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Extra fees plague debit card users

Aug. 31, 2004

By PETER ANZOLLITTO, staff writer

Students pulling plastic out of their wallets should think twice before making a purchase because, depending on whether they have a debit or credit card, it could be costing them extra.

By definition, a credit card gives the user credit, which can be used and paid back incrementally. An automatic teller machine card allows the user to have more flexible banking hours through automation. A debit card combines checks and ATM cards, making the user capable of paying merchants directly from his checking account wherever credit cards are accepted, a difference that few people are aware of.

"I always thought ATM and debit cards were the same thing," Scott Daniel, a Mesquite junior, said.

Debit cards are accepted wherever credit cards are because they are connected to credit card companies, which force merchants to accept debit cards.

According to an article in Retail Industry magazine many large retailers, Sears, Safeway, Circuit City and The Limited have joined with Wal-Mart in a $8.1 billion lawsuit against Visa and MasterCard, claiming antitrust violations.

Merchants currently resist new debit cards connected to credit cards because they can carry as much as five times the transaction fee of a traditional bank debit card, often forcing merchants to pass the charges onto consumers through price increases, the same article reported.

The Texas Public Interest Research Group (PIRG) explains on its Web site that merchants incur these fees when a consumer uses his debit card as a credit card by signing instead of entering a PIN number. Many banks now charge consumer transaction fees, between 25 cents and $1.00, when a consumer uses his debit card like an ATM card with a PIN.

Retailers involved in the lawsuit think the banks are doing this so consumers will use their debit cards as credit cards in order to collect the high transaction fee from merchants.

Representatives from both Bank of America and Wells Fargo stated that their debit cards have no consumer transaction fee.

"Though some of our debit cards may have a monthly usage fee, we do not assess a fee upon point of sale," Christine Donner, a Wells Fargo representative, said.

Despite bank-merchant issues, a consumer may avoid any charges on his debit card by using it as a credit card and signing on his purchases instead of entering a PIN.

"About a year ago I noticed I was being charged for using my debit card at gas stations so I started choosing the 'credit' option even though I was using my debit card," Brent Benner, a Grand Rapids junior, said. "I haven't been charged a fee since then."

There is also a difference in liability between a credit card and a debit card.

Texas PIRG reports that a credit card owner is only liable for $50 in fraudulent charges. A debit card owner is liable for $500, if he does not notify the bank within 48 hours, or even the entire amount of the account and the maximum overdraft amount if a report is made after 60 days.

When fraudulent purchases are made with a credit card, consumers are debating with the bank on whether they owe it money, but with a debit card they are attempting to get their money back.

The United States Computer Emergency Readiness Team (US-CERT) offers some simple advice for safe online purchasing:

* Never use a debit card to purchase something online. Credit cards not only have less consumer liability but also offer more legal protection if goods do not arrive or are defective.

* Check the website's privacy policy. Before submitting your information to a Web site, check its privacy policy. This should tell you how they will use your information and if it will be shared with other vendors.

* Look for evidence that your information is being encrypted. Encryption prevents unauthorized sources from accessing the information you are providing the vendor. Evidence of this is a URL that begins with "https" instead of "http" or a lock icon in the bottom right corner of the screen.

* Devote one credit card for online transactions. This will make it easier to spot purchases that you have not made.