Debit Cards: The Hidden Risks

Money is plastic now and for, what looks like, the future. As a society we just carry less hard money around with us and we pay people by giving them information, information which can be used against us.

According to the industry group APACS: “figures show that the number of adults shopping online has more than doubled in the last five years to almost 30 million. This makes it more essential than ever before that online shoppers take the necessary steps to ensure they don’t fall victim to fraud.”

We all like to think of debit cards as the safe choice and we’re told it will help us keep our debts under control. A debit card is linked directly to our bank account while a credit card allows us to ‘buy credit’ and pay it back later, with interest, and none of us want to take out a secured loan to pay off a credit card bill. However, a credit card may be the safer way to shop.

Say for example you’re in a shop and you pay the man behind the counter with your credit card and he uses a machine to clone the card and keeps a copy of what you typed into the pin pad. He will use that information to make purchases running up a massive debt in your name, one you will probably be unaware until you receive a statement. At this point you explain to the credit card issuer what has happened, they launch an investigation and recover their losses through insurance or legal action against the criminals. With a credit card you are protected against the costs of fraud. Debit cards, a lot of us assume, carry the same protection as credit cards, but we’re wrong.

Depending on your bank you may not even be protected at all should fraud occur with your card. This means you may end up having to live with the consequences of stolen money. Even if you are reimbursed all you money, the process takes time and there is no grace period where they assume the charges never happened. If all your money has been taken, this leaves you very vulnerable.

Never was this lack of protection in debit cards exposed so well when over the Christmas period 2,500 families were scammed out of hundreds of pounds and only the people who paid by credit card were reimbursed.

The BBC’s Watchdog program, reported: “Zone Electronics, a company based in Oldham, guaranteed delivery of the [Nintendo Wii] console for the middle of December, hundreds of people placed an order, paid their money and waited. Their payment was taken but their Wii consoles never arrived,” Adding:
“The company's website then shut down, with a message that it wouldn't be able to send orders.”

During their investigations they revealed that those who bought the console with their credit cards were assured of having their money returned, but: “customers who bought with debit cards may not get their money back. Debit cards aren't automatically covered in the same way, and customers will need to apply to their card issuer for a refund.”

Card fraud has been consistently battled by the card issuers and the government, Home Office Minister Vernon Coaker said: "Fraud is not something that can be tackled in isolation - the best results can only be obtained by working together. The Government takes fraud very seriously whether the victim is a multi-million pound organisation or a single individual. That is why we provide over £1 million a year, matched by the Corporation of London, to allow the City of London Police to expand its Economic Crime Department to tackle the problem. The Fraud Bill, currently before Parliament, will clarify the law of fraud to better equip law enforcers and prosecutors with a modern legislative framework."

It is believed that they have made some progress in combating fraud. Sandra Quinn, director of corporate communications at APACS, said: “These latest fraud figures show that the industry’s efforts are making their mark. However, each and everyone of us can also help defeat the fraudsters, and protect our cards and online accounts, by keeping our PINs, passwords and personal information safe and secure.”