What Is Debit Card Fraud?
Debit cards usually look just like credit cards, right down to the Visa or MasterCard logo. You can use them virtually anywhere you can use a credit card, both in person and to order things or sign up for memberships online. However, there are some importance differences that make you more vulnerable if someone commits fraud with your card.
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Definition
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A debit card is tied directly to your checking or savings account. Funds are instantly deducted whenever you make a purchase, according to the Washington State Department of Financial Institutions. Unlike a credit card, you are not borrowing money unless you have overdraft protection and exceed your available bank account balance. Debit cards are usually branded as Visa or MasterCard, and you can often use them for purchases without entering a personal identification number (PIN). This makes them more vulnerable to fraud since thieves can obtain and use the number.
Popularity
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Debit card use is rising, according to The Nilson Report, a consumer spending and payment newsletter. It jumped from 47.7 percent of card-based transactions in 2003 to 58.9 percent in 2008. Nilson projects it will exceed 67 percent by 2013. This makes consumers more vulnerable to having their cards or embedded information stolen.
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Types
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There are several types of debit card fraud. Consumer Reports magazine identifies skimming as a common problem. Criminals set up fake card reader devices at automatic teller machines (ATMs) or gas pumps. The information embedded on the card's magnetic strip is stolen upon insertion. It is later used to make clones which are used to buy things until your bank account is empty. If you use your PIN, the criminals will withdraw cash. Also, your card can be physically stolen, or thieves can get the number and expiration date through "phishing" phone calls, email or observation at stores and ATMs.
Effects
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You can be held liable for anywhere from $50 to the total amount of fraudulent debit card purchases and withdrawals under federal law, depending on how quickly you report the problem, warns Consumer Reports. However, both Visa and MasterCard have zero liability rules to protect you. You can still suffer devastating effects because your legitimate checks and payments will bounce if a thief has emptied your account. It takes time for stolen money to be restored, preventing legitimate payments while you wait.
Prevention
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Protect your debit card from theft and shield the number when using. Refuse to disclose it to phone callers and don't follow email links or enter it on unfamiliar websites. The Consumer Affairs website advises using the same gas pump and ATM regularly so you can detect tampering. Bank ATMs in highly-trafficked areas are less likely to have skimmers installed. Ohio Attorney General Richard Cordray recommends frequently checking your bank account activity. Ask your bank to enable online viewing and check it for suspicious transactions every few days.
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References
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