Payment cards, hopeless tech, and the USSA

[Jeroen Hoppenbrouwers]

Dear Self-Help Group,

I feel more part of the USSA now my payment card finally has been abused.    

Mind you, I have been waiting for this moment for over three years. The non-existing security system around the payment card industry in the USSA is shocking if not outright criminal, in my European eyes. But you have to participate in order to get work and life done. Working with just cash money isn't practical and I do like the detailed transaction logs that I can download and post-process with whatever software I want. This is, of course, how I discovered the unauthorized charges being made basically as they happened.

It is interesting to dream about how this all happened.

I suppose that somebody somewhere got hold of my Visa debit card details, sufficient to re-create a physical copy card that could be swiped as normal. This was not an online-only fraud, there must really have been a physical card copy. How this can be done is so well-known that I don't even bother to find out how and where. Nice detail is that my previous card was already replaced in November due to the Target and Home Depot hacks; this new card was in use for less than four weeks.

With the fake card, a test purchase was made in a Houston liquor store on the 27th. When the card proved to work, I assume it may have been sold to somebody else. I see that going prices for a carded payment card are somewhere between $10 and $50 these days.

Then I assume somebody in dire need of cash for the holidays bought it and started family shopping    She got a car fueling, a new car battery, some simple clothes, some groceries, and something at Target. All totalling about $300. Of course the card stopped working within a few hours, but all in all not a bad investment.

Now everybody is happy:

1. The shopster for a saved holiday week.
2. The criminal for $10-$50 profit.
3. The bank system for another happy customer as they solved his problem.
4. The insurance company for another piece of evidence that they are needed.
5. Visa for a few transaction fees.
6. The merchants for their customers that keep returning.

Happy 2015,


Hoppie

[Phil Bunch]

Jeroen,

I'm very sorry to learn of your credit card misfortune.  What a nuisance.

Regardless, I hope that it is quickly and completely resolved and that your out-of-pocket costs are zero or very low.
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I have the impression/understanding that the end user/owner of a simple *credit* card is protected against almost all forms of fraud, no matter what, up to something like a $50 max user loss.  Even that loss is waived if the user contacts the credit card company "promptly".

However, I understand that a *debit* card typically has few protections, an especially dangerous situation if the thing is connected to a personal checking account with significant money in the account.  A worst case scenario would then be if one hooked up a substantial savings account as "overdraft protection" to the checking account and thus to the debit card.  If stolen, theoretically the debit card could be used to empty one's checking and savings account.  

I would think that by now, with your well-established USA credit record, it would be straightforward for you to obtain a traditional credit card instead of a debit card (assuming that would help).  Obviously I don't know much about such things in your case.   I wonder if an American Express credit card would be better than a debit card, even though you must pay each month's charges off in full when a bill arrives and it has an annual fee?  Perhaps it would have better protections against theft and fraud?  Unfortunately, it's probably not as widely accepted as Visa or Mastercard.  

One feature I routinely use for all online purchases is the one-time-use "virtual credit card" feature provided by many Visa cards.  You login to their web site, obtain a single-use temporary credit card number that expires in less than a month, and then use it normally.  Your credit card will then be billed normally for the purchase.  That way, even if this virtual card number is stolen, it pretty much doesn't matter since it is not the same as your physical credit card number.  It's now been several years since I've used my real credit card number online.

The new Apple credit card system where you use your iPhone to provide a more secure credit card by swiping it into a special purpose reader may be of some help as their system spreads, especially if multiple vendors adopt a standardized system and reader.  I understand that Europe has used most of their cell phone brands this way for quite some years.

Indeed, the USA has an almost (?) non-functional card system - I have no idea why it is still functioning at all.  It's not just the credit card system that is at risk, of course.

(Please forgive me if I've misunderstood your theft and available options - I'm just trying to offer a few suggestions, hoping that one of them might somehow be useful.)

[Jeroen Hoppenbrouwers]

You're right that, contrary to logic and European systems, a debit card over here seems to be MUCH more insecure than a credit card, despite the fact that it needs online immediate verification of the PIN code that is not stored on the card itself. My bank has told me a few times that when I have a choice, I should always choose the "credit" mode of the transaction, as it is safer for me. Probably because credit card transactions are better monitored and better insured?

My credit score situation is still hopeless, as I never took out a loan or used a "real" credit card. Hence, I did not practice being in debt in various situations (revolving debt, installment debt, etc.) so I qualify as "unknown", which is worse than "very bad". I don't intend to spend a lot of money on interest when I don't need the loan, I will drive this car until it is driven to pieces by an uninsured motorist, and I never ever would dream of purchasing a home (forget about that for the rest of my life).

However I will need to fix up some issues soon. After flying in ground effect for three years, we are slowly gaining altitude now and keeping all our eggs in one basket definitely isn't smart any longer. Now I need to find a proper way to distribute savings over various banks. Sigh. As nobody wants to grant me a US bank account ("non-resident alien", i.e., I will be gone next week and cannot be trusted anyway) and moving money to Europe is too expensive and currently not financially smart, this may prove tricky.


Hoppie

[Phil Bunch]

Jeroen,



I believe this is correct - a credit card is almost completely insured against fraud and is normally not connected to one's bank accounts in any direct way.  Thus, if someone steals the card or its number, it's not your problem.  

Also, with a credit card if you find a problem with a purchase, you just call Visa or Master Card and tell them you wish to "dispute a charge".  They will freeze the payment to the vendor and hold off on charging you for the purchase until and unless the vendor proves you're wrong somehow.  Usually, they find it best to let you return the item since they don't want to be listed with Visa/MC as a disreputable vendor.  If they get too many disputes, they could lose their rating with Visa.  Most of these things are required by US Federal law, and are thus fairly well standardized and universal.

I'm hardly an expert, but I would think that the combination of having a steady job for several years with a good company, combined with paying your debit/credit card purchases reliably would qualify you for normal US credit cards.  Heck, they hand the things out to college students like candy, hoping they will become addicted to credit purchasing and build up to large balance on which they have to pay absurdly high interest rates.  You're right in that they would award you "points" for say taking out a car loan and paying it off reliably, but using a debit/credit card responsibly will count for a lot, too.  Just  my opinion, based on watching how my and others' fared with credit cards.  

House mortgages IMO are a strange situation - as we saw in the 2008 credit crisis, the banksters gave huge mortgages to people with no credible means to make their payments, and with little if any credit history.  While they're not doing that to such extremes, I have the impression that it isn't that hard to buy a house without having a zillion dollars in the bank or a Wall Street income, etc.  Any bank would be glad to talk the situation over with you and let you know what their requirements are.  Banks in the USA are generally much less formal than in Europe, by my casual impressions.  Here, US banks are now more like dealing with a fast food restaurant!  Just beware of trick mortgage types, for example using very low "teaser" initial payments followed by vastly larger required payments after a few years...

Just my thoughts and observations - good luck with your ongoing interactions with this increasingly stressed country!  
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BTW, if you feel so inclined, it would be most interesting to read a post by you on the evolution of your observations related to US culture and lifestyle, both positive and negative vs the European countries you are experienced with.   Personally speaking, I am increasingly concerned that the US seems to be progressively destabilizing and polarized as well as having far too much inequality and too much control of the government by large financial interests.

[Will]

Very sorry to hear of your troubles. I switched the entire household budget to a MasterCard that gives me airline miles per dollar spent, so I get safety (of a credit card) and also free flights as the miles add up. They also overnighted me a new card on the day after the Target hack went public... I had used it there on the last day of exposure. (Obviously, I pay the card off at the end of the month, so there is no interest to pay.)

As for building a credit rating, you can do it easily and inexpensively. You can get a credit card that is secured by a cash deposit. Start using the card, and after a few months or a year, you have a credit rating. Then you can apply for an unsecured card, and off you go.

[Balt]

Jeroen, damn, I didn't know that was your card. Sorry! But hey, that bottle of wild turkey was really needed! Kidding, of course. I get fraudulent charges on my cards several times a year. In Australia it's the bank's problem if you catch it in time.

Debit cards are less secure than credit cards because - drumroll - the loss is yours immediately until (if) insurance pays. With credit cards, the credit institution (your bank, or visa/mc/amex) are up for the interest until it's resolved.

Cheers

- Balt