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Thread: Dangers of Using a Debit Card

  1. #1
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    Dangers of Using a Debit Card

    by Kathy Kristof
    Tuesday, June 1, 2010 (CBS Moneywatch)

    Consumers need to be particularly careful during vacation season because identity thieves come out in droves. That makes it pivotal that consumers keep their debit cards on ice, said Beth Givens, director of the Privacy Rights Clearing House and one of the nation's foremost experts on keeping your private information private.

    What makes debit cards so dangerous? Givens has so many reasons, her organization has put out an exhaustive fact sheet on whether you should use cash, credit or debit cards when shopping. (The report also explains the shortcomings of gift cards.)

    Here's the short version of the dangers of debit:

    1. Loss Limits
    Like credit cards, federal law limits your liability for fraudulent transactions on a debit card to $50. But that's only if you notify your financial institution within two days of discovering the theft. If you're a space cadet and don't check your bank statements for a couple of months, you could lose everything.

    2. Pay Now/Reimburse Later
    If someone has fraudulently used your credit card, you don't have to pay the charge. But when somebody has fraudulently used your debit card, the money comes directly out of your account in real time. That means you're out the money while the bank does a leisurely examination of their records to investigate your fraud claim. Many consumers complaining to Privacy Rights Clearing House said they lost access to their funds for several weeks. In the meantime, they were caught short and unable to pay their bills, Givens said.

    3. Merchant Disputes
    The same problem affects merchant disputes. If you pay with a credit card when ordering something online, and that product comes damaged, broken or not at all, you can dispute the charge and stop payment with your credit card. If you used your debit card, the charge is paid when you made the order. By the time you find out the goods weren't what was advertised, the merchant has your cash and you're in the unenviable position of having to fight to get your money back.

    4. Phantom Charges
    If you use a credit card at a hotel, the hotel takes an imprint when you check in, but doesn't charge your card until you check out. It's a far different story with a debit card. Generally, hotels will put a “hold” on funds in your account for more than you're spending. Yes, more. They hold the full amount of your stay, plus an estimated amount for “incidentals,” such as meals at the hotel restaurant and dipping into the mini-bar. This is not an actual charge–the hold will come off your account at the end of your stay. But it affects the available balance in your checking account anyway and can lead to overdrafts. One consumer said these phantom charges cost him $140 in overdraft fees. These “holds” are commonly placed on debit card transactions made at hotels, gas stations and rental car companies.

    5. Overdrafts, Overdrafts and More Overdrafts
    Overdraft charges have been soaring in recent years and the vast majority of consumers who pay them explain that their overdraft was the result of a debit card transaction. Many consumers naively assumed that if they didn't have sufficient funds in their accounts, their bank wouldn't approve a debit swipe. But they were wrong. The result: a $4 coffee could trigger a $35 overdraft fee. Government regulators are reigning in these fees by demanding that banks give consumers a chance to “opt out” of automatic overdraft protection, but that doesn't start for existing accounts until August. (If you have a new account, it's starts in July.)

    6. Skimming
    Financial crooks have gotten sophisticated in recent years and are using “skimming” machines to read your card data and charge your account, Givens said. When your debit card is skimmed, your bank account can be drained before you know that you've been had.

    http://finance.yahoo.com/banking-bud...ecking_savings
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  2. #2
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    http://www.cba.ca/en/consumer-inform...bit-card-fraud

    Last modified: 09 May 2013

    Using debit cards has become a way of life for many Canadians. In fact, Canadians are among the biggest per capita users of debit cards in the world. Whether you’re withdrawing cash from an ABM, using your card to pay for this week’s groceries, or punching in your Personal Identification Number (PIN) for a night at the movies, your debit card is a simple way to access your money. Using your debit card is a convenient way to get money from 60,000 banking and cash machines and for making purchases at more than 450,000 retailers across Canada.

    It is also very safe, with more than 99 per cent of the four billion transactions occurring without incident each year in Canada. And while your bank is working to protect you from fraud, there are simple steps that you can take to protect yourself.

    What is debit card fraud?

    Debit card fraud happens when a thief “skims” or swipes the information off the magnetic stripe on the back of your card to create a duplicate copy of your card. They also have to capture your PIN to access your account and withdraw money or make purchases. Debit card fraud can also happen if your card is lost or stolen and you haven’t taken steps to protect your PIN.

    Your bank is working to protect you

    Banks have teams of fraud experts and highly sophisticated fraud detection and prevention systems to protect customers from debit card fraud. Very often, the banks’ security systems can detect fraud and reimburse and notify a client before the client realizes the fraud has occurred.

    But banks understand that being the victim of debit card fraud can be upsetting for a customer: after all, their money is missing. If this does happen, banks will immediately look into the matter and get the money back to the customer as quickly as possible, which can usually happen within a few days or even before the customer knows it’s gone.

    When using your debit card, you are protected by the Canadian Code of Practice for Consumer Debit Card Services and Interac policies which guarantee that, if you are a victim of debit card fraud, you will get your money back from your financial institution.
    Canada has moved to more secure technology

    Security measures are constantly being enhanced and technology is being upgraded to prevent fraud. Banks, the Interac Association and the major credit card companies are almost finished moving to chip technology for debit and credit cards. In addition to the magnetic stripe on the back, these cards are embedded with a microchip. When making a purchase, rather than swiping your card you now insert it and leave it in the store payment terminal while the transaction is processed. These cards use a technology called “cryptography” that allows the card and the store terminal to communicate with each other during the transaction and carry out security checks to ensure the card is valid.

    The microchip is state-of-the-art in payment card technology and is extremely difficult to duplicate. In fact, chips cards have significantly reduced fraud in some countries where these cards are used. The transition to chip-based technology is on target, with virtually all debit cards and ABMs capable of chip transactions and all store terminals at retailers will be converted by the end of 2015.

    The Interac Association, Visa Canada and MasterCard Canada are bringing chip card technology to Canada on behalf of the banks and other payment card partners. To learn more about chip technology, visit their websites at:

    * www.interac.ca/en/security/what-is-chip
    * www.visa.ca/chip
    * http://www.mastercard.com/ca/persona...nologies/chip/

    How you can protect yourself

    Your bank has sophisticated security systems in place, but there are still important steps you can take to further protect yourself:

    * Always protect your PIN: use your shoulder or your hand to shield your PIN when entering it into the keypad.
    * If you have a chip card, always insert first instead of swiping when making a purchase. This will protect you from having your card skimmed and, if the store terminal isn’t chip capable, it will prompt you to swipe. And always remember to take your card when the transaction is done.
    * Never lend your card or disclose your PIN to anyone else.
    * Memorize your PIN; don’t write it down.
    * Make sure your PIN cannot be easily detected if your card is lost or stolen — don't use your birth date or address or part of your telephone number.
    * Regularly review your transaction history online or on your monthly bank statements and report anything unusual to your financial institution immediately.
    * Change your PIN periodically.

    What to do if you are a victim
    If you are a victim of debit card fraud, you should contact your bank immediately and they will take the appropriate steps to protect you. For example, they may block your card to prevent losses, ask you to change your PIN or cancel your card and issue you a new one. Depending on the circumstances, the bank may also ask you to sign an affidavit if there are fraudulent transactions in your account. If there is money missing from your account, they will work to get it back as quickly as possible, usually within two or three days or sometimes before you even know that it’s gone.
    The prevalence of debit card fraud

    Debit card fraud is a crime that banks take very seriously, and their efforts to fight this crime have been paying off. Debit card fraud losses have dropped from a high of $142 million in 2009 to $38.5 million in 2012.

    More than 10 million debit transactions are processed in Canada every day and more than four billion a year without incident. Of the 23 million active debit cards in circulation, less than half of one per cent were impacted by a skimming incident last year, so the odds of it happening are quite low. But banks will continue to adapt new technologies and new practices to fight this fraud, work with police and protect their customers.

    The Interac Association collects debit card fraud statistics from banks and other debit card issuers, which can be found on their website by clicking here.

    http://www.interac.ca/en/stat-fraud
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