Posted on: Thursday, May 19, 2005

Don't let debit-card data get swiped

By Sandra Block
USA Today

To protect yourself from identity theft, hold your credit cards close, and your debit cards closer. Armed with the right information, thieves can use your debit card to make charges or withdraw cash from your account. You may not know you've been victimized until your mortgage check bounces. Cleaning up the mess can take months.

Debit cards have soared in popularity in recent years. Most retailers accept them. And unlike credit cards, debit cards withdraw money from your bank account, eliminating the temptation to spend money you don't have. Still, debit cards don't carry the same legal protections as credit cards.

The federal Truth in Lending Act limits your liability for fraudulent credit-card charges to $50. Most credit-card lenders won't even make you pay that.

Debit cards fall under a different law, the Electronic Fund Transfer Act. Your liability is limited to $50 if you notify your financial institution within two business days after discovering your debit card has been lost or stolen. If you wait more than two business days, but notify your bank within 60 days of the date your statement is mailed, you could lose up to $500. Wait longer than that, and you could lose all the money in your account.

Many debit-card issuers provide protection beyond what is required by federal law. Visa and MasterCard have zero-liability policies for debit cards processed through their networks. Those policies apply to "signature" debit cards bearing a Visa or MasterCard logo.

With a PIN-based debit card, you type in your PIN when you make your purchase and the money is deducted from your account immediately. These transactions are typically processed through bank networks. Many banks issue debit cards that perform both functions.

Mari Frank, an attorney who represents victims of identity theft, doesn't use debit cards. She uses a credit card for all noncash purchases. She says she's heard too many horror stories from debit-card holders whose checks bounced while the bank conducted a fraud investigation.

Another option is to use a PIN-only debit card. Without your PIN, criminals can't use your card. Someone who steals your signature-based card can use it to make purchases simply by forging your signature.