What to do to Avoid Getting Burned with Credit Cards

I am actually not a big fan of credit cards, but having them and using them correctly and responsibly are essential for obtaining good credit scores. But if you are among the millions of people who carry credit card balances month after month, the banks have their claws into you.

The information below are taken from “Debit card disasters: What to do when you get burned” press release. You can find the entire release here.

The Dos and Don’ts of Debit Cards

Don’t think that the same protections you get from your credit card apply to your debit card. If someone steals your credit card number and runs up a big bill, you won’t be responsible for the fraudulent charges — at least not until the card company completes its investigation and probably not at all if they find evidence of fraud. But if someone steals your debit card information and starts charging away, you’re on the hook. The money comes straight out of your bank account. Not only are they your funds — with no one there to cover for you — but getting the money back can be a huge hassle that can easily take a month, if not more, to resolve.

Even if your money is only locked up temporarily, as Greg Meyer’s was, it can still be devastating, especially if you don’t have a large balance to tide you over. Not only that, but if the hold is greater than your balance, it can trip an overdraft protection and subsequent transactions can be denied or add to your overdraft woes.

So how do you protect yourself – and your debit card? “Be alert when there’s an opportunity for so-called ’skimming’ or where people can look over your shoulder to track your PIN number,” says Tim Lukens, a senior vice president at Affinion Security Center, a company that makes anti-cybercrime software for big banks. Also, think twice before using your debit card at a restaurant, where you don’t actually see the server swiping it, or at gas stations, where surveillance cameras can record you keying in your PIN.

Online shopping is another potential danger zone. If you can’t use a credit card for online purchases, Lukens says to make sure you’re only using a debit card when shopping at well-established, trusted merchants. “I think that’s where consumers are at the most risk, when they don’t know a site,” he says. Before you enter your debit card number, look at the bottom of the web page for security seals from companies like VeriSign, Cybertrust, PCI Compliance or Truste, he suggests. Be warned, though: “A number of fraudulent sites will cut and paste logos,” Lukens says. Click on the logo if you’re unsure; if it’s the real deal, it will take you to that site’s security verification.

The FTC has created new regulations for merchants that go into effect June 1 that will require that financial institutions set up checks that will trigger a response if a customer’s card is used fraudulently. This new requirement, commonly called the “red flag rule,” should help, Lukens says, but thieves are clever and illegal charges can sometimes slip through the cracks.

Getting burned by a debit card once can change the way people purchase in the future. Identity theft victim Lu says she now only pays by cash, check or credit card. She even went to her bank to request an ATM card that couldn’t be used for debit purchases if it fell into the wrong hands. Lu admits not having a debit card can be a hassle sometimes, especially if it involves the time-consuming process of writing a check and having it approved as opposed to just swiping a card. But she says it’s worth her peace of mind. “If I felt completely secure, I’d consider getting a debit card again,” she says. “But at this point, I don’t think they’re safe.”

Nathaniel Lipman is the current President, Chairman of the Board and Chief Executive Officer of the Affinion Group. Through Nathaniel Lipman's leadership, the Affinion Group has grown to be the world's leader in membership services, insurance providers, loyalty programs, value-added checking programs, and security services.