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FOR IMMEDIATE RELEASE: November 29, 2004

UNDERSTANDING THE RISKS OF DEBIT CARDS

Debit cards are quickly replacing cash and checks as a convenient way to pay for purchases. While quick and easy, debits cards are not without risk, so be sure to take necessary precautions. Here is what the New York State Society of CPAs says you need to know to manage your use of debit cards.

DISPUTE RESOLUTION DIFFERS FOR DEBIT CARDS

When you purchase an item with a credit card and that item turns out to be defective, you have a right to withhold payment until the issue is resolved. This right is protected under the Fair Credit Billing Act. In merchant disputes, dissatisfied debit card customers don’t have the same protection.

Since your debit purchase is deducted from your account at or shortly after the time of purchase, you’re on your own if something goes wrong with the purchase. The bank won’t redeposit the money in your account for items that fail to be delivered, are of poor quality, or don’t work. Debit cards may be a great way to pay for gasoline or groceries, but for big-ticket items, it's wiser to use a credit card.

LIABILITY PROTECTION PUTS THE BURDEN ON THE CARD HOLDER

If someone misuses your credit card, your maximum liability under federal law for unauthorized use is $50. The regulations that protect you from fraudulent use of your debit card are not as user friendly. With a debit card, your liability, under federal law, for unauthorized use depends on how quickly you report that your card has been lost or stolen.

For example, if you report the loss within two business days after your realize your card is missing, you will not be responsible for more than $50 of unauthorized use. Your liability increases to $500 if the lost or stolen debit card is reported within 60 days.

Failure to report unauthorized use within 60 days after your bank mails you the statement will cause you to face unlimited loss. This means you can lose all the money in your bank account and, perhaps, the unused portion of any line of credit established for overdrafts.

As with credit cards, once you've reported the loss of your debit card, you cannot be held liable for additional unauthorized use that occurs after that date. Some debit card issuers offer more protection than the law requires. However, these are voluntary measures and could change at any time.

SAFETY TIPS FOR PROTECTING YOUR DEBIT CARD

CPAs recommend that you know the risks and take precautions to protect your debit card. Here are some helpful tips.

Remember, your card does not have to be missing in order for it to be misused. All thieves need is your name and card number to order goods by mail or over the telephone. Your bank account can be wiped out before you know the card is missing, or while the card is still in your wallet.

Finally, the New York State Society of CPAs points out the key to using any credit or debit card wisely is to keep spending within your means.

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PUBLIC SERVICE ANNOUNCEMENT
USING DEBIT CARDS WISELY
Approximate Length: 45 seconds

Debit cards, which enable you to make purchases by directly deducting funds from your bank account, can be convenient. However, the New York State Society of CPAs urges consumers to be aware of some of the risks associated with the use of debit cards. While debit cards may be a great way to pay for gasoline or groceries, it's wiser to use a credit card for big-ticket items. Credit cards allow you to cancel payment if there is a problem with your purchase, but with a debit card you're typically on your own if something goes wrong. Also, if your debit card is stolen, you risk someone substantially depleting funds in your bank account. Protect yourself by keeping your debit card secure at all times and by keeping your PIN number confidential.

Finally, the New York State Society of CPAs points out that the best way to minimize debit card risks is to keep spending under control.