Debit-Card 'Skimming' Scams

Three steps to take to protect your account data from getting into the wrong hands

Whether by choice or necessity, American consumers are increasingly relying on debit rather than credit cards. Debit card spending has risen steadily, growing from 47.7 percent of purchases made with plastic in 2003 to 58.9 percent in 2008 and it is expected to surpass 67 percent by 2013, according to the Nilson Report, a newsletter that tracks the consumer payment industry.

When you use a debit card, the money is immediately taken from your checking account. While using debit guarantees that you pay as you go, these cards have downsides, including a growing appeal to thieves. "As economic conditions have worsened, there's been a noticeable increase in all types of card fraud," says Avivah Litan, an analyst specializing in fraud detection and prevention at Gartner Research in Stamford, Conn. "But ATM and debit-card fraud is the top area of concern we're hearing about from banks all over the world."

Unlike credit-card thieves, who usually charge merchandise and then resell it to come up with money, people who create counterfeit ATM or debit cards by stealing your PIN and other account data can simply pull cold cash from your bank account. Using a technique known as skimming, they set up equipment that captures magnetic stripe and keypad information when you input your PIN at ATM machines, gas pumps, restaurants, or retailers.

Here's how you can protect yourself:

Don't Type in Your Pin at the Pump

Be especially vigilant at gas stations, Litan says. "Gas pumps are notorious for skimming because they're produced by only a couple of different manufacturers, and if someone gets the key to one from a disgruntled employee, they can insert a skimming device inside the pump where it can't be seen," she says. She recommends using a credit card rather than a debit card when you fill your tank.

If you must use a debit card at the gas pump, choose the screen prompt that identifies it as a credit card so that you do not have to type in your PIN. The purchase amount will still be deducted from your bank account, but it will be processed through a credit-card network, which will give you greater protection from liability if fraud does occur. This is because card issuers typically have "zero liability" policies for both debit and credit cards, but sometimes exclude PIN-based transactions from that protection.

Stick With ATMs Located at Banks

To reduce your risk at ATMs, use machines at banks rather than in convenience stores, airports, or any isolated locations, advises Darrin Blackford, a spokesman for the U.S. Secret Service, which investigates financial crimes involving interstate commerce. "A thief has to be able to attach and retrieve a skimming device to use the data it's gathered," he says. "And that's more likely to happen in nonbank settings where there's less traffic and no surveillance cameras."

That doesn't mean that bank ATMs are immune, however. In August 2008, Wachovia Bank reported that several debit-card "identities" were stolen when a skimming device was placed on an ATM at a branch in Cape Coral, Fla.

"It's often hard to spot skimmers," Blackford says. "But if you notice a change at an ATM you use routinely, such as a color difference in the card reader or a gap where something appears to be glued onto the slot where you insert your card, that's a warning sign you'd want to report to the bank that owns the machine."
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