Debit Card Dangers - You'll Be Shocked, Too, When You Discover the Hidden Dangers of Debit Cards

EXTRA... Yours for FREE!

I have teamed up with the author of the Credit Secrets Bible and picked up some great tips from his book in e-book format -- a $29.95 Value !!

This condensed version of his book, "The FREE Credit Secrets eBook", contains some GREAT secrets on...

- How to repair your credit
- How to get a 700 credit score quickly
- How to resolve bad marks on your credit within 30 days
- And MUCH MORE

Debit cards have become a very popular way to pay for everything from fast food to rental cars.The Federal Reserve reports that debit card transactions have been growing more than 20 percent annually and have surpassed credit card transactions.

The appeal is understandable. Debit cards are quick and easy to use.

But using a debit card can cost you hundreds and even thousands of dollars. We'll show you why you should never carry a debit card.

In it's 2007 Debit Issuer Study, PULSE EFT Association reported that U.S. financial institutions lost an estimated $662 million to debit card fraud in 2005. There is no end in sight.

You'd be safer carrying cash. Although you don't have much recourse if it's lost or stolen, but at least your loss is limited to the amount of the missing currency.

Carry a debit card, and you put the entire balance in your bank account at risk. If you link your checking account to your savings account to avoid overdrafts, you put the balance in both accounts at risk.

If a thief gets your credit card, the federal Truth in Lending Act limits your liability for any fraudulent credit card charges to $50. You may not have to pay even that amount, as many financial institutions don't impose any charge on their defrauded customers. And while the theft is being investigated, you can refuse to pay any part of the unauthorized charges.

Debit cards fall under a completely different law, the Electronic Fund Transfer Act. To limit your liability to $50, you have to notify your bank within two business days of discovering that you're debit card has been lost or stolen....

Wait longer than that, but give your bank notice of the fraudulent transactions within 60 days of when your statement is mailed, and your maximum liability jumps to $500. Miss that deadline, and you could lose all the money in your account.

Because the debit card accesses fund directly out of your account, you can be left without your grocery money while the fraud claim is being investigated.

One trip to Taco Bell was enough to send Joseph Rizk's checking account into free-fall.

Rizk made the mistake of paying for fast food with his debit card. He figures he spent only about $5 more than he had in his account.

Unfortunately, by the time he realized there was a problem, the bank had hit him about $350 in overdraft fees. At $25 to $35 per occurrence, it's easy to rack up hundreds of dollars in needless non-sufficient funds (NSF) fees.

"I overdrew, and they pretty much pummeled me with charges," said Rizk.

The Center for Responsible Lending, a consumer group, estimates that overdraft charges cost people about $17.5 billion each year. The center's research reveals that about 45 percent of those overdrafts are the result of using a debit card or taking out cash from the ATM.

Banks USED TO refuse any debit card transaction that would overdraw a depositor's account... BUT NOT ANY MORE.

Banks COULD warn depositors when their accounts are close to being overdrawn... But they DON'T.

Instead most financial institutions automatically enroll their depositors in a program that loans them the amount of the overdraft -- but at a steep price. The Center for Responsible Lending estimates that banks that offer these lending programs can expect a sharp increase in OVERDRAFT REVENUES, as much as 200 to 400 percent.

Calculated as an interest rate, rather than a fee, the cost of these loans is astronomical. The average amount of a point-of-sale purchase that overdraws an account is $14.75. The average fee is more than double that amount. According to the agency, most consumers only use these loans for a few days. So on an overdraft loan, the annual percentage rate can be as high as 20,000 percent.

In defense of this practice, it IS the responsibility of the account holders to monitor their account balances and avoid overdrafts. Of course, that requires the account holder to KNOW how much money is in their account.

R. C. Welborn learned the hard way about the risks of using debit cards. To make sure he didn't overdraw his account, he checked his online bank statement.

Since it showed $80 in his checking account, he fell free to make several small purchases a few days before his paycheck was deposited. Using his debit card, he bought two gasoline fill-ups, snacks and cigarettes, totaling about $65.

Although the balance in his account was more than enough to cover the price of what he bought, when he checked his account about ten days later, he found he had incurred $120 in overdraft fees.

"I couldn't figure out what was going on, I knew I had money in the bank," Welborn remembered.

Like most people, Welborn didn't know that merchants can place a pre-authorization hold on a customer's account. In situations where the exact amount of the transaction isn't settled when the approval is given, it makes sense a merchant would want reserve a little more to cover their transaction.

If you give your debit card to a waiter, hotel clerk, car rental company, or gas station, the merchant is likely to get an approval of a higher amount -- to cover any tip on their service, higher purchase amount, or room service. Car rental companies that accept debit cards routinely place holds in the amount of $300 to $500.

Now Welborn understands that the pre-authorization hold the gas station put on his account resulted in overdrafts on at least six other small transactions. He estimates that he paid over $2,000 in overdraft fees because he used a debit card.

"The quickest way to bankrupt yourself is not knowing what's going on with your debit card, but if you don't get a warning when you're doing it, how to you know?" Welborn asked. "I won't touch a debit card anymore. I do everything with cash."

Pre-authorization holds placed by merchants are just one of the factors that make it difficult, if not impossible for a depositor to know his or her available account balance. It's becoming more difficult to tell when a transaction hits an account.

Some debit cards allow for both signature-based debit card transactions, that, like a check, take a few days to clear, and PIN-based transactions, which hit the depositor's account instantly. Take into account paper checks that merchants and service providers frequently convert into electronic drafts, and, without real-time account information, it's impossible to know what's in any checking account.

Nessa Feddis, senior federal counsel for the American Bankers Association in Washington explains that even the banks don't have up-to-the-minute information. "We don't have real-time transactions. There will always be outstanding transactions that the consumer has authorized but have not hit the bank."

Comparing debit card transactions to a plastic check, some financial institutions instruct depositors to keep track of their purchases, just like in the old days when checks and drafts were the only way to draw funds from a checking account. But in the old days, a depositor could wait for their bank statement to reconcile their balance. Now, by the time the statement arrives, the damage may already be done.

"The debit card is really where it's a serious problem," argues Ed Mierzwinski, the consumer program director of the U.S. Public Interest Research Group in Washington. "It's harder to keep track of your balance because of the tricks banks use."

In addition, there are no regulations or statutes that limit the amount of a pre- authorization hold, or the length of time that it can be imposed on an account.

When Penny Chaisson's bought $20 worth of gas, the station put a hold of $75 on her account, more than 3 times the amount of her purchase. She contacted both the gas station and her bank, but each pointed a finger at the other. Even after escalating her complaint to management, it was 72 hours before the hold was released.

These holds stay in place until the bank or the requesting merchant gets around to releasing the amount held in excess of the purchase amount. Generally this takes a few days, but it could be longer.

Promptly reconciling your account to the monthly statement or monitoring your account balance on-line will NOT always prevent loses associated with the use of a debit card.

There is only one solution -- Don't carry a debit card. *

When opening a checking account, it is standard practice for a bank to send the depositor a combination debit/ATM card. However you can pick and choose the services you want to accept.

If you want to avoid the risks of having a debit card, but would like the convenience of ATM access, you bank will issue you a card for just that purpose, without the debit card function. You can always pay for your purchases with cash or a credit card, since both are safer than using a debit card.

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* Personal Sidebar: There ARE certain transactions for which only a credit card or debit card will work. For people who are not able to own a credit card (for whatever reasons), another option besides a debit card connected with their checking/bank account DOES exist....

That is to purchase one of the now widely available pre-paid credit cards with cash. You can usually re-load the prepaid credit cards as needed. However, there are usually fees deducted in association with these types of cards. Still, it can be worthwhile in cases where no other options exist.
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The "CREDIT SECRETS BIBLE" has been in print since 1994 and is published by Consumer Publishing Group.

For more information on the "CREDIT SECRETS BIBLE" you may visit
Credit Secrets Bible.

Copyright 2007 Consumer Publishing Group

First of all, doesn't this news shock you, too? Did you realize this is happening?

If you keep good track of your finances, you may not even realize this has been going on. I guess for myself, there have been one or two instances that I can recall in the last few years where this happened to me, but IT DIDN'T REALLY REGISTER in my mind exactly WHAT had changed.

In the "golden olden days" people who wrote "bad checks" actually risked being arrested! (How long ago was that, anyway?)

Evidently, the banks realized they were missing a "GOLDEN OPPORTUNITY" of some kind -- now they make money by "LOANING" us the money to cover our "BAD CHECKS" !

IN OTHER WORDS, they allow us to use our bank debit cards to purchase things even if we do not have the money in our checking accounts to cover the transaction. They "loan" us the money and then CHARGE US up the "wazoo" and call it "Non-Sufficient Funds" fees, or NSF fees.

When I called my own bank about this issue, I was told that I can MAIL them a letter (that I must compose myself) instructing them to make this change so that a merchant will DECLINE my debit card if there are insufficient funds in my checking account.

I immediately thought to myself, who knows how long it will take for a "snail mail" letter to arrive -- or IF they might not even DENY they ever received it? And even if my letter arrives at the bank, who knows who will get it or when any action will be taken on it?

So, I asked them if, instead, I could go to my local bank branch and fill out a form right away... NO DICE;. They said there is NO such form to fill out (which would, of course, totally SIMPLIFY this process)!

I immediately thought to myself, heaven forbid they make it EASY for us to prevent them from "legally robbing us" in this way!

At that point, I was getting really angry... they make me feel like making this SIMPLE change to PROTECT MYSELF is as difficult as climbing a mountain!

They finally admitted I can go to the local bank branch and one of the tellers will help me write a properly worded letter (because I can just imagine them refusing a letter that I write on my own on some technicality) and they will make sure it is submitted through the proper channels.

I have not done this yet, as of this writing, so I do not know how quickly the change will take effect on my debit card transactions.

In the meantime, my son (who also has been learning some extremely expensive lessons about all these issues, himself) opened a second checking account at the same bank. In that process, he asked if there are any options for his new debit card and found that he was able to set up his NEW checking account in the way that his debit card WILL be declined by merchants if there are insufficient funds in his account....

Therefore, KNOW that if YOU are setting up a NEW checking account, you can ASK your bank about the default settings and IF there are ALTERNATIVE OPTIONS for how it will work in regard to these issues!

Debt is Slavery: and 9 Other Things I Wish My Dad Had Taught Me About Money

Slavery is defined as "being bound in servitude as an instrument of labor" - something that applies to directly to debt as well! Written by aerospace engineer and debt survivor Michael Mihalik, Debt is Slavery and 9 Other things I Wish My Dad Had Taught Me About Money is a straightforward guide to taking control of one's finances and escaping the slavery that is debt. Written in plain terms for lay readers, Debt is Slavery offers practical advice and cautious warnings - such as when debt can be good (if it is used to buy something that will produce value and/or income in the future - for example, borrowing to pay for college education or start a business), when it is bad (if it is used to live a lifestyle one cannot afford), how to choose a job ("don't sell your soul for a salary"), and how to recognize the influence of the Great Marketing Machine, or GMM. The step-by-step instructions for paying off one's credit cards are especially valuable. Enthusiastically recommended reading for all Americans, and especially for young adults or college freshmen who are just about ready to move out of home and live on their own.

Credit Repair Kit For Dummies

Steve Bucci has written a must read book about Credit. He does it in a clear helpful manner. I believe that this book could be used for students learning all about the world of Credit.

Having been a Credit Manager at Princeton I found that young people had no concept of what credit is all about. These young people had to learn the subject of Credit the hard way. But had they been in a course where Credit Repair Kit was the textbook, they would have learned all the levels of credit and therefore not suffered the consequences of Bad Credit. I salute you Steve Bucci for providing the book that will help all folks on the long journey of obtaining good credit.

Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future, 2nd Edition

What can I say more than has already been said? If you only read one book about your credit, this should be it. Whether you are planning to buy a home, buy a car or start a business or declare bankruptcy in the next year, this book is a must-read to get you started thinking responsibly about your credit.

I would also check into some of the more reliable Websites and forums on the subject.

As a national lending manager for a well-known company, this book, along with the opportunity to compare actual credit reports from thousands of real cases, has given me the insight needed to manage my own credit better and start a new business in 2006.

Whether you think it's fair or not, we are a part of several systems in life. The credit system is what it is. This book will teach you to make the most of it.

A wise man once said (Oh, I hope I don't butcher this too badly): "The interesting thing about interest is: Those who understand it earn it, and those who don't, pay it." This book will help you to begin to understand.

EXTRA... Yours for FREE!

I have teamed up with the author of the Credit Secrets Bible and picked up some great tips from his book in e-book format -- a $29.95 Value !!

This condensed version of his book, "The FREE Credit Secrets eBook", contains some GREAT secrets on...

- How to repair your credit
- How to get a 700 credit score quickly
- How to resolve bad marks on your credit within 30 days
- And MUCH MORE

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