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Whose Fault is Debit Card Fraud?

Debit Card Fraud

When you use your card, you see the interaction among three parties:

  1. You tell a merchant you'd like to buy something.
  2. That merchant tells your credit union or bank to pay money from your account.
  3. Your credit union or bank asks you to authorize the transaction.

If something goes wrong during that process, many assume it is the fault of one of these three parties. In the modern financial world, though, nothing is that simple.

Here's a look at three other places fraud could occur and cause your transaction to go wrong so you can better protect yourself.

Checking the Way You Want It

1. The point-of-sale system

There are only a handful of companies that manufacture Point of Sale (POS) terminals – the systems that process credit and debit transactions. Having so few manufacturers means that anyone who learns how to defraud one of these terminals can do serious damage.

POS systems have other vulnerabilities, from PIN tracking keypads to miniature cameras. Always be watchful for small modifications in the keypads and other devices. If something looks suspicious, back out of a transaction or ask for another register to use. 

2. The merchant's processor

Tiny margins are critical to most businesses, especially those that do many transactions. To keep costs low, these businesses use third-party payment processors, which tally up the day's transactions of a merchant, bill the appropriate entity and pay the merchant. In exchange, they take a tiny percentage of each transaction.

There's lots of competition in this niche, as companies continually offer lower prices to attract merchant business. Competition means companies cut costs to stay profitable - often by cutting corners with security.

Payment-processing companies can deal with millions of transactions daily. Not all companies use industry-standard data safeguards, representing another point in the chain where data security can be compromised and there exists a risk of fraud.

When shopping at unfamiliar places, be extra cautious by using a pre-paid debit card, cash or another form of non-electronic payment. Don't be afraid to use an ATM - they're usually maintained by organizations with in-house processing, thus limiting the steps your data goes through. If you're working with a merchant you trust, ask who does their payment processing. Most big credit card companies have preferred providers who follow the highest quality payment processing procedures.

Whose Fault is Debit Card Fraud?

Every payment system has potential for fraud. A clerk can use phony bills, checks can be cashed multiple times and registers can overcharge.

3. Clearing houses

The last stage in this chain is the clearing house – external organizations that transfer funds, acting as the intermediary for the merchant's payment processor and the credit organization.

There's a wide network of American Clearing House (ACH) payment centers. Most of them smoothly process millions of dollars worth of transactions every day. However, occasional mistakes happen and some transactions are processed improperly. Clearing houses are insured against losses and they quickly correct mistakes.

Every payment system has the potential for fraud. A clerk can use phony bills, a check can be cashed multiple times, goods can be counterfeit and registers can overcharge. Electronic payment processing is among the most secure forms of exchange possible, and its failures are fixable. Swipe with confidence, knowing your liability is limited thanks to the strong trail of protection offered by electronic payment processing. As always if you have any questions or concerns regarding fraud, please contact PrimeWay Federal Credit Union, a bank that works for you with great options for everyone.


Author Bio


Since 1937, PrimeWay Federal Credit Union has been a not-for-profit organization dedicated to providing superior financial services to members in the Houston area. We offer more personalized services than you'll traditionally find at more conventional financial institutions. Our hallmarks are low interest rate loans, higher dividends on deposits and excellent member services.

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