Why I Still Don’t Like Debit Cards

I realize that debit cards are the new checkbook. You also cannot go to a bank without a debit card being presented to you. They are quick and easy to use. The problem is the liability that you might not know about when using your debit card.

As you know, identity theft is the fastest rising crime in America. With new technology, identity thieves are finding that stealing money and identities is becoming much easier.

A popular method of identity theft is a process called cloning. Basically, the identity thief clones the information from your credit card, creates a duplicate card, and then transfers the cloned information to the duplicate card. The card looks just like the original card and works just as well.

Thieves will use a device called a skimmer to steal the information. This device can be used in one of two ways. First, the thieves can attach the skimmer to a credit card processing machine. These devices are very small and can be easily attached. Once the device is attached, it steals information every time someone uses the credit card processor to make a purchase.

For an ATM machine, they attach the skimmer as well as a tiny video camera. The tiny video camera captures a video of the soon to be identity theft victim entering in their Personal Identification Number. Now the thief has the information off of the card as well as the PIN.

Second, anytime that you give someone a credit or debit card for payment, they can easily take that card and run it through a skimmer of their own while no one is looking. It is pretty easy to steal this information.

How easy is it to get into the cloning business? Unfortunately it also is pretty easy. You can actually buy this equipment over the internet. A skimmer costs around $300 to $500 and the card duplicating equipment costs around $8,000 to $10,000.

So, this is where debit cards come into the picture. Identity thieves really want the ATM cards. That is fast cash. This is also the greatest liability for a consumer. If money is stolen out of your bank account, by law you have 60 days to report this discovery to the bank. If you report it to the bank within 2 business days, you are limited to losses no greater than $50. If you report it to the bank after the first 2 business days following discovery and before 60 days as noted above, then you are limited to losses no greater than $500.

If you don’t get the report in before that 60 day time period, then you are potentially out the entire amount of money that was stolen.

In addition, there is a big burden a proof for this type of identity theft. If the bank wants to investigate, your account could be tied up for a period of days and maybe even weeks. As a result, you wouldn’t have access to that stolen money which could cause checks to bounce and financial hardship.

Now let’s compare that to the credit card. In an identity theft scenario, the maximum liability per instance is $ 50. Most credit card companies don’t even charge that amount. In addition, you have an unlimited amount of time to report the incident.

Do you ever wonder why banks push debit cards? The banking industry made over $17.5 billion in fees from overdrafts due to debit card mistakes.

Cloning is responsible for over 1 billion dollars of losses a year.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.