Linda P. Erickson, CFP®, is the president of Erickson Advisors and a registered principal offering securities and advisory services through Cetera Advisor Networks, LLC. Contact her at 336-274-9403. firstname.lastname@example.org.
In two recent conversations, one with a client and another with a much loved aunt, I learned they were using a bank account debit card for everyday purchases. I thought everyone was aware that debit card fraud has become a major risk that we all should want to avoid.
While credit card fraud and loss are protected by law to a loss of $50, debit cards have no such protection. There are several types of fraud to which you expose yourself when using a debit card:
- Loss of the card which the thief then uses to make purchases,
- ATM Skimming where the thief installs a mechanism on the ATM to capture your card information and pin number and subsequently withdraws money from your account,
- Identity fraud, the worst of all, when the thief uses your card and the other information in your lost wallet to capture Social Security numbers and other identity markers.
I keep a debit card solely to take cash from my bank account, and only making the withdrawals at my bank’s ATM, where no one else is able to see the pin number entered.
The larger risk to debit card users is that debit cards offer thieves a gateway to your personal information, as do credit cards, but also give thieves a gateway right into your bank account. I know from working with many senior women, they like to have $10,000 or more in their bank accounts. Use of a debit card to make everyday purchases, or worse, online purchases, offers the thief the ability to go in and withdraw your entire bank account balance. The Business Insider article of January 2012 cites the potential losses as follows: If you notify your bank within two days of the fraud or loss, you are only liable for $50 of the loss, but after two days that loss limitation rises to $500, and after 60 days your liability is unlimited. How many times have you been traveling or just busy with life and not looked at your bank statement for more than 60 days?
What can you do to protect yourself?
- Stop using the debit cards for everyday purchases. Use a credit card and pay the bill at the end of the month – just like a debit card.
- Never use your debit card for online purchases. I use a credit card with a relatively low credit limit and have the full amount of the monthly activity paid using a secure bank draft.
- Only withdraw cash from your bank ATM, protecting your pin from prying eyes.
- Never use a debit card for phone purchases; use the credit card as you would for online purchases.
“User Beware” is the slogan here. Know that using a debit card provides a thief or scam artist direct access to your bank account with very little protection. Use it at your risk and, I would say, peril.