300 dpi 4 col x 9.75 in / 196x248 mm / 667x842 pixels Dameon Runnels color illustration of hands entering a pin number into a debit machine and signing receipts for credit. The Dallas Morning News 2003 With PFP-CARDS:DA, The Dallas Morning News by Anuradha Raghunathan KEYWORDS: krtbusiness business krtnational national krtpersonalfinance personal finance krtusbusiness u.s. us united states coddington runnels da contributed business card credit debit atm signing pin raghunathan receipt illustration debt 2003 krt2003

After discovering a $150 charge for gas from ARCO on her debit card, Camarillo resident Barbara Zeavin is thinking about switching to credit cards.

"Gas should only cost $40," she said, adding that she had to go to her bank to find out whether the charge was fraudulent or a transaction procedure used by the gas station.

Although the charge may not be fraudulent, it certainly has Zeavin weighing her payment method options. The fact that keeping track of all her debit card charges has become a hassle is also pushing her to use credit cards.

Zeavin's debit card problems only skim the surface of the many reasons why consumers should avoid using debit cards, according to specialists.

Debit cards "are dangerous because the money is immediately taken form the bank account, and you don't have a chance to dispute it until after it happens," said Paul Stephens, director of policy and advocacy for Privacy Rights Clearinghouse, a nonprofit consumer information and advocacy organization.

If a credit card is used, there is an opportunity to dispute a charge before the bill is paid, according to a Privacy Rights Clearinghouse report released in June titled "Paper or Plastic: What Have You Got to Lose?"

A major difference between debit and credit cards is where the money comes from, said Jay Foley, executive director of the Identity Theft Resource Center.

In the case of a credit card, the credit card company pays the merchant and is then paid by the consumer. On the other hand, the debit card is a "direct pipeline" into the bank account, and once a transaction is made, the money is gone. "It comes down to which would you rather do — call the credit card company and argue about a bad charge or fight with the bank to get the money," said Foley, who does not carry a debit card because he prefers the security that a credit card offers.

Liability sometimes waived

Under federal law, the owner's maximum liability for unauthorized use of a credit card is $50, which is sometimes dropped, said Justin McHenry, research director of IndexCreditCards.com.

Debit cards do not provide the same protection. According to the Federal Reserve Board, a person's loss is limited to $50 if the card owner notifies the financial institution within two business days after the loss or theft. But the owner could lose as much as $500 if he or she does not meet the deadline.

If a fraudulent charge is not reported within 60 days after the statement is mailed, the owner risks unlimited loss on transfers made after that period.

Consumers should feel confident using either debit or credit cards, said Pia Hahn, Wells Fargo corporate communications consultant. For example, Wells Fargo credit cards, ATM cards and Visa-branded check cards are protected by the WellsProtect program, which provides cardholders with zero liability if any card is lost, stolen or used without authorization as long as the cardholder notifies the company immediately.

However, the bank is not obligated to restore funds for at least two weeks while it investigates, according to the Privacy Rights Clearinghouse.

During that time, problems such as bounced checks and late fees could develop while the bank is sorting out the situation, McHenry said.

Another reason that McHenry prefers using credit cards is that credit card companies defend the card owners.

For example, if the card owner buys something online and it never shows up or breaks immediately, and the merchant will not give a refund, the credit card company is "going to bat for you," he said.

The credit card company will take the charge off the statement and go to the merchant.

"If you have a credit card company on your side, you're in much better shape than if you use a debit card and have a dispute because then it's just you versus the merchant," McHenry said.

Foley said people should open a credit card account with no annual fees and learn to pay a monthly bill.

The Privacy Rights Clearinghouse suggests that consumers ask banks to replace debit cards with ATM-only cards so a personal identification number is always necessary to complete a transaction. With a debit card, any thief can use it without knowing the PIN number.

Although it is recommended that people use credit cards, some people believe that if they take care of their debit card, they are protected.

"I'm pretty judicious with the way I use my debit card so I usually don't worry about identity theft," said Camarillo resident Tammy Siano, noting that she uses debit cards because she likes the immediate feedback and no interest rates.

Some consumers will continue using debit cards because they are easier to carry than cash, McHenry said.

Foley said he believes that people choose debit because banks do not give them a real choice. When people sign up for an account, they are automatically given debit cards, unless they specifically demand an ATM card.

"Banks are always going to try to tell you that a debit card is a good thing to use," said Foley, noting that banks make money when debit cards are used.

Regardless of the payment method, Foley said people should check their bank statements every month because there is only a certain time period to deal with errors or inconsistencies. Once that period has passed, people are stuck with incorrect charges.

Sign back of cards?

There has been an ongoing debate on whether to sign the back of cards.

McHenry said he has heard rumors that people should not sign cards, but he does not see a legitimate reason why they shouldn't.

According to the city of Ventura's police services Web site, people should sign all new credit cards upon receiving them. Without a signature, the card company may not cover any fraudulent charges on the card.

If the backs are not signed, thieves could easily create their own signature and use it wherever they make purchases, said Norm Magnuson, vice president of public affairs for the Consumer Data Industry Association.

If the card is signed and it is lost or stolen, then the thief has to be pretty skilled to replicate the signature, Magnuson added.

People should add "See Photo ID" along with signing the back of their credit or debit cards, especially debit cards, said Beth Givens, director of the Privacy Rights Clearinghouse. That is what she has done with hers.

"This practice could advert fraudulent use if, and that's a big if, the clerk is paying attention," she said.

In a situation where somebody has obtained someone's credit cards but no driver's license, he or she would be less likely to use the card.

Identity Theft Resource Center's Foley said he only writes "See Photo ID" on the back of his cards because he does not like giving people a sample of his signature.

Magnuson said that if putting "See Photo ID" increases a person's comfort zone as a consumer, then they should do it, but he said some people might not always have their photo identification on hand.

Len Newcomb, a private investigator and retired Oxnard police detective, said he believes that merchants should be checking identification anyway, and that people should be "more than pleased" to show identification because it protects them.

On the Net:

www.privacyrights.org

www.ci.ventura.ca.us

www.federalreserve.gov