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FDIC's Consumer News: Tips on Debit Cards, Deposit Insurance & Account Co-owners

POSTED ON BY

The FDIC recently published its Summer 2012 Consumer News which provides advice on various banking topics. Most of the tips are probably well-known to those who are financially savvy. However, there are some useful reminders of federal regulations and protections. I've included a few excerpts that I found most useful.

Fraud and Liability for Debit and Credit Cards

We have discussed the issue of liability protections on debit and credit cards many times. Credit cards are safer based on regulations. The FDIC described these protections in its article, Debit, Credit and Prepaid Cards: There Are Differences:

Your liability for an unauthorized transaction varies depending on the type of card. Federal law limits your losses to a maximum of $50 if a credit card is lost or stolen. For a debit card, your maximum liability under federal law is $50 if you notify your bank within two business days after learning of the loss or theft of your card. But, if you notify your bank after those first two days, under the law you could lose much more.

Comprehensive Guide to Deposit Insurance Coverage

The FDIC announced the availability of a new large-print version of its deposit insurance coverage guide. This provides many examples of how to insure over $250,000. One example on page 33 shows how a couple with two children can insure $3 million in deposits at one bank.

If you want even more details, you may want to review the guide that's designed for bankers. It's called the FDIC Comprehensive Seminar on Deposit Insurance Coverage For Bankers. I reviewed this guide and showed how it's easy to insure $1.25 million at one bank in my post Maximizing Your FDIC Coverage with Beneficiaries.

Adding Others to Accounts: Understand the Risks

Adding a family member as a joint owner to an account may simplify paying bills, but it has risks. Another aspect to consider is the effect to insurance coverage. Joint accounts can increase your insurance coverage, but that's not always the case as described in this FDIC article, Adding Others to Accounts: Understand the Risks:

if a single mother adds two children as co-owners but specifies that they must act together to withdraw any funds, the three individuals do not have equal withdrawal rights and the account would not necessarily be FDIC-insured up to $750,000 ($250,000 for each person named). "In this situation," Becker explained, "the FDIC would have to look to state law to determine the ownership interest of each person and would provide deposit insurance coverage accordingly."

Other Topics

The FDIC summer consumer news also has articles on choosing bank accounts, changing banks, electronic statements and managing mortgages. In my quick review of these articles, I didn't find anything that I thought would be worthwhile to highlight. If you find something interesting, please leave a comment.


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Comments
14 comments.
Comment #1 by Anonymous posted on
Anonymous
Ken, there is much more to it than this article.

I had bad experience with fraudulent charges on debit card connected with reward checking account.

The moment I called to dispute the charges, the bank told me to put it in writing, notarize it and mail it to them all the while the fraudulent charges kept coming in and the bank said that they can not do anything about it, since these are PRE-AUTHORIZED only charges and they have no access to them. Some charges were denied and some went through, which made me write another disputed letter and mail it again.
Furthermore, the bank said that it may take a month to clear all the charges and my debit card was canceled. Without it I could not make the required monthly purchases for that period and lost the $60 bonus for that month because it took the bank 2 weeks to mail me a new one.

There were few other follow ups  back and forth with correspondence because some of the charges were still coming in from overseas and the source can not be traced to the charger of the debit because it was showing one name as user another name as processor and third name as mediator of the fraudulent charges.
Since the fraud was so extensive, the bank put temporary stop on my checking account and I could neither deposit nor withdraw nor pay any bills for that month.

After 42 days, the bank un froze my account, but un authorized charges kept coming again.
When I ask the bank why, the manger confessed to me that the USA banking system is open to anyone to transact deposits and withdrawals with a code attached as being in-process, which means someone wants to secure funds for a pending transaction.
Some pre-authorized charges were so big that my running balance went down to $0 and could not use my debit card again until these pre-authorized charges were either deleted or put through.

Long story short, I had to close that account and open another one and lost another month of reward interest. Like I said, it is not that easy to dispute un-authorized charges on DEBIT CARD.
Now I have 3 accounts with spreads of equal balance in all of them, should something like this repeat itself, I have back up. By the way, some of the charges were for services rendered and not purchases of goods, which made the disputes very difficult to cancel and correct.

13
Comment #2 by Anonymous posted on
Anonymous
Ken: Are NCUA's policies regarding insurance any different from FDIC?  Sander

4
Comment #3 by Anonymous posted on
Anonymous
Hi Ken, to be a qualified benefitiary, does it still have the requirement that the person has to be your parents, sibling, children/step children. For example, your newphew or niece or sister/brother-in-law or  friend will not qualify.

1
Comment #4 by KenBDG posted on
KenBDG
@anonymous #1, thanks for sharing your experience with debit card fraud.

@anonymous #2, The NCUA has very similar rules for credit union deposit insurance. Refer to MyCreditUnion.gov for details on NCUA deposit insurance.

@anonymous #3, Qualified beneficiaries are no longer limited to immediate family. I have more details in this blog post.

6
Comment #5 by Anonymous posted on
Anonymous
Thanks Ken for the article, and the links. Also for answering your commentors questions. Who else in this age would do that. You run a great blog. THANKS .

8
Comment #6 by 51hh posted on
51hh
Anon. 1: Thanks much for sharing your experience with us.  If possible (without compromising your privacy), can you share with us how the fraud came about (e.g., loss of debit card or restaurant/gas station usage or something else)?  I am sure it will help a lot of us to be more cautious and preventive.  TIA!

5
Comment #7 by Anonymous posted on
Anonymous
To 51hh - #6,

I’m #1 responding to your question.
The bank reported the fraud to FBI and as far as I know, the card number was stollen on online purchases or on a web site that is not secure enough to protect their customers.

After the card was hacked, it was resold to crooks around the world from Russia mafia to Chinese
restaurants in Shanghai. Over 80 charges showed up in 10 days period and the bank was overwhelmed by the shear volume of other charges that were denied and still unknown until today.

Once you debit card is compromised, report it immediately and you MUST CLOSE the ACCOUNT, otherwise the bank is powerless to do anything in future to protect you, because from the debit card number the thieves can find your account number and attack it again and again with direct debits and withdrawals.

Requesting new debit card did not worked for me and I lost 2 months of reward interest and had to pay late fees on my other bills that I was late in payments and paid notarization and overnight postage rates few times back and forth. It cost me over $250.

The bank refunded some fees but they were related to their own charges of overdraft fees charged to the account. It is very important to know when your card was hacked, otherwise the bank will assume your legitimate charges as fraud and will create mess that must be cleared with correspondence.

8
Comment #9 by Dan B (anonymous) posted on
Dan B
#7.........What a massive headache! I guess the question that comes to mind is whether you still use RCAs after having gone through all that crap.

1
Comment #8 by 51hh posted on
51hh
Thanks much for the thoughtful reply, Anon. 7.  The safe approaches are: (1) use debit card only on trusted sites (which are rare nowadays), and (2) (as you suggested) close account once fraud is detected. 

Thanks again, it is an education for all of us RCAers with required monthly debit transactions. 

3
Comment #10 by RJM posted on
RJM
Ive had a number of reward checking accounts over the last few years. And I sometimes carry a paypal debit card that Im grandfathered at 1.5% cashback on.

I have NEVER had a problem with any of them. But, my real credit cards, Ive had 3-4 of those over the last 5-6 years get a fraudulent charge. Most times, the banks call me before I notice it. While each time they had me tear up my card & send a new one, its a bit of a hassel.

Thank goodness Ive never run into the other problems.

But, I dont use them for anything other than the 12 per month and I used to use the paypal card more often than I do now. Im into using gift cards I bought at discounts for as many places as possible.

Never had a problem with one of them. Although one time the cashier at walmart forgot to give my card back. I got home & paniked and then went back an hour later. The girl had went home but they found my card in her little bag when they keep the coupons by the register. Apparently those are not emptied with each shift.

About 15 years ago, I had my identity stolen but a nigerian fraud ring in NYC. Opened a half dozen accounts in my name and attempted more. Had cell phone & landline phone in my name.

Still not sure how it happened but it wasnt too bad getting it resolved. Most places didnt require anything other than my word altough a couple wanted letters.

Will be interesting to see what happens with lower cashback rewards on credit cards in the future.

Still, the protections with credit cards make me feel much safer using them. Particularly for internet purchases & such.

Im pretty careful but there is so much attempted fraud & spoofing that It wouldnt suprise me if I did have a problem again in the future.

But, so far, most everyone has been very easy to deal with. They just take my word for everything. Plus, they can usually tell the fraudulent purchases before I know. Of course, Ive never attempted to scam a bank by making charges & then claim they arent mine. Id have to guess some people try that.

 

1
Comment #11 by RJM posted on
RJM
Appreciate #1s post about his nightmare.

Im curious, did you use this card for everyday purchases and/or internet purchases ?

I pretty much only use my reward cards at gas stations for very small charges & at aldi which is the only place I shop that doesnt accept a credit or giftcard.

The banks used to call almost every month when I knockout 10-12 very small transactions at once just to make sure its not fraud-related but now, they tend to get used to it or read the notes on my account before calling.

1
Comment #12 by 51hh posted on
51hh
RJM:

A bit off-topic, but 4 debit transactions per gas pump is the local daily limit in Mass; in addition, the bank/credit union freezes the card at 6 consecutive debit transactions a day.   

1
Comment #13 by RJM posted on
RJM
51hh

I tend to swap back & forth between debit & credit as both count toward my limit of 12 and it seems like it will allow me to get more small transactions in that way.

Another favorite place for me is Sams Club. No longer a member but my old card still works for gas,

Im pretty sure Ive done 15-16 on 2 different cards at one time at Sams. Again, swapping between debit & credit.

Some stations are tougher than others. Some cashiers manually cut you off. A lot of variables.

The only thing I think the 6 per day limit per card I run into is at Shell. But, Im not sure thats just not their cashiers cutting the pump off manually.

My objective is to "knock out" all or most all of my now 24 needed transactions a few days into the new month.

But, sometimes hitting too many stations can cause a temp hold on my card for the day. In the past, that would be followed up with a phone call from the fraud department but I rarely get the calls now and the next time Im out I can repeat.

But Sams is the best place Ive found to knock out a bunch without running into any kind of automatic shut off.

I dont think Ive EVER gotten turned down there. The attendants look at me funny sometimes but none have said anything.

And at one station, a BP, a foriegner came running out "You no more buy just 6 cent worth".

LOL

I usually go to Aldi 5-7 times per month but I still like to knock out my transactions before the 10th. So I almost always go over by the time the month ends.

A bit surprised that Sams hasnt shut me down. I guess their system just isnt set up for it.

I dont use these cards for ANYTHING other than 4-9 cent gas purchases & Aldi.

Try swapping between Credit & Debit and see if you can up your # of transactions.

2
Comment #14 by 51hh posted on
51hh
Thanks, RJM, for the information and funny story:D

In Mass, (every) Gas station is limited to 2 credit and 2 debit transactions per day (of course I can run through 5-6 different stations a day).  The bank/credit unions set their own "hold" policy; most are at 6 debit/credit transactions.

I have many RCA accounts (now stand at 18), thus doing 4-5 debit transactions/card/day is ok for me.  I am usually done within the first 4-5 days; no need to alert the merchants or banks/credit unions:-)

I used to do credit/debit transactions at gas stations but now favor indoor online transactions and utility billpays; getting too old to fight those mean gas station clerks and the hot/cold weather. 

Thanks again.

1
Comment #15 by Anonymous posted on
Anonymous
Number #1:

Did you have to file a police report?  I know for fraud and robbery, the bank will not refund fees without.  Thanks for sharing your story!

1