The dangers of debit cards

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The issue of debit cards seems to put up regularly in various threads. Since these discussions often cover the same ground, I thought it made sense to have its own thread. That way, the next time it comes up in another thread, it would be easy to simply reference this one.

Unfortunately, there are still many people out there who are ignorant of the risks of debit cards. I’ll try to summarize the biggest problems here.

As with credit cards, there are federal protections for debit cards, generally limiting your liability for fraudulent use to $50. This lulls some people into a false sense of security. If someone racks up charges on your credit card, you can dispute them all, and the bank can’t try to collect any of the money while they do their investigation. By contrast, with a debit card, the money is already gone from your account! There’s no requirement for the bank to give it back while they do their investigation. Especially in the case of international charges (even Canada), the investigation can take many months.

Let me repeat: even if you detect the fraud quickly, you could still be short thousands of dollars while fighting a protracted battle against your bank!

Ah, but you don’t travel internationally with your debit card. Doesn’t matter! Many thieves who steal numbers in the U.S. are part of rings who then send the numbers overseas for exactly that reason. Remember, a signature-based transaction on a debit card goes through exactly the same network as on a credit card.

Oh, so you’ll just avoid doing signature based transactions? Still not safe. Many card numbers are stolen by skimmers on POS terminals and ATM machines. Even if you’re doing a PIN-based transaction or getting cash from the ATM, the skimmer still gets your debit card number for future fraud.

Let me repeat: even if you only use your debit card in the ATM, you’re still at risk for debit card fraud.

At this point, many debit card advocates resort to saying that “debit card fraud is rare,” and “you shouldn’t live in fear.” First, it’s not rare, and it’s growing quickly. You can download a research report on the topic from Actimize, an anti-fraud company. Second, it’s not living in fear to take reasonable precautions. How many people on FW lock their doors, shred sensitive documents, and periodically monitor their credit reports? Why? Because even though the risk of burglary or identity theft is low, the pain if they happen is very high, and precautions are easy to take.

In the case of debit cards, the appropriate precaution is to never carry or use one. Find a bank that will either issue an ATM card or can disable the POS functionality. For any banks that can’t do that, either shred the cards or keep them somewhere that they won’t be found during a burglary. Make all of your purchases with credit cards, which are both safer and have more benefits.

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Very good thread ThePessimist!! Very informative and eye opening!
However I do not agree with on not using a debit card. ... (more)

Accurise (Jun. 04, 2010 @ 2:49p) |

A very good post! Its well informative and eye opening!
Valid points were made but I personally do not agree on not using... (more)

Accurise (Jun. 04, 2010 @ 2:53p) |

I have a bunch of debit cards issued from my bank accounts and have never once used them to buy anything. I have always... (more)

fedguy (Jun. 04, 2010 @ 7:01p) |

"if you are quoting from personal experience regarding lack of access to your funds while the fraudulent charge is being investigated, please post the name of the bank so we can avoid it. Anyone else with personal experience regarding this, please chime in and perhaps we can create a list of banks with "safer" debit cards, as well as a list of banks to avoid."

Below is a summary of some of the main arguments in this thread:
As with credit cards, there are federal protections for debit cards, generally limiting your liability for fraudulent use to $50. This lulls some people into a false sense of security. If someone racks up charges on your credit card, you can dispute them all, and the bank can%u2019t try to collect any of the money while they do their investigation. By contrast, with a debit card, the money is already gone from your account! There%u2019s no requirement for the bank to give it back while they do their investigation.

False. The bank must credit the money back within 10 business days of the reported error, assuming it has not already concluded its investigation within that time period.
Note that the above is not something to rely on, as there are reports of banks "concluding" their investigation and quickly deciding that there was no fraud, requiring a lengthy appeals process.

Let me repeat: even if you detect the fraud quickly, you could still be short thousands of dollars while fighting a protracted battle against your bank!
True, but only if the bank completes its investigation within 10 business days and advises you that the transactions were not errors/unauthorized. Otherwise, if the investigation is "protracted" then the bank must give you a provisional credit within 10 business days of being notified of the error.
In most of the horror stories, the bank did say that the transactions were not errors or unauthorized.

Let me repeat: even if you only use your debit card in the ATM, you%u2019re still at risk for debit card fraud.
True. Fraud is a risk of having a debit or credit card, regardless of whether it is used at all.
Which ignores the fact that you're exposing yourself to an additional source of risk for no good reason by using the debit card rather than an ATM card.

In the case of debit cards, the appropriate precaution is to never carry or use one. Find a bank that will either issue an ATM card or can disable the POS functionality. For any banks that can%u2019t do that, either shred the cards or keep them somewhere that they won%u2019t be found during a burglary. Make all of your purchases with credit cards, which are both safer and have more benefits.
That is certainly one precaution. Another is to keep your money at home and to spend only cash. I would not especially recommend either precaution. An intermediate precaution would be to limit the amount of cash you have in any one account. Why? Because all of the protections and risks that are covered by Regulation E apply to any bank account that allows electronic transfers. So if you can ACH money out of your bank account, so can a fraudster. And if it happens to you, well, you're "as screwed" as if they were using your debit card.
This is a recurring, but bogus, argument throughout the thread: there's always risk in banking, so you might as well pile on a bunch more for no good reason by using a debit card.
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I greened your thread, because it's an important topic. I disagree with your conclusion: "the appropriate precaution is to never carry or use one." Full disclosure: I use debit cards in order to meet the requirements of my RCAs (Reward Checking Accounts); other than that, I use rewards or c@shback credit cards. For me, I'm satisfied with making signature-based transactions with my debit cards in order to meet my RCA requirements and monitoring my linked checking accounts daily.

I don't ever use my RCA debit cards at ATMs or make PIN-based transactions with them, but I do use my BoA debit card to make deposits and occasionally get Cash Back. My BoA checking account is monitored regularly, too. Most debit cards have daily caps on ATM withdrawals and even signature-based transactions. On one of my debit cards, I even ran up against a cap of 15 transactions in a single day.

Should the worst happen and large sums of money are taken from my checking accounts, I've other resources to draw upon while the funds are recovered. For the moment, the rewards (no pun intended) of using my debit cards in my limited fashion are worth the risks.

ETA: See From VISA Zero Liability policy: and from the Security tab of Bank of America Check Card, both described and linked to in below posts, for examples of additional protections placed on debit cards. See the below attachment for the less-generous Federally-imposed protections on debit cards (and credit cards).

Please capitalize DANGER in the subject line.

One way to avoid Debit card fraud is to not have a lot of checking accounts, preferably one or less; these days most people rarely write checks. Savings accounts will receive an ATM card, not a Debit card.

In the US Visa's Zero-Liability Policy extends to all of their debit card products. That includes:

"Visa’s cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss."

Not to say that makes debit cards a wonderful thing, legal protection is definitely nicer than a Visa "policy", and even if you get the money back there's lots of inconvenience that could be limited with a credit card, but it's not as grim as you imply.

From VISA Zero Liability policy:

Shop worry-free at millions of merchants.
You can use your card to shop with confidence. That's because Visa protects your card information 24/7 and you won’t be held liable for unauthorized purchases made with your card or account information.

Review your monthly account statement and report fraudulent charges.
Take the time to look at your monthly Visa statement, and let your financial institution know if anything appears incorrect so swift action to regain control of your account and to resolve the situation for you can occur.

Count on quick resolution and provisional credit if your card is lost or stolen. 1
If your account is compromised, Visa is committed to setting things right without further aggravation or inconvenience to you. Visa’s cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss.




1Covers U.S.-issued cards only. Does not apply to ATM transactions, PIN transactions not processed by Visa, or certain commercial card transactions. Individual provisional credit amounts are provided on a provisional basis and may be withheld, delayed, limited, or rescinded by your issuer based on factors such as gross negligence or fraud, delay in reporting unauthorized use, investigation and verification of claim and account standing and history. You must notify your financial institution immediately of any unauthorized use. Transaction at issue must be posted to your account before provisional credit may be issued. For specific restrictions, limitations and other details, please consult your issuer.


From the Security tab of Bank of America Check Card:

Zero Liability. If your card is lost or stolen, Bank of America reimburses you for any unauthorized card transactions up to the amount of the loss, when reported within 60 days from statement date.1

Guaranteed credit. Your account will be credited by the end of the next business day for unauthorized transactions if your card is lost or stolen.1

Fraud monitoring reviews how and where the card is being used and is designed to block potential fraud if abnormal patterns are detected.

1Claims may be filed against posted and settled transactions subject to dollar limits and verification, and must be reported within 60 days of the statement.


ETA: I think this supports the idea that, although debit card risk exists, there is pretty decent protection, especially if one uses one's debit card as a credit card, i.e. makes signature-based transactions rather than PIN-based ones.

barbcole said: "Visa’s cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss."
You didn't include the footnote from Visa's policy:
VISA said: Covers U.S.-issued cards only. Does not apply to ATM transactions, PIN transactions not processed by Visa, or certain commercial card transactions. Individual provisional credit amounts are provided on a provisional basis and may be withheld, delayed, limited, or rescinded by your issuer based on factors such as gross negligence or fraud, delay in reporting unauthorized use, investigation and verification of claim and account standing and history. You must notify your financial institution immediately of any unauthorized use. Transaction at issue must be posted to your account before provisional credit may be issued. For specific restrictions, limitations and other details, please consult your issuer.
Read that carefully: the provisional credit may be "withheld, delayed, [or] limited ... based on ... investigation and verification of claim and account standing and history..." The summary of the policy sounds nice, but you need only do a cursory search for news articles to see that banks often engage that "right" to do their investigation first.

Your commentary is weird and off base OP.

Visa debit cards, for example, have Zero liability guarantee the same as credit cards.

Most reputable banks will refund monies disputed within 24-48 hours while they investigate. Unless you are a new customer or a shady customer, few banks are going to hold on to your money while they investigate such things.

The banks have massive motivations to want people to use debit cards because they make money on every transaction. In reality, and against your long and fairly ignorant commentary, seemingly devoid of actual experience, your debit card is as safe as your credit card most of the time.

I have actually dealt with stolen debit card issues more than one time and at no point was I actually out any money or ever in any jeopardy. My bank handled things professionally and quickly and it was no problem at all. In fact in one case they caught the fraud before I did and closed my account to prevent additional fraud and then contacted me. Again never out any money, everything was reimbursed as soon as I talked to them and then they mailed me the proper forms to file a report on the issue. In the meantime they sent out a new card within a couple of days and then I receive a confirmation letter a few weeks later saying the investigation was complete and my credit was finalized.

I really don't know to what purpose you wrote this lengthy article full of so much inaccuracy, it really doesn't make any sense.

Banks want customers to feel secure using their debit cards because they make lots of money off of them. Thus they go to extraordinary lengths to deal with these issues promptly. Pretty much everything the OP wrote is inaccurate and based on information that might have been true in 1998.

aeiouy said: Banks want customers to feel secure using their debit cards because they make lots of money off of them. Thus they go to extraordinary lengths to deal with this issues promptly. Pretty much everything the OP wrote is inaccurate and based on information from like 1998.
No, the research report I cited about ballooning debit card fraud is from 2009. If you took a brief moment to search for articles on debit card fraud, you'll find many from very recently.

I'm glad your bank handled it well. You're lucky. He's an article from, oh, yesterday about an M&T Bank horror story.

ThePessimist said: [

You didn't include the footnote from Visa's policy:


Read that carefully: the provisional credit may be "withheld, delayed, [or] limited ... based on ... investigation and verification of claim and account standing and history..." The summary of the policy sounds nice, but you need only do a cursory search for news articles to see that banks often engage that "right" to do their investigation first.


The same foot note applies to credit cards too. It's clearly meant for cases where the bank feels the customer is acting in bad faith or engaging in fraud.

With a credit card the law says they can't try and collect the charges from you while they're investigation -- no law requires provisional credit. Visa policy does. The SAME Visa policy that applies to debit cards.

While I agree with the general sentiment that credit cards are more beneficial than debit cards 98-99% of the time, I think cutting up cards or even not carrying them is an excessive precaution. The simple solution to protect yourself is to not keep more than a few cents in your checking account. If you need money from an ATM, take it from a savings or money market account that's linked to your ATM card. The card itself is only good for signature-based transactions unless the thief also knows your pin. Without the pin, the card can be used to access only the checking account, not the other linked accounts where the real money is kept.

Does the $50 limit to liability apply to ATM transactions withdrawing cash, or does that apply only to using the ATM card as a Visa/Mastercard?

Anyone have experience having their PIN stolen and cash emptied from their account? Is it more difficult to deal with getting the money credited back when the person committing fraud got a hold of your PIN and hypothetically withdrew a thousand+ dollars cash over a couple days?

ThePessimist said: aeiouy said: Banks want customers to feel secure using their debit cards because they make lots of money off of them. Thus they go to extraordinary lengths to deal with this issues promptly. Pretty much everything the OP wrote is inaccurate and based on information from like 1998.
No, the research report I cited about ballooning debit card fraud is from 2009. If you took a brief moment to search for articles on debit card fraud, you'll find many from very recently.

I'm glad your bank handled it well. You're lucky. He's an article from, oh, yesterday about an M&T Bank horror story.


Great story. First it is from the Guadalajara Reporter. Secondly in the first paragraph it refers to it as being a credit card and a bank card. So it is not even clear what they are talking about.

So I guess I will take the story of one guy in Puerta Vallerta who doesn't even seemingly know what happened to them, over me and other people I know who have had similar expeirences.

Is that what you suggest I do?

The story says "The McCleafs’ bank card functioned as a credit and debit card"

A visa debit card is not a credit card. So how does this guy have a credit and debit card? I have to admit, I am not familiar with any such product.


These people saw fraud on their magical card and first thing called HSBC because that is where they magically deducted their card info was stolen? Talk about flawed logic. Why would you not call your bank first. If this happens all you have to do is call your own bank, not call other banks you have no relationship with.

The bank decided they did not believe them, and that they committed fraud. Given the story, I am tending to side with the bank.

So you support your ignorant position on debit cards by linking me to a story where a couple in mexico likely committed fraud and then tried to get the bank to pay for it?

Sounds like they heard other expats had their cards cloned so they staged a whole thing where they could run up a bunch of charges and try to get the bank to reimburse them.

I don't really care what the outcome was their whole story sounds off.

All the fraud I have experienced has been in Africa or South America, this is not some kind of shocking surprise, and the banks eat the fees and loss because they make so much on the transactions. Clearly their story did not seem very valid, and I don't know why they were trying to hold a bank to US law when they lived in a different country, that doesn't even really make sense.

The bottom line is that story is full of holes and questionable wording as to make it worthless as any kind of account to be worried about.

If this was a credit card, then this happened on a credit card not a debit card. If it was a debit card, no bank is going to allow someone who lives off social security to run up over 10,000 of other draft charges on a debit bank account.

Although your points are well described, valid, and taken; I still think that one can not go crazy with the thought of carrying a Debit Card as the riskier think to do. Let's face it, Debit Cards are here to stay and part of us all daily life.

Using the same train of thought as you; one can get ran by a vehicle, a train or just fall into the next available hole or crack down the street and die. Same holds true for the usage or not of a Debit Card.

Let me repeat: we aren't safe even in our own house. Just as we aren't totally safe by having or using a Debit Card.

The sky is not falling...yet.

Debit Card information you posted is well worth to read, know and understand however.

I think most of you miss a key point the OP was making. Even though debits cards have most of the same protection as credit cards.

The effect and resolutions are far different. An unauthorized transaction on a credit card is a "future" liability. You are not responsible for paying until the dispute is resolved. However, an unauthorized ATM/Debit card transaction immediately comes out of your account. The money is gone "until" the dispute is resolved.

I don't think the answer is to not carry debit cards. However, one should be aware of the risks. I think the prudent thing to do use ATMs and debit cards in bank accounts that are minimally funded for ongoing expenses. The last thing one should do is have ATM/Debit card access to all your liquid funds including emergency funds.

Think of it as having a firewall potecting the majority of your funds. Then have your ongoing transactions outside the firewall accessible by ATM/Debit card access.

I use a debit Visa card tied to my checking account for almost all purchases except online. Very convenient, and I get decent rewards. Irks me everytime I see someone writing a "check" in line in front of me. I will continue to "live on the edge" using my debit card.
If everyone used a debit card instead of a credit card there would be zero defaulting since you have to stop spending when you run out of money.

A newbie question: What is the difference between Debit card and ATM card?

TIA

confused200 said: A newbie question: What is the difference between Debit card and ATM card?

TIA
http://www.google.com/search?q=What+is+the+difference+between+De...

ATM = access to cash only

DC = access to cash and ability to conduct POS transactions as you would w/a CC

I had this happen to me a couple weeks ago. I only use my debit card at ATMs and wouldn't you know somebody in Australia made a 2900 purchase to eRauctions. I wish i didn't need cash for anything.

Chase new OPT for Overdraft with Checkcard will take affect March 29,2010 customers have the option of adding this feature. I made sure i got it and the Personal Banker kept on getting annoyed tried to get to get a saving and upgrade my card. i told out str8 am not here for you to upsale me and OVERpriced checkcard crappy reward points. and i dont want no ridicilous 0.01% saving acct w/ limits. just give me a what i ask you nothing else.

Walked in and walked out with a Chase College Checking w/ Overdraft opt out and a basic checkcard. I said NO will not switch my Direct Deposit from my LOCAL COMM. BANK! i kept on bragging how my local bank treat customers with awesome cust. the only reason i need this account was because of 11pm deposit and atm locations w/ Walgreens and blink feat, how with my local bank i get UNLIMITED Surcharge refunded daily.

robby69 said: I use a debit Visa card tied to my checking account for almost all purchases except online. Very convenient, and I get decent rewards. Irks me everytime I see someone writing a "check" in line in front of me. I will continue to "live on the edge" using my debit card.
If everyone used a debit card instead of a credit card there would be zero defaulting since you have to stop spending when you run out of money.


If everyone was conservative with their money, there would be zero defaulting since you have to stop spending before you are out of any money.

How about keeping 2 checking accounts with similar balances, but only carrying/using 1 of the debit cards. If it gets stolen and the account is drained, you still have money in the other while the fraud resolution is going on.

Swivelguy said: How about keeping 2 checking accounts with similar balances, but only carrying/using 1 of the debit cards. If it gets stolen and the account is drained, you still have money in the other while the fraud resolution is going on.

This is an excellent solution for people who have Money-Doubler(tm). However, you should upgrade to Money-Quadrupler(tm) today, as this way you can keep FOUR checking accounts with similar balances, and that way be capable of three fraud resolution disputes at the same time without touching your primary bank account!

A few items of note before anyone starts shoving their debit cards into the paper shredder:

First, debit cards have a daily limit, usually it's around $3k -MUCH less than credit card limits. Second, with chase anyway, once the daily transaction amount hits $2k in one day, or multiple charges are made in succession, the bank will put a hold on the card to make sure nothing fraudulent is going on. Third, I recently discovered $1500 had been charged fraudulently to my debit card. I called the same day and Chase IMMEDIATELY deposited $1500 into my account while they investigated the issue. 2 weeks later they found in my favor and since the money was already deposited everything was fine. I have also had to dispute my own purchases on my debit card for $200 to $1k and chase did the same thing (deposited the amount in my account while they investigated).

While I understand the "risks" of using a debit card, there are also safeguards in place to minimize those risks.

I do agree though, that bringing your debit card with you overseas in not a good idea. use travelers cheques or a CC. No need to dispose of the debit card though. Just don't use it until you get beck to the states.

OP, if you are quoting from personal experience regarding lack of access to your funds while the fraudulent charge is being investigated, please post the name of the bank so we can avoid it. Anyone else with personal experience regarding this, please chime in and perhaps we can create a list of banks with "safer" debit cards, as well as a list of banks to avoid.

bppcomplete said: Swivelguy said: How about keeping 2 checking accounts with similar balances, but only carrying/using 1 of the debit cards. If it gets stolen and the account is drained, you still have money in the other while the fraud resolution is going on.

This is an excellent solution for people who have Money


Fixed?

(You don't need much money in the 2nd checking account, really. When you get robbed, you can pull some money into it from a savings account. You know, that "emergency fund" thing?)

My perspective as the manager of the debit card fraud department at a small bank. I agree with what most of the OP says, but would stop WAY short of saying don't use debit cards. Most banks waive the $50 responsibility because VISA has a zero liability policy and they'd rather keep things simple. Like it was mentioned, there are daily limits to DCs. Ours are even limited by debit or credit transactions. Most banks have some sort of fraud detection software, so if you have a transaction in Kansas City, MO at 9:15 PM and then another in Moscow, Russia at 10AM, it raises a flag. For overseas travel, what I did is open a second checking account and got a new debit card. Every day I would log on to online banking and transfer funds to the new account from my main accounts. In the event I was compromised, I was at little immediate risk. Do note, however, that, in most instances, your account will not be attacked until months after it has been compromised. In my overseas scenario, the card and account would have been closed long before the information had been sold. I also only use credit cards for online transactions. While my credit card has never been compromised, it is just a personal preference. I really don't recommend using debit cards for monthly charges, like gym memberships, cable bill, etc. Claims are more involved and it is a lot simpler to stop an ACH to your account.

I gave my dad a checking / visa card in case he needed a few bucks for gas, or whatever. All was well for about two years then all of a sudden I got a text message about a charge. By the time I was able to call and close the card, two other transactions had also appeared. They removed them all and gave me a card with a new number. My dad had two other cards that put his checking into > $1500 in the red. Problem is if they would stop at zero, but banks want the OD fee. A year later, he still hasn't cleared up the one account that I know about. Deference between both of us is I was all over my account. He doesn't listen, pay attention, or do things pronto so I guess he deserves it...

Green for this cause Knowledge is Power.

This discussion is missing on a true FWF spirit, if one never profits by using debit card instead of credit, why use it?
Except the unfrequent valid reasons (i.e. to satisfy Reward checking) debit card are losers for at least two reasons:
  1. With CC you keep 40-45 days of float, 30 more with BofA bill payments
  2. Debit's card reward programs don't even come close

Case closed - regardless of safety/security concerns the usage of debit cards signature-based is inferior.

Seek the Clark Howard perspective on this.. I believe the term for debt cards that he uses is "worthless".

Compared to a credit card's better consumer protection, bigger rewards, and chargeback capability, I agree.

Hmm is it 2003 all over again??

http://www.fatwallet.com/forums/arcmessageview.php?catid=52&thre...

Debit cards suck compared to credit cards, nothing has changed.

Surprised at questions about what's a debit/credit card combo--I find that most banks in NYC have replaced their ATM cards with a "Visa" card that may be used either way (which I find confusing and think may cause problems in future). I admit to not being sure of all these possibilities, so I've tried solving in advance by buying prepaid cc's (when they were cheap/free) from my bank to use for online or unsure shopping. Besides I prefer "real" shopping--in person, where I can see what I'm buying.

ThePessimist said:

As with credit cards, there are federal protections for debit cards, generally limiting your liability for fraudulent use to $50. This lulls some people into a false sense of security. If someone racks up charges on your credit card, you can dispute them all, and the bank can’t try to collect any of the money while they do their investigation. By contrast, with a debit card, the money is already gone from your account! There’s no requirement for the bank to give it back while they do their investigation.

False. The bank must credit the money back within 10 business days of the reported error, assuming it has not already concluded its investigation within that time period.


Let me repeat: even if you detect the fraud quickly, you could still be short thousands of dollars while fighting a protracted battle against your bank!

True, but only if the bank completes its investigation within 10 business days and advises you that the transactions were not errors/unauthorized. Otherwise, if the investigation is "protracted" then the bank must give you a provisional credit within 10 business days of being notified of the error.

Let me repeat: even if you only use your debit card in the ATM, you’re still at risk for debit card fraud.

True. Fraud is a risk of having a debit or credit card, regardless of whether it is used at all
.

In the case of debit cards, the appropriate precaution is to never carry or use one. Find a bank that will either issue an ATM card or can disable the POS functionality. For any banks that can’t do that, either shred the cards or keep them somewhere that they won’t be found during a burglary. Make all of your purchases with credit cards, which are both safer and have more benefits.

That is certainly one precaution. Another is to keep your money at home and to spend only cash. I would not especially recommend either precaution. An intermediate precaution would be to limit the amount of cash you have in any one account. Why? Because all of the protections and risks that are covered by Regulation E apply to any bank account that allows electronic transfers. So if you can ACH money out of your bank account, so can a fraudster. And if it happens to you, well, you're "as screwed" as if they were using your debit card.

I use debit cards only to meet the monthly usage requirements of my RCAs. The huge bump in interest is worth that to me.

That said, I was a victim of DC fraud last spring.

It was on my SBoT card---one I had not even used in nearly a year.

One of the best features of a SBoT account is that it has a highly functional email alert system, which warned me of the fraudulent activity the same day.

A single $10 unknown charge had posted.

Within minutes I had sent a secure bank message to SBoT, and requested that the card be immediately closed.

Unbelieveably, two days later, I received another email alert, and found another charge of around $50.

I was furious, mostly because I had received no reply in response to my initial bank mail. And this wasn't the first time that had happened.

So I fired off a direct email to the bank president, who promptly put me in touch with the vice president, with whom I emailed directly for the remainder of the experience, which lasted several weeks.

The first thing I learned is that there is a "stream" of pending charges. Future charges can be immediately prevented, but pending charges cannot.

The bank was successful at preventing a ~$100 future charge, but there was still a pending charge of approximately $100 in the stream.

Apparently---and at least initially---banks (some banks?) take the side of the vendor, and don't act proactively to deny a pending debit, even if the customer insists it is fraudulent. This was a very helpless feeling.

Here I need to make an important, critical revelation. When a debit card is used as a credit card, the actual account balance does not matter. Although PIN-based ATM transactions consult the account balance in real time, signature-based "credit" transactions do not (or may not).

So the second fraudulent debit overdrew the balance in my account. To prevent the third from doing so---and thus incurring a second overdraft charge---I was actually asked to make a deposit to cover it!

I'm not certain whether the recent federal legislation regarding overdrafts addresses this, so be warned: a small balance does not protect you from DC fraud.

Meanwhile, I inquired into the process of disputing the first. I knew all along that SBoT had a rare "dispute fee" but didn't think much of it at the time.

This fee, it turned out, was $25 per fraudulent transaction.

This meant, simply put, any charge less than $25 was not worth disputing. So I ended up eating the initial $10 charge.

For the $50 charge, the VP said that in order for MasterCard to provide zero liability protection, I would need to get a police report, submit a form to MC, then wait 90 days. And I'd still have to pay the $25 dispute fee. What a PITA.

So I elected instead to simply telephone the vendor myself, and explain that the online purchase was fraudulent. Surprisingly, they couldn't (or wouldn't) tell me the shipping address. They asked me to send them a letter in writing. But a few days later---before I even wrote the letter---they reversed the transaction themselves.

As for that third pending transaction, I had to wait 30 days for it to post. It never did. Never really found out why. I was just glad it was all over.


I asked the VP to reverse the overdraft charge, and she did, so the net damage was a mere ten dollars.

Considering all the other horror stories I had seen, I felt genuinely lucky.

Nowadays, once a bank's RCA has run its course, I close the account as soon as I can avoid an account closing fee.

Many FWers hold their RCAs open, in hopes the great interest rate will return some day---but this has never happened with any RCA in recorded history.

Edit: fixed some typos.

The only down side to a debit card fraud that I see is that if the Bank investigates and concludes that there was no fraud, you wind up having to sue for the money. If it was a credit card fraud, they have to sue you for the money (of course, you wind up with a negative credit report in the process, but for some (and not others) that is better than being out of the cash while you fight the good fight in court, or I suppose, in an arbitration. Duggg, that really sucks. The investigation fee was the first thing I noticed when I opened that account and I was never comfortable with it. Though, according to my post on it, it was $15 not $25.

As for closing accounts with small balances, I don't usually bother. If someone were to overdraw my $3.00 account with a fraudulent transaction, I would simply advise the bank it was not my charge. But it is a risk of having an account open that you will be the target of fraud. There is no doubt of this. That risk is greatly reduced the longer you have the account open and inactive, however, as thieves tend to base activity on recently obtained information.

dugggg said: Apparently---and at least initially---banks (some banks?) take the side of the vendor, and don't act proactively to deny a pending debit, even if the customer insists it is fraudulent.I believe the law treats a debit card transaction as "instantaneous" so that even though it is "pending" from the bank's perspective, it has already occurred from the merchant's perspective. Its just like the thief paid cash and the merchant, who is out the goods, does not usually have to return the stolen cash. I am not absolutely certain about that, but I think that is the way it works. Merchants are discouraged from asking for picture i.d., and it would be unfair to screw the merchant in most cases. That is why the bank is the victim of the fraud, in the end.

dugggg said:

Apparently---and at least initially---banks (some banks?) take the side of the vendor, and don't act proactively to deny a pending debit, even if the customer insists it is fraudulent. This was a very helpless feeling.


Banks have to wait for stuff to actually post before doing anything about it. Too much stuff is processed and never posted. If they did what you suggest and a vendor did a refund or recall they would then be giving you twice the money.

I don't see a problem with the banks waiting for an item to actually post before refunding it.

As for your other issues find a better bank. Most banks don't behave that way. Most banks will always waive overdraft fees in cases of fraud.

Of course I have a relationship with my bank that goes beyond just trying to milk an account opening bonus from them, so YMMV depending on the bank and your relationship I guess.

neophyte said: This discussion is missing on a true FWF spirit, if one never profits by using debit card instead of credit, why use it?
Except the unfrequent valid reasons (i.e. to satisfy Reward checking) debit card are losers for at least two reasons:
  1. With CC you keep 40-45 days of float, 30 more with BofA bill payments
  2. Debit's card reward programs don't even come close

Case closed - regardless of safety/security concerns the usage of debit cards signature-based is inferior.


Debit cards I use don't have any caps on rewards. The caps on most reward cards are so small that it takes no time to use them up when you are spending and moving substantial amounts of money every month.

I have unlimited cap on my debit rewards, so after all the credit card rewards are used up, I can keep earning rewards for every penny I spend, and I spend a lot.

I use both credit cards and debit cards.

It is stupid for people to attack debit cards when the stories on this forum about horror stories and credit cards outnumber debit cards 100 to 1. My point is don't be ignorant and use all the tools available to you.

What good is a credit card if they cut your limit when you are on vacation?

I realize that I am not the typical FWF member who is chasing nickles and dimes.. and I am fine with that... but people claiming there is some kind of substantial risk of debit over credit are just incorrect.

ATM, which include credit card debit cards usually give you the least fees when traveling overseas (atleast in europe in my experienct) on currency exchange for walking around currency.

Skipping 80 Messages...
I have a bunch of debit cards issued from my bank accounts and have never once used them to buy anything. I have always used cash, checks, EFT, or credit cards. I guess I was in the habit of looking at debit cards like ATM cards since you can use them at ATMs. And I hardly ever use an ATM machine.



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