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 We
enjoy the 24-hour convenience ATM cards provide;
so do crooks. People who use their cards
infrequently, may never know they're gone until
thousands of dollars of damage is down. Many new
ATM cards double as debit cards and, even
without knowing your PIN (Personal
Identification Number), a crook can clean you
out--and then some.
A stolen ATM/debit card can
be taken to any merchant and used to charge
purchases to your "account." All
that's needed is a forged signature. Clever
crooks start out small, to make sure you haven't
reported the card as stolen, then head for the
big purchases. They can drain your checking
account and tap into any back-up credit line you
have established.
Additionally criminals who
fraudulently use check cards for telephone and
online transactions do not have to give a
personal identification number (PIN) or
signature to the merchant on the phone or
online. The charges are simply deducted
directly from your checking or savings accounts.
You won't know it until you get your next bank
statement.
Risks increase when using
check cards primarily because federal laws that
safeguard credit-card use don't necessarily
translate to check cards - a fact few consumers
know.
A survey conducted for the
National Consumers League found that three out
of four consumers didn't understand the
difference between debit and credit cards. Most
of those surveyed believed they had the same
rights when using check cards and credits cards
to dispute transactions when products were
misrepresented, defective or not delivered, or
services canceled. They also believed they had
the same protections if their debit cards are
stolen and fraudulently used. They don't.
In outright fraud cases,
Visa or MasterCard voluntarily protect check
cards they issue through member banks as if they
were credit cards, meaning the maximum a
defrauded customer is liable for is
$50. Visa states they have adopted a
"zero-liability" policy, which applys
to its debit cards as well as credit
cards. Many banks eventually refund the
entire amount stolen.
But different banks have
different policies concerning disputes -
including how long they will take to investigate
disputed charges, and how soon after a reported
fraud they "temporarily credit" an
account. This is where the main
differences are visible between a credit card
and a debit card.
The main problem with a
debit card is that if it is stolen and someone
drains your related checking account, all of the
money in that account is gone for the time it
will take your claim to be investigated and your
account reimbursed.
Once you discover the theft,
you must report it to the police, close your
checking account, open a new one and get new
bank cards. If you have direct deposit for any
income, that has to be changed also. You may
have to wade through months of uncertainty while
the bank decides whether or not to believe that
you have been victimized.
And there are other
liabilities: If you discover your bank account
has been ripped off because checks unexpectedly
are bouncing, you may or may not get stuck with
the bounced-check fees. Unwinding the damage,
including possible credit-report problems, isn't
something most banks undertake. The bank may
eventually refund the stolen funds, but in the
meantime it can be a big mess for the consumer.
In contrast, if there are
fraudulent charges on your credit card, you
simply wouldn't pay them and your checking
account is never touched.
Consumers should review the
ground rules of their check cards. Debit cards
are convenient for many purposes, but people
need to be careful. If there is an ultimate
dispute, the bank has to make the decision
either to credit your account and it takes the
loss, or not credit it and you take the loss.
About 40 percent of
consumers now have Visa or MasterCard debit
cards. Even if you don't ask for the debit
"feature" you may get it when you
apply for a new ATM card or renew your existing
card. Banks love debit cards because they save
time and money on check processing so they
promote them vigorously. You may decide that the
advantages outweigh the risks, but be sure to
weigh them carefully before you decide.
Most importantly, if you do decide to use a
debit card, make sure you have another account
to cover any short-term emergencies. The
amount should equal at least a month's worth of
expenses, and preferably three to six months
worth. Such an emergency fund is a smart
idea in any case, but particularly if you have
to subsist awhile without the money in your
checking account.
You probably also don't want
to use your debit card for large purchases or
other transactions in which you may need some
negotiating leverage. Federal law gives
you the right to withhold payment on defective
items or services purchases with a credit card,
if you've made a good faith effort to resolve
the dispute with the merchant. Debit cards
don't offer the same protection. For an
interesting, related story on one travelers
misfortunes with credit card fraud while
traveling abroad, see this related story.
Additional Credit Card Debit
Card Tips
The cost of credit and
charge card fraud to card holders and to
card companies alike was $985 million in
2000. Everyone pays for credit and charge
card fraud in higher prices, whether or not they
are personally defrauded.
While theft is the most
obvious form of credit and charge card fraud,
fraud occurs in other ways, as well. For
example, someone may use your card number (not
the card itself) without your permission. This
may occur in a variety of ways:
A thief rifles through trash
to find discarded receipts or carbons to use the
card numbers illegally.
A dishonest clerk makes an
extra imprint from your credit card or charge
card for his or her personal use.
You receive a postcard or a
letter asking you to call an out-of-state number
to take advantage of a free trip or a
bargain-priced travel package. When you call,
you are told you must join the travel club
first. You are asked for your credit card number
so you can be billed for the membership fee. The
catch? New charges continue to be added at every
step and you never get your free or
bargain-priced vacation.
How to Guard Against Credit
and Charge Card Fraud
- Here are some suggested
precautions you can take to help protect
yourself against credit and charge card
fraud. You also may want to instruct any
other person who is authorized to use your
account to take the same precautions.
- Sign your new cards as
soon as they arrive.
- Carry your cards
separately from your wallet. Keep a record
of your card numbers, their expiration
dates, and the phone number and address of
each company in a secure place.
- Keep your card in view,
whenever you can, after you give it to a
clerk. Retrieve your card promptly after
using it.
- Avoid signing a blank
receipt, whenever possible. Draw a line
through blank spaces above the total when
you sign card receipts.
- Void or destroy all
carbons and incorrect receipts.
- Save your card receipts
to compare with your billing statements.
- Open billing statements
promptly and reconcile your card accounts
each month, just as you would your checking
account.
- Report promptly and in
writing any questionable charges to the card
issuer.
- Notify card companies in
advance of a change in address.
In addition, here are some
things you should not do:
- Never lend your card(s)
to anyone.
- Never leave your cards or
receipts lying around.
- Never put your card
number on a postcard or on the outside of an
envelope.
- Never give your number
over the phone unless you are initiating a
transaction with a company you know is
reputable. If you have questions about a
company, check with your local consumer
protection office or Better Business Bureau
before ordering.
What To Do If Your Cards Are
Lost or Stolen
If your credit or charge
cards are lost or stolen, call the issuer(s)
immediately. Most card companies have a
toll-free number for reporting missing cards.
Some companies provide 24-hour service. By law,
once you report the loss or theft, you have no
further liability for unauthorized charges. In
any event, your maximum liability under federal
law is $50 per card.
What To Do About Suspected
Fraud
If you suspect that someone
has illegally used your credit card, call the
card issuer immediately. Use the special
telephone number that many card issuers list on
their billing statements. You also may want to
follow up your phone call with a letter. You may
be asked to sign a statement under oath that you
did not make the purchase(s) in question, but
you cannot be required to do so.
For more information about
your credit rights, write to: Public Reference,
Federal Trade Commission, Washington, D.C. 20580
for these free publications: Credit Billing
Errors; Fair Credit Billing; Lost or Stolen:
Credit and ATM Cards; and Telemarketing Travel
Fraud. You also can write to this address for a
free copy of Best Sellers, which lists all the
FTC's consumer and business publications.
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