Debit cards and security issues

Debit cards have become one of the most popular modes of payment in the modern world, and according to financial experts debit card withdrawals and payments have surpassed the use of credit cards, cash and even checks individually. However, not many realize the potential security problems associated with debit cards and according to the American Association of Bankers, the debit card loss has risen from $662 million in 2005 to $788 million in 2008.

One of the reasons debit cards have gained in popularity is they relieve the person being burdened with credit. It also avoids the need to carry cash and in a way, the person can control the amount of expenses by having just enough money in the debit account. However, following security problems shall make anyone think twice or adapt more secure payment methods rather than using a debit card for each and every payment.

In recent times, there were many reports of identity theft from debit cards using a device known as a ‘skimmers’ attached to the card reader of a ATM. Thus, the fraudsters are able to clone a debit card and use the same to withdraw money or make payments using the same account.

According to an article in the ABC News, such skimmers have been discovered in three banks in Savannah, Georgia this year. Although these were detected early, fraudsters were able to steal around 276 customers’ information from the Georgia’s Own Credit Union.

Another instance where debit cards may pose a security risk is at the time of using the PIN number. The four-digit code may easily be followed by a third party at the time of entering or may be leaked through negligent acts by the card owner. Thus, writing the PIN in a piece of paper, giving the PIN code for online transactions, or even disclosing the same to another person may pose a security threat.

When a person uses a debit card, it draws money directly from the person’s checking account and therefore the transfer could take place instantaneously. Thus, when the debit card has been used fraudulently, the debit card owner usually is not aware about the transaction and therefore may continue to issue cheques through the same account. It can lead to bounced cheques and therefore harm the credibility of a person. Furthermore, the liability of such losses are far greater than using a credit card as the person could become liable for the entire amount of the account and up to the overdraft level if such a transfer has taken place and quick action has not been taken.

Thus, the take home message from this article shall be that, ‘debit cards are not the safest business instrument’ and therefore one needs to be careful about when and where to use the debit card for everyday transactions.