regular basis (so you can give notice of fraud immediately)
  • Report stolen funds immediately (so you’re not responsible for the charges)
  • Check-in annually with your bank as to the policies regarding debit card theft (know whether your debit card is specifically protected and to what extent)

While you can notify the bank by phone, it is best to get everything in writing. For purposes of the time requirement, notice is considered given when you put the letter in the mail. It’s even better if you send the mail certified. You can, of course, send notice by mail and call. Whatever you do, keep a record of your communications you have with the bank. This will put you in the best position if you have to escalate your problem.

Remember that if you take the actions listed above, you will be more protected than you otherwise would. Even if you didn’t do anything wrong, like in the example above, you can still find yourself stuck with fraud charges that your bank won’t reverse. These specific steps will help you protect yourself, even when you’re not at fault. This is particularly important if you use your debit card frequently.

Don’t want to use a credit card? Learn how to survive with just debit cards here. 

Debit vs. Credit: How to Decide

Using a debit card forces you to keep your spending in check because you cannot spend more than you have in the bank. However, it may be riskier than using a credit card for the reasons described above. Discover, for example, now offers a Freeze It® on/off switch for your account. If you’re concerned because you’ve lost your card, you can temporarily freeze your account and Discover will not authorize new purchases, cash advances or balance transfers.

If you’re not sure which is best for you, ask yourself what do you value more – your spending being limited or the additional protections from fraud. If you can control your spending, then you may be better off with a credit card. If you are a spender, however, then take the additional steps listed above to make sure you fully understand your specific liability in the event of debit card fraud. If you feel your bank is behaving unethically and should be refunding you, then reach out to the Consumer Financial Protection Bureau to file a complaint.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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College Students and Recent Grads

Should You Settle Your Private Student Loan Debt?

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If you’re wondering whether private student loan debt settlement is a good idea, then you’re probably in a bit of financial trouble already. And you’re not alone: Data shows that 11.5% of student loans are delinquent, a huge number when you consider that 44 million Americans have student debt. Unlike handling delinquent loans with a federal debt servicer, such as Great Lakes or Navient, private student loan settlement doesn’t include many of the same flexible options. For example, you will not be eligible for government income-driven repayment plans or mandatory forbearance and deferment.

Also, because each private lender has its own policies, your specific choices will depend on who you owe and how willing that lender is to work with you.

Let’s look at what’s involved with private student loan debt settlement and what other alternatives are available if you’re at the end of your financial rope.

Private student loan settlement: Can you settle your debt for less?

Private student loan debt settlement does happen, though this would generally occur after your loan is in default. While federal student loans aren’t considered in default until at least 270 days have passed without a payment, private loans can (in theory) go into default after just one missed payment.

Default brings a parade of serious consequences for your finances, including possibly having the debt sent to a collections agency and even facing a lawsuit, which could lead to creditors taking money directly from your paycheck or going after your property.

But your private lender might be willing to work with you, either on an affordable repayment plan or possibly settling the debt for less than you owe. Ideally, you’d want to fix things before the loan goes to collections, or a lawsuit is filed.

How your private student loans can end up in collections

If you stop repaying your private student loans, a private lender can contact you and try to secure payment. Often, however, the lender will have a third-party debt collector do this.

Having debt in collections can involve an onslaught of phone calls, emails and other communications, as the agency tries to recover the money owed. But the law also states that the collections agents may not use “abusive, unfair or deceptive” tactics, so be sure to know your rights as a borrower.

If you think you’re getting trampled on (or if there’s been a mistake, and the debt isn’t even yours), then look over these government tips on how to respond. Also, know that for more serious steps, such as wage garnishment, the collections agency or lender would need to get a judgment against you in court.

What it means if your private student loan lender sues you

Facing a lawsuit over your student debt can be extremely stressful, not to mention expensive, but sometimes, it does come to that.

If you lose your case, then the lender or agency can take action to recover the money, possibly including:

  • Garnishing your wages
  • Garnishing your tax return
  • Freezing your bank accounts
  • Getting a lien on personal or real property

At the same time, there are laws that cap the amount of money a lender can recover from you. For example, the Consumer Credit Protection Act limits wage garnishment, often at roughly 25% of your disposable earnings.

Because student loan debt is usually large, it’s a good idea to speak with an attorney who can help you through the process. An attorney can explain your specific options based on the law and the terms of your loan — inexpensive (and sometimes free) legal aid is available if you search around.

Also note that if the loans are very old, the collection of them might be unenforceable in court — though your credit would still be hit hard for nonpayment of debt. It’s also worthwhile studying some general tips for dealing with student loan lawsuits.

Private student loan settlement and other possible solutions

If your private student loans are in collections, or if you have a judgment against you, your three main choices are:

Pay the amount in full

Obviously, if you can pay the debt in full, you should. This is unlikely to be the case, though, or else you probably wouldn’t be in this situation.

Still, if you’re not yet in default  and you know someone with great credit who can cosign a loan, you could refinance and pay off the old debt in one swoop.

Negotiate a repayment plan

Some lenders or collections agencies will work with you to create a repayment plan that you can afford. As mentioned, private lenders don’t offer the repayment options that federal loans have, but they may still be happy to recover the funds somehow, even if later than originally agreed upon.

However, remember that some collections agents can be a little tricky. For instance, do not give them your bank account information unless ordered to do so by a court. The debt collector could easily use that information to take money from your account, and you may have great difficulty proving you didn’t authorize it.

Settle your student loans for a lower amount

As with any consumer debt, there is the possibility of negotiating a lower amount to pay, though you’ll need to have that money ready, and you’ll definitely want to get the agreement in writing.

Usually, you’ll need at least 50% or more of the money you owe (including penalties and fees) for a lender to consider settling for less than the balance of your debt. Once an amount is agreed upon, you’ll generally be expected to hand it all over in a single lump sum.

Remember that if you settle your debt, the forgiven amount is reported to credit bureaus, so it will very likely hurt your credit. You may also owe taxes on this amount if the lender reports it to the IRS and you’re not insolvent.

If you decide to try a negotiated settlement, be sure to check out our complete guide to this process, though note that it will be up to the lender to decide whether or not to offer this option.

At the end of the day, the best move will depend on who your debt collector is and how much they are willing to work with you.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.


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College Students and Recent Grads

5 Private Student Loans That Offer a Grace Period

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Graduating college, trying to get a job and figuring out how to navigate adulthood feels overwhelming enough. Who wants to throw in making student loan payments? That’s where the grace period for student loans comes in.

Unfortunately, this financial breathing room isn’t always available. It’s common for federal student loans to come with a six-month grace period, but private lenders are not required to offer this buffer time. Still, even with private debt, some banks and credit unions are kind enough to extend the courtesy of a student loan grace period.

Which student loans have grace periods?

As mentioned, most federal student loans have a standard six-month grace period, with PLUS loans being the exception. (Federal Perkins loans used to come with a standard nine-month grace period, but the program expired in 2017.)

With private student loans, on the other hand, there is no standard grace period. Just as with other loan features, the grace period terms, if any, will vary by lender. You will need to read your specific loan documents to know whether your private loan has a grace period, or you can call your lender directly to ask.

Note that some private lenders might use another term instead of “grace period,” or they might not use a term at all and simply say that your first loan payment is due a certain number of months after graduation. Either way, though, it would amount to the same thing.

5 private lenders with grace periods for student loans

While your specific private loan agreement will determine whether you have a grace period, there are several lenders that state upfront on their websites that they do offer grace periods on student loans.

1. Discover

Discover’s website says: “All Discover Student Loans provide you with a grace period — a period of time when you are not required to make your full (principal + interest) monthly payments, which begin when you enter repayment. Depending on your loan type, full monthly payments are not due until 6 or 9 months after you graduate or your enrollment status drops below half-time.”

With Discover, if you have an undergraduate private loan, your grace period is six months long. For private student loans to pay for a professional degree, such as a law degree, medical degree or MBA, your grace period is nine months long.

For borrowers with more than one loan type, Discover may align your repayment start dates and periods so that they are on the same schedule.

2. Wells Fargo

Wells Fargo offers grace periods for some of its student loans. Specifically, the bank’s website says:
“With most Wells Fargo private student education loans, you start making payments six months after you graduate or leave school, although for some loans like the Wells Fargo Student Loan for Parents and the Wells Fargo Private Consolidation loan, payments begin once the loan funds have been sent.”

Make sure to read your loan documents to determine if your private student loan from Wells Fargo does include the six-month grace period. And if you do have any questions or uncertainty about the grace period, ask the lender — ideally, before signing.

3. Citizens Bank

The Citizens Bank website states the following:
“With our Citizens Bank Student Loan … no principal or interest is due while you are still enrolled at least half-time. Payment begins 6 months after graduation.”

Citizens Bank (like Wells Fargo) does not call this period between graduation and repayment a “grace period,” but the website does say that payment begins after a six-month period. Still, as with the other lenders on this list, speak with the bank to make absolutely sure when you’re expected to start sending in payments.

4. Sallie Mae

Sallie Mae’s website says that for the Sallie Mae Undergraduate Smart Option Student Loan, “you have six months after you leave school (your grace period) before you begin to make principal and interest payments.”

With this particular loan from Sallie Mae, you should have a six-month grace period before your loans enter repayment. Note that the lender also offers the option of interest-only payments or fixed $25 monthly payments while in school if you want to avoid interest from piling up during that time.

5. PNC

The PNC Solution Loan for undergraduates also has an optional grace period, according to the PNC website.

Specifically, the lenders says, “If you choose to defer payments, repayment begins six months after you graduate.”

Will my loan accrue interest during the grace period?

Bear in mind that you will probably end up adding to the amount you owe during that grace period, due to interest accumulating.

Some federal loans also rack up interest during grace periods (such as unsubsidized direct loans), though a few do not (like subsidized direct loans). But with private student loans, your debt will very likely accrue interest during the grace period.

How can I minimize the impact of interest?

If you want to stop your interest from capitalizing (in which unpaid interest is added to the principal of the loan), you can make interest payments during your grace period.

As mentioned, the private loans from the lenders listed above will likely accrue interest during the grace period. If you’re hoping to save as much as you can on your student debt, however, you can speak with your lender to see what options are available. Usually, small payments during school or while the grace period is in effect can cut down on those interest costs.

Again, speak with your lender to know how interest on your loan will work before signing on the dotted line.

When grace periods are over

It’s important to remember that should you choose to consolidate your student loans, you’d lose any of your remaining grace period. And once you use it up, it’s gone for good. That’s when it’s time to start paying back your loans.

If you aren’t able to get a private loan with a grace period, don’t panic: Repayment may start a little sooner for you than it will for others, but you have a lot of time to prepare for that inevitability. Plus, the faster you start paying back what you borrowed, the faster you’ll pay it off.

Grace periods: overview

  • The grace period is the time after leaving school when you don’t need to make payments toward your student loan.
  • Grace periods for federal loans tend to last six months. The timing for when you’ll have to start repaying private student loans, however, will depend on your loan terms — there is no standard.
  • The terminology that lenders use to describe this buffer before repayment starts might not include the phrase “grace period,” so be sure to read your loan documents carefully to know what’s expected.
  • Paying off any accruing interest during your student loan’s grace period will save you money in the long term.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.


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