Debit card 101: Choosing ‘credit’ still risky

Herb Weisbaum • Profile • E-mail

I was overwhelmed by the response to last week’s column about crooks who steal debit card numbers at gas pumps. It seems the warning about this relatively new and growing scam really hit a nerve with readers.

Technology makes it possible for thieves to snag account information and PIN codes when people pay at the pump. It’s called skimming. Debit card numbers are a prized catch because they are linked to bank accounts.

Armed with this information the bad guys can make a fake ATM card, go to almost any cash machine and take your money — hundreds, possibly thousands of dollars — before you even know it.

Avivah Litan, a fraud specialist at the research firm Gartner, tells me debit card fraud has risen much faster than other types of fraud in the last year or so. “The criminals are after cash and this is the most direct method to get into your bank account,” she says.

Is there a safer way?
Because debit card skimming is so difficult to spot, some police agencies now advise motorists not to use a debit card to pay at the pump. That prompted dozens of readers to ask if there’s a safer way to use their debit card when they buy gas. This e-mail came from Adrian:

How safe is it to use the debit card as a credit card, meaning don't enter the PIN. Do debit cards used as credit cards benefit from the same protection as credit card transactions?

No. Choosing the “credit” option does not turn your debit card into a credit card. Because the Visa and MasterCard logo are on most of these cards, many people are confused about that. Let me explain.

If you use a debit card you know there are two ways to authorize the transaction: with a PIN or your signature. Many retailers give you the choice.

Choose “debit” and you need to punch in your PIN. Choose “credit” and in most cases (other than pay-at-the-pump machines) your signature is required. What does this mean to you?

“Using your debit card with the PIN number just means the transaction is routed over a different network and it happens more quickly,” explains Gerri Detweiler with credit.com. “But either way, the money still comes out of the account you have it linked to.”

Still the fraud experts I spoke to agree: It is safer to make a debit card purchase using the “credit” option (no PIN used) if the card has a Visa or MasterCard logo on it. That’s because the credit card company’s zero liability protection policy applies to this transaction.

“You get better protection, the thief doesn’t get your PIN and you’re not going to get money raided out of your bank account,” says Avivah Litan.

Protect yourself at the pump A credit card is the safer way to pay with plastic. If a thief does skim a credit card number he can’t take money out of your bank account. He can only charge things, which you can dispute as fraudulent. While most debit card issuers promise “zero liability” if the card is used fraudulently, it still takes time to get the missing money back into your account. Also, federal law provides much better fraud protection for credit cards. “With your credit card, your maximum liability is $50,” explains Ruth Susswein with the advocacy group Consumer Action. “With a debit card it could be as little as $50 or an unlimited amount. It all depends on how quickly you report the loss.” The Electronic Funds Transfer Act does not fully protect debit card users from fraudulent charges unless the cardholder reports a lost or stolen card within two business days. More information: Consumer Action's understanding debit cards

A widespread problem
The U.S. Secret Service confirms investigations into gas pump debit card skimming are underway in a handful of states right now, including: California, Nevada, Pennsylvania, Delaware and Washington.

Hundreds of victims in the Seattle area learned this summer just how easy it is to become a victim of debit card skimming. Their stolen account numbers were used to withdraw money from cash machines in several states during the Fourth of July and Labor Day weekends.

The skimmer scammers withdrew $600 from Jennifer and Darren Mundell’s checking account using an ATM in California. “I was totally blown away by this,” Jennifer said. “I had no idea they could even do that.”

Here’s the amazing part of this story. Detectives say the debit card numbers were skimmed back in August of 2007. Yes, the thieves sat on that information for a year before using it.

“We are looking at a sophisticated, very well-organized group of individuals who did this,” said Jason Visnaw, a detective with the Puyallup, Wash., Police Department. He says the total loss could reach $500,000.

The Mundells got their money back from the bank. But they now pay with cash at the gas station. For them, the days of using their debit card at the pump are over.

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