Chase Urges Customers To Use Less-Secure Type Of Debit Transaction

JPMorgan Chase is telling checking account holders that when they buy stuff with a debit card, they should complete the transaction with a signature instead of by punching in their PIN.

A Chase letter to cardholders strongly suggests they "always select 'credit'" when making a debit purchase, according to the American Banker. "It's not a credit card, so the money still comes out of your checking account," the letter says. "But by choosing 'credit,' you won't have to enter your PIN in public."

"We know it's confusing," the letter adds.

It's an appeal to safety. Problem is, security experts and consumer advocates are unanimous that debit card purchases are safer with a PIN than with a signature.

"Signature transactions pose greater threats of fraud because the bank's promises of zero liability are only promises, not the law," wrote Ed Mierzwinski of the U.S. Public Interest Research Group in an email to HuffPost. "Besides, if you are a victim of fraud, even if the bank eventually pays you back, remember that's your money missing from your checking account and causing hassles like other bounced checks until the bank puts puts your money back in. And, all consumers pay more at the store and more at the pump because the fees banks extract from merchants are higher for signature debit than PIN debit."

An analyst told American Banker that with a signature debit transaction, the bank stands to make $1 from merchant interchange fees on a $100 purchase, versus a dime or a nickel with a PIN transaction. "PIN is actually more secure, but PIN does not generate as much revenue to the bank," the analyst said. "If they get you to use signature debit, then they are going to make much more money."

A Chase spokesman did not immediately respond to a request for comment.

The bank may also be able to make more money from fees. Signature debit purchases may not post immediately to a cardholder's debit account, causing confusion about how much money is actually available. That's what happened to Vartan Altounian, a California man who didn't understand why Bank of America hit his account for $70 when his balance, which he checked online, never hit zero. (According to American Banker, Chase is the only big bank touting the safety of signature debit transactions; other banks offer incentives like points or cash back for swiping and signing.)

Chase has also been accused of deliberately misleading customers with its overdraft opt-out screen.

"Chase is becoming a leading serial misleader," Mierzwinski said, "telling consumers to do things that help the bank, not themselves."

Comments

[mateoconifer]

09:24 PM on 04/25/2010

banks doing what banks do best: screwing their customers rather than working for their profits

[gallimaufry03]

10:00 AM on 04/24/2010

While I completely agree with other posters here that Chase is doing what it can to generate more fees for itself, there is something everyone should do that doesn't get talked about in articles like this.

The guy in this article said his account never went to $0 but he was hit with fees.

No one should ever rely upon what the BANK says the account balance is, particularly if you live paycheck to paycheck and don't have much money in the bank. I got down to $1.26 once with 3 days before payday, but I wasn't sweating it because I balance my account almost daily. I write everything down, including the monthly bank fees, check image fees, etc., then don't draw anything on the account until I know the next paycheck has been deposited and shows as "available."

You have to write it down. You have to keep track of every single thing you swipe your card for, no matter debit or credit.

So, yes the bank is doing what it can to generate profits ... but we're still in charge of keeping track of our money and how we use it.

[DubiousVoter]

05:27 PM on 04/23/2010

BofA was robbing me blind each month by setting me up to have overdraft fees. They made over $2 Billion in fees last year. What a scam!

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[eaglett1111]

10:59 AM on 04/23/2010

Typical of Chase. People are choosing not to have "overdraft protection" on their debit cards, so now Chase is trying other ways to milk money. They are reeling, because they made a chunk of change on overdraft fees, and now the people using debit cards (if they are not hornswaggled by the confusing opt out language on the Chase forms) are not going to be providing Chase with overdraft income. this is a very evil bank.

[Trittydi]

01:02 AM on 04/23/2010

They can't bet blood from a rock.
*

[Trittydi]

01:00 AM on 04/23/2010

What a bunch of dick.s.
*

[TXfemmom]

12:48 AM on 04/23/2010

Wells Fargo suggested that a long time ago, and gives higher awards for points when one does that. I thought at the time that anything they want must bring in more money and compromise the good for me, so I always use the pen. My husband, however, thinks signing for it is better. Neither is particularly safe, but I cover it when I put in the pen, and hope for the best.

As for Chase, I don't think anything about Chase is safe. We had our card jeopardized by someone who used it to purchase $1,300 in merchandise from one of those pyramid sales schemes, and the company could not tell me why they would permit someone to use another person's card to charge something from them, when one had to be a member to purchase there. They had to know who used it.

Then, we got our new Chase card becaue that one had to be cancelled. We had not even put that card into use, had not powered it up to say, and then someone charged $100 in magazine subscriptions on it. We hadn't even used it or activated it, so the problem HAD TO COME FROM CHASE.

[Lahonda]

12:07 AM on 04/23/2010

I run an international company that processes a few million in credit cards a year and have done this for 15 years.

Here's what I know from our experience:

When you sign for a transaction, the bank treats the transaction like you used a credit card AND CHARGES THE MERCHANT a varying 2-3% fee and if you use your PIN, which only costs the merchant 10 cents to process. The bank may charge you for using your PIN because they make almost nothing from the merchant.

The issue that hits a lot of people at hotels and gas stations are pre-auth transactions that take as many as 7 days to clear from your account if not properly used. That is the one that bites everyone because most are good at memorizing how much they've spent but the pre-auth puts a set amount on hold in anticipation of a higher payment, like for a hotel that allows you to charge restaurant and sundries to your hotel folio. People get stung by that very often.

I like using my PIN in most cases as it save the merchant money and deducts the funds accurately. Don't put an overdraft on your card account and most problems disappear.

[Catfish1968]

11:54 PM on 04/22/2010

Signature isn't safe - most places here don't check ID

[aspiecelia]

10:55 PM on 04/22/2010

I am at war with the Devil's minions at Wells Fargo. All of the large banks have been doing what they can to encourage unauthorized charges so they can charge you for overdrafts. We know they know exactly what they are doing, they have almost no safeguards now, but they used to. I am trying to close my account and they are doing everything they can to block me. When I go to the bank the employees tell me they can't do anything because the centralized system blocks them from getting information. I expect them to implode eventually. I wish they would and do us all a favor.

[imajoebob]

10:44 PM on 04/22/2010

I always ask the merchant which one they prefer. Some prefer a lower fee, others the improved cash flow. It doesn't cost me anything, and helps them reduce their costs. Win-win.

[propitiousmoment]

10:09 PM on 04/22/2010

This totally ignores the danger of credit card and pin numbers being picked up either by electronic sweeps of stores with poor wireless security, or people who put devices on the machine to pick up the number and your key strokes. It happened to me, they cloned my card and cleaned out my checking account. I pretty much always use cash, but if I do use my card the credit option just feels safer.

[tomg01010]

11:09 PM on 04/22/2010

I've heard that too, protect your pin and use your debit card as a cc for your protection. I was told it was especially important when using gas stations away from home.

[Clem2]

10:06 PM on 04/22/2010

I had bad experiences with Chase and tried to close my acct(s). They made it as didfficult as possible, but finally I'm outta dere! YAY!.

They were totally screwing up my balance with their mistakes, putting money in that I did not put in, taking money out that I did not withdraw, it was a nightmare.

[peter915]

10:00 PM on 04/22/2010

I hate to say this, But I never had a problem with Chase. My Credit card balance is $58. My Online service and Iphone App work Flawlessly. My CC interest rate hasnt changed in years. They treat me very nice on the phone. There is nothing wrong with Chase

[gallimaufry03]

10:05 AM on 04/24/2010

There is nothing wrong with Chase ... for YOU. Other people here (including myself) have encountered problems with them or with other big banks.

Now, that said, they did provide me with an excellent credit card repayment program that got my monthly payments down to an affordable amount and made it possible to actually pay off those cards in 5 years. The reps on the phone were always polite, never condescending. And when I go to my branch I'm always treated well.

However, there have been other issues that will eventually make me take my business to my local credit union.

[SShaw490]

09:50 PM on 04/22/2010

I used to work with a very bright guy who objected, complained and stonewalled everything that he didn't agree with 100%. I used to tell him all the time, "JR, you can't gripe about everything, because if you do, then people don't listen to you when it's really important. Pick your battles and fight about the important stuff." Even when he was right, he was obnoxious and insufferable - and I say that as a guy who really likes him.

In a world where we really don't even have a way to quantify the financial health of entire nations because of all the derivative transactions that are opaque to the world; where we genuinely don't know the true GDP of our own country; where we don't know whether or not the world's energy supply can support another decade of growth in China and India; where we have a world-wide deep recession because banks don't even trust the fiscal security of other banks; I just wonder if "use your card as credit rather than debit" is the battle that we want to fight. I wonder if that's the hill we want to die on.

In short - who cares?

[imajoebob]

10:56 PM on 04/22/2010

Unfortunately, this is exactly how the banks legally "cheat" us out of billions every day. It's only a few cents difference, it rarely makes any difference to me, it's not worth my time... next thing you know, you've got $165 in overdraft fees because the gas station was allowed to temporarily dock your debit card 75 bucks for a 6 gallon fill-up. Or when you get laid off and call to talk about temporarily restucturing your mortgage payments you find out they don't own it, and it's been repackaged with 1,200 other mortgages and sold in 573 separate pieces through a third-party arbitrager.

They flood us with disinformation and hide actual facts from us while we blithely keep feeding them our money. Way back in the 18th Century they were already saying to take care of the pennies and the pounds will take care of themselves.

[chicamarie]

12:12 AM on 04/23/2010

I also feel compelled to disagree - banks are hoping that we only see the big picture and focus on what the news is telling us to focus on, not examine the minutiae that will send us all to the poor house. Between cell phone companies slipping in miscellaneous fees that rise from the ashes of a closed Facebook quiz window, to having numerous other agencies raise rates almost imperceptibly if your credit rating dips below their acceptable levels, to power companies rolling in new-found income from installing digital meters that are more "accurate" (ahem), we are being nickeled and dimed to death.
It may not seem like a big issue, but if the credit card company is making more from your signature-debit transaction, you better believe that that cost is coming right down the pike at you from the merchant, eventually.