Debit cards are convenient, but be aware of the risks
YONGSAN GARRISON, South Korea — As Community Bank customers receive their new debit cards, consumer advocates warn that the increased convenience comes with increased risks.
If someone takes your card and manages to get in your account, federal law limits financial liability. But if you voluntarily give your personal identification number to someone, that individual could legally be considered your agent, opening you up for greater financial liability, bank officials said.
But that’s an extreme case. Debit cards, however, do expose consumers to a higher level of liability than regular credit cards. Liability rules were included in a pamphlet sent with the Community Bank debit cards:
If you inform Community Bank within two days of a loss or theft, you are liable for no more than $50.If you do not inform the bank, and the bank can show that they could have stopped someone from using the card without your permission, you can lose up to $500.If transfers appear on a statement that you did not authorize, the bank should be informed immediately. If written notice is not received within 60 days after the statement was mailed, you may not get back any of the money you lost after that 60-day period.According to Public Interest Research Groups, a consumer watchdog that tracks banking issues, many banks have pledged to limit liability to $50 or less. Massachusetts has a law for this limit, but other states may not.
There is no charge for replacing a lost card, said Gregory Morgan, Community Bank’s Pacific theater manager. Similar to other banks, a $1.50 fee will be charged if the debit card is used at an ATM other than Community Bank’s. But there are limits on daily account activity using a debit card.
When cards are used without inputting a PIN, it is called an offline transaction. For the Community Bank Visa debit card, the daily limit for offline transactions is $309, which may be a combination of ATM withdrawals — one that is currently not functioning but allowing withdrawals on good faith — or purchases, Morgan said.
So, it’s possible to go to the post exchange with a debit card, select the credit button and the sign for the transaction. Even though it is not a credit card, the transaction will become an offline debit transaction.
For banks, that type of transaction is the most profitable, according to Public Interest Research Groups. Banks receive a percentage fee of up to 2 percent of every offline transaction amount. For PIN-based online transactions, banks get a flat fee between 7.5 to 10 cents, according to the group’s Web site.
For online transactions — those requiring a PIN — the daily limit is $2009, with purchases limited to $1,500 and automated teller machine withdrawals limited to $509, according to the Community Bank Web site.
Consumers can use the cards on the Internet or off-base in the countries where they live as long as Visa is accepted, Morgan said. The bank that handles the particular merchant’s transactions will determine the exchange rate, he said.
Though it may sound like common sense, here’s an additional reminder: Don’t give out the pin number for the new Community Bank check card you receive in the mail.
While check cards — also known as debit cards — are generally more secure than credit cards because a PIN usually must be inputted when a purchase is made, it’s just as risky if someone else knows your number, Morgan said.
“The PIN number should never leave their lips — even to a friend,” Morgan said.
Don’t write the pin on the back of the card, either, he said.
Consumers throughout South Korea, Japan and Okinawa have started receiving their check cards courtesy of Community Bank. The Defense Department recently renegotiated its contract with Bank of America, and part of that contract includes provisions for debit cards and other features such as online banking.