The Danger In Your Debit Card

If you swipe or insert your debit card, happy in the knowledge that you’re paying cash versus racking up credit card debt, stop. There are hidden dangers in using a debit card that you may not be aware of: they are riskier than credit cards.

According to federal law, if your credit card is stolen, you are liable only for the first $50 worth of fraudulent charges. But if your debit card is breached — as is happening more and more frequently — you could potentially be out hundreds or even thousands of dollars.

That’s because debit cards do not offer the same type of protection as credit cards. Federal law will protect you after the first $50 from fraudulent withdrawals from your checking account, but only if you report them within two business days of occurrence. If you wait as long as 59 calendar days to report the theft, you’ll be liable for up to $500. After 60 days you’re on your own, and at the mercy of your bank. If you report a lost or stolen debit card before it’s used for a fraudulent transaction, you are not liable for any losses.

Most people eventually do get their money back, but how many of us can go weeks or longer after our bank account has been cleaned out? And there is no guarantee, no law that forces your bank to replace your stolen funds.

Many banks will replace the stolen funds, often within 48 hours, but again, they are not required to. And how many checks will have hit your account, then bounced, in the intervening period? And you’ll have overdraft fees piling up, draining more funds from your account, until you can get the whole mess cleared up.

Can’t happen to you? Fair Isaac Corporation (FICO) says otherwise. The company that created the universally used credit scoring model says the number of debit cards compromised at ATMs and U.S. merchants rose 39% in the first half of this year over the same period last year. In addition, there was a 26% increase in the number of locations where debit cards were compromised.

The company attributes the rise to improvements in skimming technology, the device that allows thieves to see your PIN when you key it in.

“For under $200, someone can buy a skimmer from an online marketplace,” Michael Betron, senior director of product management for FICO, told The Washington Post. And these devices are getting smaller and harder to detect.

The Post also reported on a woman (the writer’s godmother) who placed an online order for face cream (free, with a $5.99 shipping charge), who later found the online company had put through two other unauthorized charges, one for $92.92 and another for $89.95. Because the woman lives on a small fixed income, the fraudulent fees caused her checking account to become overdrawn, and she therefore incurred a $39 overdraft charge.

The bottom line? A debit card is just as vulnerable to crooks as a wallet full of cash.

FICO offers these tips for consumers:

• If an ATM looks odd in any way, don’t use it. Use only ATMs that are connected to your financial institution. FICO says most thefts occur at non-bank outlets.
• If the card doesn’t go into the machine smoothly, don’t use it. It the card isn’t returned to you at the end of your transaction, contact your financial institution immediately. Thieves may have captured your card.
• If you suspect your card was compromised at a restaurant, merchant, or ATM, ask your card issuer for a new card and PIN.
• If someone is lingering too closely when you’re using your debit card, either ask them to back up or don’t complete the transaction.
• Check your bank account frequently—once a week is not too often: Call the bank, do it through the bank’s website, and check your monthly statements.
• Update your contact information on all your cards to ensure that the financial institution can reach you immediately if it suspects fraudulent activity.

Billshark would like to add another caution: never use your debit card for online transactions unless you are certain the merchant is well-known and its website is secure. Look for the “https” in the address.