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Debit Card
Frequently Asked Question

... Continued From Previous Page

If I use a debit card can the merchant put a temporary "block" or "hold" on other funds in my account?

Yes, in certain circumstances, merchants can take these steps as protection against fraud, errors or other losses. One common situation involves a hotel putting a hold on a certain amount when you use a debit card (or credit card) to reserve a room. Another example is when you use your debit card at the gas pump. Typically, the gas station will create two transactions — the first to get approval from your bank for an estimated purchase amount (let's say $50) when you swipe your card before pumping gas, the second for the actual charges when you're done. Until the first ($50) transaction is cancelled by the bank, usually within 48 hours, you wouldn't have access to that amount in your account.

Because a debit card transaction is processed so fast, is it possible to "stop payment" or obtain a refund if I later discover a problem with the merchandise?

It depends. Because funds are deducted from your account very quickly, don't expect to have the option to stop payment or obtain a refund. If the transaction cannot be cancelled, you may be able to work out other arrangements with the store. For example, if you return an item to a merchant and you're not able to get a refund, you instead may qualify for store credit or a gift card.

"If you're concerned that the merchant might not deliver what is promised, you might consider using a credit card instead of a debit card," says Janet Kincaid, FDIC Senior Consumer Affairs Officer. "That's because the consumer protections are stronger for credit cards when it comes to returning damaged merchandise." She noted, for example, that the Fair Credit Billing Act, which applies to credit cards but not debit cards, gives you the ability, under certain circumstances, to withhold payment on defective goods until the problem has been corrected.

Sometimes you're asked to enter a PIN to approve a debit card transaction, other times you sign your name. Does it matter?

Yes, it could. Examples: If you use a PIN at a merchant's sales counter, you also may be able to get cash back, and that can save you a trip to the ATM. However, be aware that some financial institutions charge consumers a fee for a PIN-based transaction. There also may be differences in how quickly the transaction is posted to your account, depending on how your bank processes PIN vs. signature debits.

Also, here's how to select each option. If you want to sign for a debit card transaction, you generally swipe your card through the reader and choose "credit" — even though you are authorizing a debit (withdrawal) from your account, not a credit card transaction. To use your PIN instead of signing, select "debit."

What more do I need to know
to prevent debit card fraud?

Protect your debit card as well as the account number, expiration date, security code on the back, and the PIN. "Even if you never lose possession of your card, someone who learns your account number, security code and PIN may be able to use that information to access your account and create counterfeit cards," said Aurelia Cardamone, an FDIC Senior Technology Specialist.

While in many cases you are not responsible for unauthorized transactions (see federal protections described later), it can be a hassle resolving the situation. Here's how to avoid becoming a victim:

  • Never write your PIN on or near your card. Memorize it instead.

  • Don't give out bank account information over the phone or the Internet unless you have initiated the contact or you know the person is who he or she claims to be. For example, beware of deceptive calls or e-mails from crooks claiming to be from your bank asking you to "verify" (divulge) your account information. "Don't fall for it," said Cardamone. "A true representative of your bank will never need to ask for your PIN because your bank already has your account information.

  • Don't share your debit card PIN, security code and other account information with friends or relatives who aren't co-owners of your account. Likewise, never reveal this information to new "friends" you meet over the Internet. "Common scams start with a job offer or an Internet friendship or romance that leads to pleas for money transfers and secrecy," said David Nelson, an FDIC fraud specialist.

  • Take precautions at the checkout counter, ATM and gas pump. Always stand so that no one can see the keypad where you enter your PIN. At retail establishments, it's best to use do-it-yourself scanners. If you give your card to a clerk, be on guard against a dishonest employee who runs your card through two scanners instead of one. The second scanner could be capturing your account information to make a counterfeit card. In general, be alert for suspicious-looking devices that may be used to "skim" information from your card.

  • If you use your debit card to shop online, consider extra precautions with your personal computer. Experts advise installing and periodically updating virus and spyware protection and a "personal firewall" to stop thieves from secretly installing malicious software on your personal computer remotely that can be used to spy on your computer use and obtain account information.

  • Look at your bank statements as soon as they arrive. Or, better yet, review your account each week by phone or the Internet. Promptly report any discrepancy, such as a missing payment or an unauthorized transaction, to your bank. Your quick attention to the problem may help limit your liability and give law enforcement authorities a head start on stopping the thief.


 
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