Debit Cards Less Safe Than Credit Cards & Please Use Your Credit Card Online

Over the years I have been droning on and on about the differences between a debit card and a credit card regarding safety and why people need to be more afraid of using their card in a restaurant than online. Where does the waiter go with your card when you hand it to them?

Debit cards and credit cards are not covered by the same laws regarding consumer protection. Credit cards give you better protection. If your debit card is cloned or scammed the funds come straight out of your checking account, bouncing other checks and payments. Not so with a credit card.

But a new story in Wired simple exemplifies my constant warnings. For the full story, read Washington D.C. Restaurants Become Credit Card Cloning Hot Spots.

With unobserved access to diner’s credit cards, restaurant wait staff have long been the source of a steady stream of stolen magstripe data. It takes only a second to swipe a customer’s card through a tiny skimming device purchasable over the internet, which is easily concealed in pocket or apron.

Corrupt servers are typically recruited by a ringleader who encodes the data — like customer names and account numbers — onto blank cards, in some cases turning out full blown replicas, complete with holograms. The servers often earn up to $50 per card if they work at an upscale eatery, down to just $10 each if, as in a recent Florida case, the cards were stolen from a Burger King.

The D.C. skimming ring was first spotted a year ago by Citibank, which noticed a froth of fraudulent transactions trailing legitimate card use at Clyde’s, where cards skimmed by a single server wound up accounting for $107,000 in bogus charges.

The most prestigious, and recent, hot spot was 701 Restaurant, the clubby eatery where Hillary Clinton rang out her presidential campaign last June. Restaurant owner Ashok Bajaj says the Secret Service told him about the skimming earlier this month. According to court records, cash register logs tied $38,000 in fraudulent transactions to cards handled by server Lavelle Denise Payne from August 2008 until this month.

At the agency’s request, Bajaj kept Payne on for another week while the government firmed up its case. “We watched her very carefully for that week,” says Bajaj. “She was the nicest person. I don’t know. Maybe this is a sign of the economy.”

“It’s very sad when people do these things,” Bajaj adds. “I mean, she was making excellent money working at the restaurant. But I guess it’s never enough.”

Now for the people that get all freaked out by using your credit card online, just remember that your biggest worry is the wait staff and also that when companies computers are hacked in to that the bad guys get the card numbers of all customers, including you, even if you refused to use it online.

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I guess this story is duplicitous since it is about being paranoid and stop being paranoid in the same article. Ironic.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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