Debit Cards – Still Risky
While carrying large wads of cash is still the riskiest shopping behavior a consumer can engage in, debit cards have their own risks and downfalls. Just recently one of the largest cybertheft cases that related to debit and credit cards was initiated, naming Albert Gonzalez of Miami as an alleged participant in over $130 million dollars worth of loss.
Debit cards are the most extensively used form of plastic payment, but thee cards have higher risk capacity than credit cards. Jay Foley, executive director of San Diego’s Identity Theft Resource Center says, “If you lose your credit card and you report it, it’s the credit-card company’s problem. If you lose your debit card and you report it in the same period of time, the transactions that occur from the time the card was lost and the time you reported it are still going to land on your doorstep.”
That’s because while federal law limits liability in relation to stolen credit cards to only $50, debit card users are on the hook for $500, or even more if they don’t report the missing card within 60 days. The different limits relate to the increased security and fraud protection methods employed within the credit card industry, methods not utilized within the debit card industry.
Consumer advocates are not so quick to dismiss debit cards though. Susan Grant, Consumer Federation of America’s director of consumer protection, applauds the fact that debit cards encourage spending discipline. She does feel though that greater security and legal rights would benefit fraud victims. She also acknowledged that since with a credit charge the consumer hasn’t yet paid the bill, they have more leverage if unauthorized charges are found on their account. In the case of a bank account, especially one with overdraft protection, a consumer can quickly lose a large sum of actual cash and have to fight to sort out the mess.
The American Bankers Association believes it would be fair to offer debit users the same protections that are currently offered to credit card users. Doug Johnson, VP for risk management policy for the association notes, “It makes more sense to make customers whole because these unauthorized transactions are occurring by and large through no fault of the customer.”
Consumer groups are pushing for a widespread adoption of chip and pin cards, which offer increased security over traditional debit cards. The main reason the cards offer protection is because the physical card is needed to access money.
