Michaels, Aldi breaches put customers on alert

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Consumers across the country are on alert for potential account fraud after word of new security breaches at a couple of major retailers has again highlighted the weak consumer protections on debit cards.

The retailers in question are craft store Michaels and hard grocery discounter Aldi. In the case of Michaels, the exact number of customers affected is unknown. But this breach is spread out among Michaels stores in 20 states.

Criminals apparently entered the Michaels stores pretending to work for the point-of-sale company that handled their transactions and put skimmers on the POS devices! Those skimmers allowed the crooks to capture the debit card numbers and 4 digit PINs of customers.

The rules for debit cards are vastly inferior to credit cards in the event of account fraud. With debit card fraud, banks typically assume that you gave your PIN out even if it’s used by a criminal!

I had a recent call from a listener who tried to dispute a bogus debit card transaction and the bank tried to pull this funny business. I think it’s just mean-spirited and dumb. Banks don’t use modern card security; we are, I think, the last country on Earth that does not use smart chip technology. Instead we use magnetic strips that predates the modern computer era!

Here’s what you need to know: With credit cards, you have strong protections if a criminal obtains your number and uses it. With debit cards, however, it’s really the law of the jungle. You must be strident to protect yourself.

If a criminal has obtained your info and they withdraw money, your money is gone for good if you don’t notice it in time. You could have checks bouncing all over town. Most banks will say you’re guilty until proven innocent.

Keep these tips in mind:

  • Any dispute you file needs to be in writing.
  • You have a right to restoration of your funds. It’s not your fault the nation’s banks don’t have meaningful security in place.
  • You have 60 days to notice and report any stolen funds to your bank or you lose the right to your money forever.

I hope I’ve made you sufficiently paranoid, and that you now thoroughly check your statements when they come in. Especially if you shop at Michaels or Aldi as a debit-card customer!

Editor’s note: This segment originally aired in May 2011.

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