Debit Card Trap (paying, reporting, accounts, charge)

[formercalifornian]

Originally Posted by TuborgP

If you use your debit as a credit card the credit card protections are in place and the money is still deducted from your account right away. Don't enter a PIN and it is being used as a credit card.

That's not true, Tuborg. DrShang is correct about the risks of using debit cards. Fraud is much easier to commit against debit card users and consumer protection is not nearly as extensive as that for credit card users. If you don't catch a fraudulent purchase within 48 hours, you may be on the hook for quite a bit of the money that was stolen from you. It's best to treat debit cards with kid gloves, as you would with cash.

I do use a debit card...very infrequently and very carefully. I don't often use my one credit card, despite the superior protection. I actually prefer cash, believe it or not. My life lends itself to infrequent purchases, and I tend to bunch all my errands to a couple of days a month. My first stop is the ATM to get the money I need to complete that day's purchases. In general, I don't tend to carry a lot of cash on my person.

Why not use my credit card? While the rewards are nice, I value my privacy, and it doesn't seem like a fair exchange to submit my spending habits to my card issuer's microscope for a few tokens of their appreciation. Moreover, I don't like the games that most credit card companies, including mine, play with their merchants and users, so I withhold my business. It's as simple as that.

[TuborgP]

Originally Posted by formercalifornian

That's not true, Tuborg. DrShang is correct about the risks of using debit cards. Fraud is much easier to commit against debit card users and consumer protection is not nearly as extensive as that for credit card users. If you don't catch a fraudulent purchase within 48 hours, you may be on the hook for quite a bit of the money that was stolen from you. It's best to treat debit cards with kid gloves, as you would with cash.

I do use a debit card...very infrequently and very carefully. I don't often use my one credit card, despite the superior protection. I actually prefer cash, believe it or not. My life lends itself to infrequent purchases, and I tend to bunch all my errands to a couple of days a month. My first stop is the ATM to get the money I need to complete that day's purchases. In general, I don't tend to carry a lot of cash on my person.

Why not use my credit card? While the rewards are nice, I value my privacy, and it doesn't seem like a fair exchange to submit my spending habits to my card issuer's microscope for a few tokens of their appreciation. Moreover, I don't like the games that most credit card companies, including mine, play with their merchants and users, so I withhold my business. It's as simple as that.

I am not disagreeing with him but you need to realize that most debit cards are also a Visa/MC credit card. When you don't enter a pin it is being used as a credit card and the resulting legal protections for credit cards are in play. That is why many places ask you debit or credit and you would say credit and they process it as such. It still comes out of your account right away. The easiest way to avoid problems is to use on line banking ( if your bank offers) you can see your account daily or hourly if you want to log in that frequently. It is interesting that non of the conversation is about checks. If you use online banking you can pay your bills on line and see how much is being held from your account from something in process. Also if you have a linked money market/savings if you are getting under your floor you can transfer money over. Notice I said floor and not 0. Your floor would probably be a minimum balance in your checking account of at least $500 if not $1,000 or more. You can schedule the payment of bills per your time schedule. If you want you can pay your bills the day they come in. They great part about it is you have a record of the transaction and the pay date and if the company says you paid them late you have your evidence.

http://www.aarp.org/money/credit_deb...ebitCards.html
Some cards are dual-purpose credit/debit cards. Before you swipe the card through the reader, you select a "credit" or "debit" button on the reader. If you select "debit," you then enter your Personal Identification Number (PIN).

If you select "credit," you are given a credit receipt to sign. "Credit" charges will appear on your next charge account bill.

The above is from the link and I stand by my original statement. You need to select your bank and cards with full understanding of the options you could have. The trick is to have your debit/credit linked to your checking account. Not all banks offer that service.

[TuborgP]

Understanding Debit Cards
What if your debit card is lost, stolen or misused?
You must act quickly. The most you can lose is $50 if you report to the bank or credit union that your card is lost or stolen within two days of when you discover the loss. However, your liability increases to a maximum of $500 if you report within 60 days after you receive your bank statement.

If you don't to notify your bank within 60 days after you receive your bank statement, your liability is unlimited. You could lose all the money in your account. Check your bank statements carefully and promptly for charges you didn't make.

Some major debit card issuers provide more protection. Some state laws cap your total loss at $50.

The above is all from the link. If you want to argue with them the article has the contact info probably.

If you wait 60 days to notify them, well ok.


With good online banking you can check your checking and if linked credit card account daily, hourly or when ever you log in. When traveling out of town monitor the use of all cards daily for a reasonable amount of time after that. Don't use a debit card at a gas pump and be careful of ATM withdrawals. Don't use your debit card for major purchases and limit it to a pattern of specific usage.

[Teak]

This issue of banks using debit cards as a profit centre is a sensitive subject to me also. I have a son who is still trying to make his way in life and he rang up around 14 overdraft charges in the space of 4-5 weeks. He never checked his balance online, and the bank corresponded with him by LETTER, which takes a while, eh?

The overdraft charges started at $25 and quickly ran up to $39 before I was alerted by a relative who had a check from my son bounce. Basically, the son had let his balance get down below $0, and then EACH time he used the debit card (for $3-6 purchases), the bank hit him with a $25-39 fee!! I was so angry, both at him and the bank. I called him and chewed him out, and then called the bank. The bank manager said, "We sent him a letter as per our policy, blah blah blah....". In the end, I got my son to call the manager and ask to remove a few charges, which they did (four only). It was, basically, a $300 lesson to my son in money management.

[TuborgP]

Why debit cards are such a rip-off on clarkhoward.com
Most of us have had the experience of making a purchase with a debit card and being asked if we want to do it as debit or credit. If you go for credit, the merchant will pay $1.50 in processing fees. If you opt for debit, the merchant may only pay 17 or 18 cents. So the merchants are always battling with the banks over the use of these cards. Sometimes the banks will even assess you a fee when you select the debit option for a purchase. Meanwhile, the September issue of Consumer Reports' Money Adviser states that your account is 17 times more likely to be hijacked if you go the credit route versus the debit option. But the debit option has other danger

The above is from the link

As usual their are two sides to every coin. You have to decide which side you want to play with up at any given time. Read more than just forums and evaluate your decision for continued appropriateness.

[TuborgP]

Originally Posted by Teak

This issue of banks using debit cards as a profit centre is a sensitive subject to me also. I have a son who is still trying to make his way in life and he rang up around 14 overdraft charges in the space of 4-5 weeks. He never checked his balance online, and the bank corresponded with him by LETTER, which takes a while, eh?

The overdraft charges started at $25 and quickly ran up to $39 before I was alerted by a relative who had a check from my son bounce. Basically, the son had let his balance get down below $0, and then EACH time he used the debit card (for $3-6 purchases), the bank hit him with a $25-39 fee!! I was so angry, both at him and the bank. I called him and chewed him out, and then called the bank. The bank manager said, "We sent him a letter as per our policy, blah blah blah....". In the end, I got my son to call the manager and ask to remove a few charges, which they did (four only). It was, basically, a $300 lesson to my son in money management.

It is possible to have the debit function turned off so it becomes usable at ATM machines without a debit function.

[berdee]

Originally Posted by TuborgP

I am not disagreeing with him but you need to realize that most debit cards are also a Visa/MC credit card. When you don't enter a pin it is being used as a credit card and the resulting legal protections for credit cards are in play.

I agree with most of what you've posted so far, but I cannot agree on the two above statements.

Just because a debit card may have a Visa/MC logo on it does not make it a credit card, it is still a debit card. Just because the Visa/MC logo is on a debit card does not give it the same protection that a credit card has when it comes to theft. A debit card with or without the V/MC logo falls under the EFTA and Regulation E, with the minimal protections you listed out in your following post:

Originally Posted by TuborgP

The most you can lose is $50 if you report to the bank or credit union that your card is lost or stolen within two days of when you discover the loss. However, your liability increases to a maximum of $500 if you report within 60 days after you receive your bank statement. If you don't to notify your bank within 60 days after you receive your bank statement, your liability is unlimited. You could lose all the money in your account.

For credit cards, under TILA and Regulation Z, cardholder liabiity is capped at $50 for all unauthorized transactions, regardless of whether the fraud occurs in a single transaction or multiple transactions and regardless of when the cardholder learns of the loss or theft of the card or reports the loss or theft to the card issuer.

[McBain II]

Great thread, Berdee.

[Bob from down south]

Originally Posted by berdee

Yes, that's stating the obvious.

There are some who do have problems in overspending, hence one of their reasons for using debit instead of credit. They think that if they should hit their limit then the bank will reject the card. Not so if there is overdraft protection on the account.

More importantly, not all overdraft fees that occur from debit cards come from the card holder overspending but rather from some form of debit card theft.

Many people are surpised that there is OD protection on their debit card accounts, since many banks have a habit of placing ODP on accounts without informing the account holder that it is being added, or has been added.

OK, let me add to my previous post and say that if you can't be bothered to read and understand your card agreement (or get advice from someone who can), you shouldn't have a debit card...or a credit card either.

Fees accrued as the result of a fraud are not the account holder's responsibility. Yes, it could take a while for recoupment on a debit account...that's where having a reputable bank that holds those fees in abeyance while the dispute is in the process of resolution comes in.

OD protection is not a substitute for the aforementioned requirement for discipline in account management. Not understanding the overdraft resolution mechanism is NEVER an issue when overdrafts are not incurred.

Originally Posted by formercalifornian

Fraud is much easier to commit against debit card users...

I'd like to see a credible source for this assertion. Given that a debit transaction requires use of a PIN, I don't follow how a debit card would be an easier target for fraud than a credit card. I believe that the opposite is true.

[user_id]

The same sort of people that can't correctly balance their check book are usually the same sort of people that will hurt themselves with a credit card. Its really a no win situation.

But for someone that wants to use a debit/check card out of principle, I think using a separate account is a good idea.