The Dangers of Debit: How Bank Cards Are Making Consumers Vulnerable to Fraud

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Thanks to the large scale Target breach over the holidays, many American consumers were made instantly aware of the dangers of financial data theft. While a breach of this size certainly doesn’t happen everyday, this incident brought home the reality that it could happen at any time to any of us.

Financial fraud is a very real danger to individual consumers. While the everyday action of using your debit card to buy gas or check-out at the grocery store seems innocent enough, it can easily result in stolen bank information and/or financial fraud. This information is stolen in many ways, but it often involves “skimming” the card data when you swipe your card.

If a scammer gets ahold of your information they have a direct gateway into your bank account. Within a few hours they can drain your savings account. What’s worse is that choosing the “debit” option and entering in your PIN when you use your debit card (as opposed to the “credit option”) can put your money at even more risk.

So how can you avoid putting your bank account at risk when you use your debit card? When given the option, choose the “Credit” option over “Debit” to make a purchase.

The Difference Between “Credit” and “Debit” When Using Your Debit Card

When you choose the Debit option, you’re required to enter in your PIN (Personal Identification Number), which authorizes your transaction. The transaction is completed via a debit network that connects your information to your bank or credit union.

When you choose the Credit option after swiping your card, you’re required to sign for your purchase but you aren’t required to enter in your PIN. The transaction will be connected to the credit company directly rather than through an external debit network.

Why You Should Choose “Credit” When Using Your Debit Card

There are generally better protections when you choose credit at the register. Since you’re connecting with your bank through their specified credit network, you benefit from the certified and regulated security measures that they have installed. Credit card companies also often have the most sophisticated fraud alert services. Typically they find the unusual activity before you do and can reverse the charges as soon as you tell them they weren’t yours. Meanwhile, a fraudulent debit charge could take weeks to clear up and in some cases you can lose your money. If you’re worried about going (further) into debt when using credit card, try signing up for ReadyForZero, a free tool to help you manage and pay off your debt.

You might also save on a small fee by choosing credit. Not many people are aware of this but some banks charge a transaction fee each time you enter your PIN at the point of purchase. This is an unnecessary cost that you can avoid by choosing credit when using your debit card.

Many retailers now default to debit but you can always request credit before the transaction goes through. The retailer can ensure that your transaction will be rung as credit rather than debit if you don’t see an option on the screen. Just remember to keep daily track of your balance by manually subtracting each charge from your balance. While the purchase will show up online, it sometimes takes a few days for the balance to update. Keeping a register daily is the best way to prevent you from unknowingly going negative on your account.

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Precautions to Take If You Do Choose Debit:

Protect your PIN when entering it in a public space. It never hurts to cover the number pad with your open hand as you punch in your PIN. This way you can ensure that your number isn’t being scoped by anyone else.

Inspect all ATM machines or swipe pads with a critical eye. If it looks unusual (such as a strange device sticking out of the ATM), don’t take a chance. Trust your logic and your gut when it comes to using any ATM machine. A primary way for scammers to get ahold of your information is to set up “skimming” machines that copy your card number and track your PIN. Gas pumps, public transport kiosks, and public ATMs are all places that are regularly targeted.

Those who entered their PIN at the point of purchase at Target were not only at risk of fraudulent purchases, but also at risk of having their bank accounts wiped clean by those who stole the information. By choosing credit over debit when using your debit card, you can at the very least ensure that your cash flow won’t be compromised, even if you ever are victimized by fraud. And if you ever do notice a fraudulent purchase, contact your bank immediately.

Have you tried ReadyForZero yet? It’s a free and secure online tool for managing debt. Try it now.

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Have you tried ReadyForZero yet? It's a free online tool for paying off debt.

Try it now

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  • Solace

    Is there any difference, in terms of security, between using a debit card as credit or using a credit card not connected to your bank account?

    • Claire Murdough

      Great question! They generally have similar security measures but protections will differ depending on your bank, credit union, or credit card company. Luckily, most are extremely quick to catch and alert you to any fraudulent transactions.