Debit Card Risks and Scams: Are You the Next Victim?

It was a couple weeks before Christmas, and like many Americans these days, I have been trying to avoid using credit cards, opting for the "Pay as you go" method of making purchases by using only cash or my debit card. Banks have made using your debit card very attractive in recent years; you have a Visa/Mastercard logo, it works just like a credit card, and you can even get points for using it as a credit card in some cases. As the economy has worsened, knowing that you are paying with cash that you have, instead of deferring payment and accruing interest as you would on a credit card also seems to be a smart option. Unfortunately, in the same way honest consumers are trying to change their spending habits to be more prudent, thieves have also had to adapt their scams and schemes to get with the times. This is where the average person can easily become a victim.

As I was checking my bank balance to get ready for my final Christmas shopping withdrawal, I felt a horrible sensation in my stomach when I heard automated-voice-lady announce I was more than $250 overdrawn. Knowing I'm not THAT bad at math, I immediately called customer service. Apparently, 4 separate charges - 2 at $49.99 and 2 at $69.99 had been made with my debit card to the same website in the last 24 hours. I was absolutely infuriated, as it became clear that one of the big disadvantages of using a debit card over a credit card is in this scenario: you are not immediately credited the charges you claim as fraudulent if you have been scammed.

As polite and helpful as my bank was in this situation, it didn't change the reality of my personal dilemma. I was going to have to wait 7 - 10 business days before the signed affidavits claiming a fraudulent charge had been received and reviewed before I would get my money back. I would also have to report my debit card as lost or stolen, and wait that same time period before the new one arrived; leaving me cardless for about a week. I may or may not have my money in time for Christmas.

What was really bothering me was how this information had been obtained, and how I could prevent it from happening again. Within a couple of days, my daughter called to say her bank account had been overdrawn by more than $700, all point of sale purchases from a gas station over a period of a few days. It was also her debit card number that had been compromised, and she was so freaked out as to how someone got her debit card number, that she closed out her checking account and started a completely new one. Hearing this, I decided to go to my banker to discuss my options, and find out how I could protect myself from being scammed. This is what I learned:

Open a Separate Account for Online Purchases

My particular bank offered me an extra, free checking account, since I already had a premier checking and savings. The idea behind this is simple; it is sort of a "dummy" account with it's own separate debit card and checking account number that you only use for online purchases, traveling, etc. By only depositing the money into that account that you will be using for what are considered risky debit card purchases, you protect your main checking account if the dummy account is compromised. Check with your bank to see if they have a free option available for you to use against being scammed.

Other Risky Locations to Use Your Debit Card

My banker also informed me that non-bank ATM's, gas pumps where you put in your pin number, and even convenience or other "mom and pop" type stores where you might swipe your debit card and put in your pin, are prone to what are known as "skimmers". Skimmers are thieves who put a small data retrieval device in a machine (such as a pin pad or gas pump) that collects your information when you use the machine. They then come back later to retrieve the device after having "skimmed" your information. One reason that these places are so vulnerable to debit card scams is that they don't always have security cameras (as in a convenience store ATM) or are easily accessed by unmonitored employees. According to Avivah Litan, a fraud detection and prevention analyst that was quoted in an article from ConsumerReports.org, "...ATM and debit card fraud is the top area of concern we're hearing about from banks all over the world".

Check Your Balance Regularly

This bit of advice was told to me by my banker, but also referenced in the same article from ConsumerReports.org. In the same way we are advised to check our credit reports regularly in case there are mistakes that could prevent us from getting a car or home, we should be regularly checking our bank balances for any suspicious activity. Don't wait for that old-school bank statement to arrive in the mail; you can check online as part of your daily routine, or even call the toll-free bank number and check the automated system.

Both my daughter and I got our money back into our accounts, but it did prevent me from doing a couple last minute things I had planned for the holidays, and she ended up staying home rather than going out on New Year's Eve. Not the end of the world, but it could have been much worse if we had not discovered - and reported it - right away. Don't let the latest tricks of the thief-trade catch you off-guard. By making a few small changes, you don't have to become the victim of yet another debit card scammer, skimmer or hacker.

Source:
http://finance.yahoo.com/banking-budgeting/article/108583/debit-card-skimming-scams?mod=bb-checking_savings