Avoid These Debit Card Traps (page 2 of 3)

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People should use a credit card, even if they don't any other time

Be Wary on the Web

Say you buy an MP3 player for $80 through an Internet discounter. You wait two weeks. Your music player never arrives, and now the seller is nowhere to be found.

If you used your credit card to buy the player, you've got options. Under the terms of the Fair Credit Billing Act, your card company must remove the questionable charge from your bill while it investigates. The law says you're liable for up to $50, but you'll most likely end up owing nothing.

If you paid by debit card, you're doubly out of luck: no pocket tunes for you, and your money is already gone. Under the Electronic Fund Transfer Act, your debit card issuer isn't required to step in if you make a deal with an unscrupulous merchant. You get to wrangle with the seller yourself, no matter what your bank promised when you opened your account.

Then there's the fraud issue. Federal law generally limits your liability to no more than $50 if your debit card is stolen or copied, as long as you report the crime within two days of receiving your statement. However, if you don't notice the suspicious activity till weeks later, you may be liable for up to $500 or more. As with transaction disputes, recouping your cash isn't a sure thing.

Avoid the Trap

Don't use debit for online purchases, especially if you don't know the retailer's reputation, says Avivah Litan, electronic security specialist for Gartner, an information technology research firm that works with banks. Also opt for credit for all expensive items, like furniture.

Fraud is trickier because it can strike even if you're careful. Nessa Feddis, a senior federal counsel to the American Bankers Association, recommends checking your printed statements every month. Better yet, register for online banking and track your money trail even more frequently.

Some card issuers offer zero liability policies, meaning they won't hold customers responsible for even that first $50 in fraud charges. But they are not legally bound to do so. "We get calls from listeners who struggle for weeks to get their own money back," notes Howard. Even if a store's card reader prompts for your PIN, you can override the system by pressing Credit/Other or asking the cashier to process the sale that way. When you sign a receipt, your debit transaction piggybacks on the credit card processing system, triggering the zero liability policy to kick in.

 

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