Dump Your Debit Card?
The Privacy Rights Clearinghouse is recommending you dump your debit card. Their main concern is that if your debit card is used fraudulently, your card issuer can take up to two weeks to get the stolen funds into your account while they investigate. In the meantime, you may bounce checks or be unable to pay other bills. Their fact sheet goes into great detail as to the dangers of debit cards, especially for those purchases where no Personal Identification Number (PIN) is required.
If you're vigilant and catch fraudulent use of your debit card, you're not likely to be held responsible for the purchases under the card associations "Zero Liability" policies. With Visa's Zero Liability policy, for example, you won't be responsible for fraudulent charges to your Visa Debit card unless by chance the thief used your PIN number and the transaction was processed on a network outside Visa's network. Even then, you would still be protected under the Electronic Funds Transfer Act rules which limit your liability to $50 if you report a loss or theft promptly.
Visa also requires its card issuer members to provisionally credit your account within five business days, rather than fourteen, and reports that many issuers will credit the victim's account within 24 -- 48 hours. Bank of America, for example, offers credit within the next business day if your card is lost or stolen and used by a thief.
Mastercard also offers Zero Liability for most transactions, though I don't have any more details than those listed on its website, since my calls to clarify its requirements for provisional credit were not returned.
I respect the PRC a great deal, and their fact sheets (some 50 plus) are excellent, but I'll confess I still use a debit card for some purchases. They do have a point, though, if you can use a no-fee credit card and pay it in full each month, do you need a debit card?
If you do use a debit card, I recommend you:
1. Talk to your issuer and find out their policy for provisional credit if it is lost or stolen, and
2. Monitor your account online and set up alerts for unusual activity on your account (most issuers offer this service these days).
What do you think? Do you use your debit card or dump it?
Personal finance author Terry Savage has also weighed in on the debit card debate in one of her columns. You can read it here:
http://www.suntimes.com/business/savage/460264,CST-FIN-terry09.savagearticle
She warns that if you use your PIN for a VISA debit transaction and it is not processed over Visa's network then the zero liability policy does not apply. But I wonder how many thieves use a PIN for a fraudulent transaction. Since they can process a debit transaction without a PIN, would they bother trying to get it?
If you've been a victim of debit card fraud, we would like to hear from you. What was your experience? How quickly did your financial institution resolve it?
Posted by: Gerri Detweiler | July 17, 2007 at 07:35 AM