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Cross my palm with debit cards

Know the Score

Posted: May 31, 2008 1:14 a.m.
Updated: August 1, 2008 5:03 a.m.
Cross my palm with debit cards - not silver!

While the financial gurus are wringing their hands over the rise in credit card debt, consumers are going their merry way with their debit cards. The use of debit cards has increased more than 50 percent in just seven years, and banks see profit in the trend. They're cranking up the frequent flier and other rewards to encourage debit card use.

Debit cards are just another way of paying cash because when you use it you're authorizing the merchant to take the money directly from your checking account. Most ATM cards can also serve as retail debit cards today because they have a Visa or Master Card logo on the face. They can be used in most of the outlets that accept credit cards including shopping sites on the Internet.

They are popular because:

* You know you're spending real dollars. Credit cards allow you to pay in the hereafter, and allowing a misty view of what you can afford. Debit cards limit you to the amount of cash you have on hand.

* They are an easy source of "walking around" money. When you use it at a supermarket or drugstore you can usually ask for cash back. You can add $50 to $100 added to the bill and the cashier hands it over in cash.

* They're a way to save. If you pay with a credit card that carries a balance, you'll start owing interest on your purchase from day one. You avoid that with a debit card.

The downside of using your debit card is that debiting doesn't register on your credit history. To build a good credit history you still have to use your credit card and pay it on time. Debit cards also give you less protection than your credit cards do because most credit cards carry a type of warranty on the purchase even if the merchant doesn't.

There are two ways of using your debit card in a brick and mortar shop. You swipe your card in the machine and use either your PIN (personal identification number) or your signature like you do when using a credit card. When you swipe your card you're able to choose between "credit" and "debit." If you press "debit," you enter your PIN, but if you press "credit" the clerk will ask for your signature. It's still a true debit in both cases and the payment comes directly out of your account, but you avoid the possibility of someone nearby learning your PIN and using it fraudulently.

Visa and Master Card advertise "zero liability" if a crook uses debits to empty your account. Some banks offer this protection only on signature debits, but even then you may have to report the loss within a fixed time span. Fraud could cost you everything in your bank account plus the maximum overdraft. With credit cards you're usually fully protected against fraud, or at most out $50.

PIN transactions were considered especially safe until three major data breaches occurred last year. Huge caches of card numbers with PINs floated into wicked hands. PINs are still safer than purchases based on signature alone, but as long as your card can be used that way you are exposed.

So far, only a tiny percentage of hacked data turns into identity theft, and this is because the numbers are harder to use than you realize. It takes elaborate procedures to open fake accounts wholesale or handle stolen goods. One method the crooks use to gain unsuspecting "mules" to receive packages is to place work-at-home ads recruiting stay-at-home re-shippers. They have to be able to forge cards in high volumes and use them fast. Most frauds still arise the old-fashioned way from cards stolen individually.

The best debit card rule to have is don't use them on the Web. With your bank account open, you risk too much. Use either a credit card or order by phone. Think safety first.

Maureen Stephenson is a local author and owner of REMS Publishing & Publicity. Her column represents her own views and not necessarily those of The Signal.


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