I recieved a call on Friday from a close relative who was very distraught because someone had cleared out his checking account using his debit card information.  He was paid on Thursday and on Friday his checking account was empty.  He could not buy groceries for his family, couldn’t pay a bill, and wouldn’t even have gas money to get to work this week.  He realized that he had been robbed when he went to the grocery store and tried swiping his debit card and was told that he didn’t have enough money in the bank to cover the transaction.

According to news reports the problem of debit card fraud is widespread. There are ways to protect yourself so that you don’t find yourself in the same position as my relative.

How Debit Card Fraud Happens:

A thief watches as you enter the PIN and subsequently distracts you and steals your debit card.

In order for fraud to occur, a thief needs both your PIN and the magnetic stripe information on the back of your card. The PIN is not stored on the card’s magnetic stripe. So, if your card is stolen or duplicated, the thief has to find some way to get your PIN. Common methods used to steal or duplicate cards and obtain the PIN are:

  1. Easily identified PINs – Your purse or wallet is stolen and the thief finds your PIN written down somewhere close to your card, or, successfully tries a commonly used PIN, such as your birth date, based on information found in your wallet. In this instance, you would be liable for your loss.
  2. Surf and Pick Pocket – A thief watches as you enter the PIN and subsequently distracts you and steals your debit card.
  3. Card Jam – Various devices are used to jam your card in the bank machine. After your card becomes jammed, a helpful stranger suggests that you try to input your PIN a few times, but the card remains stuck. After you leave, they remove your card and have your PIN.
  4. Skim and Clone (Transaction is sent to the financial institution) – There have been cases of equipment being set up at a business to illegally collect your PIN and card information. For example, when you hand over your card to make a purchase, the card is run through a device that sends your magnetic stripe information to the financial institution. The person then swipes the card a second time to record the information into a hidden device which allows them to make a duplicate of the card. At the same time, a camera records your PIN information.
  5. Bogus machines (Transaction is not sent to the financial institution) – A bogus machine, that replaces the real PIN Pad, lifts your card and PIN information and issues a transaction receipt but does not actually send the transaction to the FI. The implicated employee covers your purchase by putting cash in the till so that the owner is unaware of any fraud since the outlet’s books balance. At a future date, the employee uses the stolen data to create a card to empty the funds from your bank account. The evidence of the fraud could be that you have a transaction receipt (if indeed you received one) for a purchase but the purchase does not appear on your bank statement.
  6. Handing your card over to pay for a transaction and not getting the receipt.  Unfortunately, you  just left a paper trail and if the cashier watched you enter your pin number, they now have access to your account.

There are some things you can do to protect yourself from debit card fraud.

  • Protect Your Social Security Number. Do not put your social security number on any document that is not legally required. Never give your social security number, bank information, or debit card number to anyone over the phone.
  • Pick Up New Checks at the Bank. Do not allow them to be mailed to your mail box where they can be stolen. If you are expecting a new debit card or credit card, insist that they be sent they be sent certified or overnight express mail so that they will not be sitting in the mail box.
  • Shred Important Papers. Shred any paper that contains bank information, credit card information, or anything that contains your social security number.
  • Check Your Credit Report Every 6 Months. Make sure there isn’t any activity or new accounts showing that you did not authorize.
  • When creating passwords or PINs, do not use the last 4 digits of your social security number. Make your passwords unique and use a combination of letters and numbers. Do not reveal your password to anyone. If you write passwords down, keep the paper in a lock box or safe.

Knowing a bit more about how this type of fraud occurs may help you to protect yourself and your checking account.