PIN’s, Signatures & Debit Card Fraud…
PIN’s or signatures to prevent debit card fraud???
When a bank investigation confirms fraudulent activity on your debit card, both Visa and MasterCard have ‘zero liability’ policies that, in most cases, exempt debit cardholders from liability. But even when consumers are granted liability protection identical to that for credit cards, the headaches of repairing the damage are much greater with a debit card.
Unlike credit cards, payments for fraudulent transactions on a debit card come directly out of your bank account. These unauthorized charges can cause balancing errors or drain your funds completely, resulting in bounced checks and overdraft fees. Although most banks will remove overdraft fees caused by fraud, funds won’t be available until the investigation is complete– meaning, you may have to deal with a whole host of new issues when your bills are paid late or you can’t afford everyday necessities.
One way of reducing the risk of debit card fraud is to use a PIN vs. a signature card. Retailers generally report a higher incidence of fraud with debit card purchases requiring a signature than with purchases using a PIN. “Signature-based transactions are definitely less secure, so it’s really outrageous that banks are steering customers to use signatures rather than PINs simply because it generates more fee income,” says Avivah Litan, director and financial analyst for research firm Gartner.
Ironically, although your odds of becoming a fraud victim are lower when you use a PIN, your protection from liability if fraud does occur is greater with a signature card because issuers may exclude some types of PIN transactions from their zero-liability policies. Litan advises calling your card issuer to find out what your liability is for unauthorized signature vs. PIN debit purchases. She says that since banks encourage the use of signature debit, you’re likely to have better protection when you sign.
* For more tips on preventing fraud, see our section on Credit Card Security >
