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Crooks Who Use Your ATM Card As A Passport To Your Account

We enjoy the 24-hour convenience ATM cards provide; so do crooks. People who use their cards infrequently, may never know they're gone until thousands of dollars of damage is down. Many new ATM cards double as debit cards and, even without knowing your PIN (Personal Identification Number), a crook can clean you out--and then some.

A stolen ATM/debit card can be taken to any merchant and used to charge purchases to your "account." All that's needed is a forged signature. Clever crooks start out small, to make sure you haven't reported the card as stolen, then head for the big purchases. They can drain your checking account and tap into any back-up credit line you have established.

Additionally criminals who fraudulently use check cards for telephone and online transactions do not have to give a personal identification number (PIN) or signature to the merchant on the phone or online.  The charges are simply deducted directly from your checking or savings accounts. You won't know it until you get your next bank statement.

Risks increase when using check cards primarily because federal laws that safeguard credit-card use don't necessarily translate to check cards - a fact few consumers know.

A survey conducted for the National Consumers League found that three out of four consumers didn't understand the difference between debit and credit cards. Most of those surveyed believed they had the same rights when using check cards and credits cards to dispute transactions when products were misrepresented, defective or not delivered, or services canceled. They also believed they had the same protections if their debit cards are stolen and fraudulently used. They don't.

In outright fraud cases, Visa or MasterCard voluntarily protect check cards they issue through member banks as if they were credit cards, meaning the maximum a defrauded customer is liable for is $50.   Visa states they have adopted a "zero-liability" policy, which applys to its debit cards as well as credit cards.  Many banks eventually refund the entire amount stolen.

But different banks have different policies concerning disputes - including how long they will take to investigate disputed charges, and how soon after a reported fraud they "temporarily credit" an account.  This is where the main differences are visible between a credit card and a debit card.

The main problem with a debit card is that if it is stolen and someone drains your related checking account, all of the money in that account is gone for the time it will take your claim to be investigated and your account reimbursed.  

Once you discover the theft, you must report it to the police, close your checking account, open a new one and get new bank cards. If you have direct deposit for any income, that has to be changed also. You may have to wade through months of uncertainty while the bank decides whether or not to believe that you have been victimized.

And there are other liabilities: If you discover your bank account has been ripped off because checks unexpectedly are bouncing, you may or may not get stuck with the bounced-check fees. Unwinding the damage, including possible credit-report problems, isn't something most banks undertake. The bank may eventually refund the stolen funds, but in the meantime it can be a big mess for the consumer.

In contrast, if there are fraudulent charges on your credit card, you simply wouldn't pay them and your checking account is never touched.

Consumers should review the ground rules of their check cards. Debit cards are convenient for many purposes, but people need to be careful. If there is an ultimate dispute, the bank has to make the decision either to credit your account and it takes the loss, or not credit it and you take the loss.

About 40 percent of consumers now have Visa or MasterCard debit cards. Even if you don't ask for the debit "feature" you may get it when you apply for a new ATM card or renew your existing card. Banks love debit cards because they save time and money on check processing so they promote them vigorously. You may decide that the advantages outweigh the risks, but be sure to weigh them carefully before you decide.  Most importantly, if you do decide to use a debit card, make sure you have another account to cover any short-term emergencies.  The amount should equal at least a month's worth of expenses, and preferably three to six months worth.  Such an emergency fund is a smart idea in any case, but particularly if you have to subsist awhile without the money in your checking account. 

You probably also don't want to use your debit card for large purchases or other transactions in which you may need some negotiating leverage.  Federal law gives you the right to withhold payment on defective items or services purchases with a credit card, if you've made a good faith effort to resolve the dispute with the merchant.  Debit cards don't offer the same protection.  For an interesting, related story on one travelers misfortunes with credit card fraud while traveling abroad, see this related story.

Additional Credit Card Debit Card Tips

The cost of credit and charge card fraud  to card holders and to card companies alike  was $985 million in 2000.  Everyone pays for credit and charge card fraud in higher prices, whether or not they are personally defrauded.

While theft is the most obvious form of credit and charge card fraud, fraud occurs in other ways, as well. For example, someone may use your card number (not the card itself) without your permission. This may occur in a variety of ways:

A thief rifles through trash to find discarded receipts or carbons to use the card numbers illegally.

A dishonest clerk makes an extra imprint from your credit card or charge card for his or her personal use.

You receive a postcard or a letter asking you to call an out-of-state number to take advantage of a free trip or a bargain-priced travel package. When you call, you are told you must join the travel club first. You are asked for your credit card number so you can be billed for the membership fee. The catch? New charges continue to be added at every step and you never get your free or bargain-priced vacation.

How to Guard Against Credit and Charge Card Fraud

  • Here are some suggested precautions you can take to help protect yourself against credit and charge card fraud. You also may want to instruct any other person who is authorized to use your account to take the same precautions.
  • Sign your new cards as soon as they arrive.
  • Carry your cards separately from your wallet. Keep a record of your card numbers, their expiration dates, and the phone number and address of each company in a secure place.
  • Keep your card in view, whenever you can, after you give it to a clerk. Retrieve your card promptly after using it.
  • Avoid signing a blank receipt, whenever possible. Draw a line through blank spaces above the total when you sign card receipts.
  • Void or destroy all carbons and incorrect receipts.
  • Save your card receipts to compare with your billing statements.
  • Open billing statements promptly and reconcile your card accounts each month, just as you would your checking account.
  • Report promptly and in writing any questionable charges to the card issuer.
  • Notify card companies in advance of a change in address.

In addition, here are some things you should not do:

  • Never lend your card(s) to anyone.
  • Never leave your cards or receipts lying around.
  • Never put your card number on a postcard or on the outside of an envelope.
  • Never give your number over the phone unless you are initiating a transaction with a company you know is reputable. If you have questions about a company, check with your local consumer protection office or Better Business Bureau before ordering.

What To Do If Your Cards Are Lost or Stolen

If your credit or charge cards are lost or stolen, call the issuer(s) immediately. Most card companies have a toll-free number for reporting missing cards. Some companies provide 24-hour service. By law, once you report the loss or theft, you have no further liability for unauthorized charges. In any event, your maximum liability under federal law is $50 per card.

What To Do About Suspected Fraud

If you suspect that someone has illegally used your credit card, call the card issuer immediately. Use the special telephone number that many card issuers list on their billing statements. You also may want to follow up your phone call with a letter. You may be asked to sign a statement under oath that you did not make the purchase(s) in question, but you cannot be required to do so.

For more information about your credit rights, write to: Public Reference, Federal Trade Commission, Washington, D.C. 20580 for these free publications: Credit Billing Errors; Fair Credit Billing; Lost or Stolen: Credit and ATM Cards; and Telemarketing Travel Fraud. You also can write to this address for a free copy of Best Sellers, which lists all the FTC's consumer and business publications.

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