Beware the Debit Card

by Dave in

We came back from our Memorial Day weekend away to find an urgent message from Citibank. My wife's Debit Mastercard had been fraudulently used down in Mexico for a number of days, and Citibank wanted to start the process of canceling the old card and issuing a new one.

This certainly isn't the first time we've received a phone call like this. With 4 different businesses, each with their own credit and debit cards, plus our personal stuff, this is something we deal with once or twice per year. But it is the first time it's happened to a debit -- not credit -- card of ours.

You see, my wife likes to use her debit Mastercard to make all her purchases, since it allows her to track money in real-time, not having to wait for a monthly statement to find our whether or not she's overstretched things a bit. For this the debit Mastercard/VISA is fantastic. The merchants see it as just another credit card, no PIN is required, yet it pulls the money right from our checking account. For protection, the banks (Citibank included) have a fraud guarantee on debit cards just like they do on their credit cards -- or so we thought.

Certainly they will cover any fraud. The difference is that with a credit card, it's the bank's money at play in the interim, whereas the debit card it's our money at risk. And this weekend's events proved that. Instead of it simply being a bunch of fraudulent charges on a statement that we simply had to acknowledge, this time the charges wiped out her checking account and our overdraft protection line of credit attached to it, leaving us with zero balance left to cover any additional checks. For this, Citibank has no immediate remedy. Sure the money will come back, but it may take a few days or even weeks for the "provisional" credit to be applied. In the meantime we're out the money. Thankfully we have an attached savings account from which we were able to immediately transfer some interim funds, but had my wife simply used a credit card instead of a debit card, all of this would be moot.

I confirmed this with a high ranking customer service agent. Point blank, I asked him, "so we should only use credit cards and not debit cards, right?" After a considerable pause, his reply was, "Yes sir. That's absolutely right."

It's because of this that I'm canceling all of my debit cards going forward and making them all "ATM Only" cards -- where a PIN is required. Surely the banks would prefer that I didn't -- they like the fees they earn from potential debit charges -- but if they're not willing to protect me on them, I'm not willing to play that game.