A debit card may seem to work much the same as a credit card, with one primary difference. The primary difference between the way a credit card and debit card works is that when purchases are made, the funds are automatically deducted from the account associated with the debit card. There is no interest for partial or monthly payments when using a debit card because there are no monthly payments or minimum balance due. The fact that entire purchases are paid for in one transaction can cause concern for cardholders regarding security problems associated with debit cards.
Carrying your entire account
When you are carrying a debit card in your wallet, you are carrying your entire account with you. If your purse or wallet is stolen, and your card is used, there is the potential for loss of all the money in your account. Unlike the limitations on credit card liability, the limit is not so minor in the event of theft of a debit card. Debit card users can be liable for up to $500 in the event of debit card theft, and that is only if the theft is reported within the first 48 hours. This is unlike the liability of a credit card holder, who is only responsible for the first $50 in the event of theft.
If benefits are posted to a debit card, you may suffer serious financial issues
Many benefit programs are now distributing the cash benefits on a debit card issued by the state or federal government programs. Some states issue welfare benefits on a debit card. Child support payments as well as social security disability programs, social security retirement as well as survivor benefits are now distributed on a debit card if the recipient chooses to obtain their benefits by using a debit card, rather than receiving a paper check.
If your debit card is stolen, it can take weeks for a new card to arrive by mail. Another concern is that there is a fee for the debit card to be replaced. A person with benefits on the stolen debit card may have no access to those benefits, which will mean no way to pay rent or mortgage, utility or other bills. This can cause serious financial hardship for the person with money on the stolen debit card.
Gas stations and hotels can hold your funds
Some gas stations and hotels will charge $1.00 to the account of a debit card holder to make sure the card is active when a customer presents a debit card for payment. The security issue is that the card may have a hold placed on it until the gas station payment has been paid or the person has checked out of the hotel. This means that the debit card holder may not have access to funds on the debit card account.
Fraud affecting multiple accounts
In 2011, ABC News reported that craft and gift card chain store Michaels was “rocked” by debit card fraud after fraudsters installed skimmers which was able to gain access to millions of debit card numbers and other information. Other chains have suffered from thieves stealing their customers’ debit account information.
Even a former fraudster told ABC that he does not carry a debit card, which Frank Abagnale called “one of the worst financial tools ever given to the American public.”
PIN number not safe
Debit card holders may think that their PIN guarantees safety and that even in the event of theft no one will be able to gain access to money in the account associated with the debit card without the PIN. This has been proved to be incorrect. In many of the cases where thousands of debit card users information being stolen through the use of skimmers, the PIN information was also able to be obtained. Fraudsters then have full access to the account and can totally wipe all money out of the account.
Security issues with debit cards may some users rethink using debit cards
With recent debit card issues being brought to light, some debit card users may rethink using debit cards. Whether consumers use debit cards or not is up to them. But it will be beneficial to have another means of accessing funds in the associated account.