I have always loved the convenience of debit cards, but this recent experience has me re-thinking the cost of that convenience.

First, your liability if you are a victim of debit card fraud is greater than if someone steals your credit card or uses your credit card to make unauthorized purchases.

With credit cards, your liability for unauthorized transactions is limited to $50. However, most major credit card issuers have a zero liability policy, so you typically aren’t liable for anything if you are a victim of credit card fraud.

With debit card fraud, your liability is limited to $50 only if you notify your financial institution within two business days after realizing their card has been lost or stolen. After that, your liability is limited to $500 if you report any suspicious activity within 60 days of receiving your account statement. After 60 days, your liability is unlimited, so it’s very important to check your statements on a regular basis.

Another big difference is that with debit card fraud the thief is stealing money directly from your checking account. Which can mean bounced checks, late fees, or even black marks on your credit report while you’re fighting to get your money back. With credit card fraud, you are fighting unauthorized charges, which can reduce the amount of credit you have available, but it doesn’t affect your cash flow like debit card fraud.

Even if you detect the fraud early and you are able to recover all of the money taken from your checking account, with debit card fraud you may be without your money for a period of time while your bank is investigating the fraud. I was very discouraged to find out that my bank can take up to 10 days to refund the money to my checking account (a previous bank refunded my money the same day when I was a victim years ago). And in some cases, your bank has up to 45 days to refund your money!

So what can you do to avoid debit card fraud (or credit card fraud)? While you may not be able to avoid it completely (if a thief really wants your money he’s probably going to get it no matter how cautious you are), here are some steps you can take to minimize your risk for fraud:

• Check your account balance and activity frequently – I check mine at least once a week, and usually more, but since I was on vacation this past week it took a little over a week to discover the unauthorized transaction in my checking account.
• Call your bank immediately if your debit card is lost or stolen.
• Check your bank statements immediately (no throwing them in a pile or drawer to review a month later).
• Notify your bank by phone (or in person) and in writing as soon as you discover the fraud.
• If it’s an unauthorized transaction, contact the company the thief purchased goods through immediately upon discovering the fraud – in writing.
• Be cautious about where you use your debit card. I’m not sure how the thief got my debit card information since I use my debit card frequently, but I’m pretty careful about not using my card on websites that don’t look secure, or stores where I don’t shop regularly.
• Keep receipts or other records to back up all of your purchases. If you use your debit card frequently but don’t keep good records, it’s possible that an unauthorized transaction could slip by you unnoticed.
• Use a credit card instead of a debit card if you are shopping online or with someone you don’t know.

Why you should check your credit report

• to check for errors
• to check for fraud and identity theft
• to get the best interest rates
• more and more people are relying on credit scores – car insurance, employers, etc.

When to check your credit report:

• Once a year if you have good credit and don’t anticipate any large purchases in the near future
• Before a major purchase, such as a new home, new car, etc. – should request your credit report 6 months ahead of a big purchase so you have time to correct any errors
• If you’ve been denied a credit card, loan or other product or service because of your credit (you are entitled to a free credit report if you have been denied credit based on information found in
  your report)
• If you suspect that your identity has been stolen
• If you are starting a plan to get out of debt or repair your credit.

How to check your credit:

There are three credit reporting agencies (Equifax, Experian and TransUnion), and they are required to provide you with one free credit report each year. The three agencies do not always share the same information, so it’s important to check all three.

You can order all three credit reports at one time, but it may be a better idea to check one company one month, wait a few months, then check another company, then the third company a few months later.
This way you are getting three free credit reports a year, and you are checking several times a year, so you are more likely to catch errors and/or fraud.

Go to www.annualcreditreport.com to request your free credit report online. This is the only authorized source for consumers to check their credit report online for free. There are commercials and websites for other companies who claim to offer your credit report online for free, but they are generally selling a service or they are a scam.

In addition, you can call 1-877-322-8228, or you can write for your free credit report at: Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281.

Finally, you can purchase a 3-in-1 report, which is basically getting all three reports from each of the credit bureaus. This is a good idea if you have never requested your credit report before, or if you suspect fraud. You can purchase your 3-in-1 credit report at www.myfico.com.

This made me wonder… how profitable are these payday loan places, that they are popping up on every street corner? I’ve heard that payday loans charge high interest rates, but I had never really researched this info before now.

Here’s what I found out…

First, if you’re not familiar with payday loans, basically, they are short-term loans, usually in small amounts. Typically, you write a check for the amount of the loan plus fees, and the lender cashes the check on a specified date, usually one to four weeks later.

Here’s an example: you need $100 to pay your bills so you borrow $100 from a payday loan company. You write a check for $115 and leave it with the lender, to be cashed in two weeks. Your fee for that loan is $15 – that is an annual percentage rate (APR) of 391%.

Although the Truth in Lending Act requires lenders to disclose the finance charge, including the APR, many consumers do not understand the true cost of a payday loan. To continue the example above, let’s assume that you can’t pay the $115 when it comes due. The lender allows you to roll the loan over for another two weeks, but you pay another fee each time you do this. If you rollover the loan in the example above three times, your total finance charges would be $60, for a $100 loan. That equates to an APR of more than 1000%!

As you can see from the example this a very costly way to borrow, even when compared to high interest credit cards. If you find yourself in a cash bind, here are some alternatives to payday loans to consider: a personal loan from a bank or credit union, a personal loan from family or friends, a cash advance against your credit card, a cash advance from your employer, etc.

The Fair Credit Reporting Act requires credit reporting agencies to maintain an opt-out list of consumers who no longer want to receive pre-approved credit card offers.

You can opt out by going to www.optout-prescreen.com or by calling 1-888-567-8688.

I imagine this will be a popular mortgage in California and other areas where home prices have sky-rocketed, but can you imagine paying on a house for 50 years?  And what will the interest rate be on a loan this long?  How will you build equity in your home with a 50-year loan? 

The 50-year mortgage will probably help first-time homebuyers afford their first home, especially those that live in markets where real estate has boomed, but will this be a good option?  Only time will tell…

At www.annualcreditreport.com, you can request a free credit report once every 12 months. This credit report does not include your credit score, but you can purchase your credit score by contacting one of the three credit reporting agencies (Equifax, Experian or TransUnion).

Another great resource for credit reports is www.myfico.com, where you can purchase your credit report from all three agencies, including your credit score. myFICO also has an education section where you can learn more about your credit reports and score.

You should check your credit report annually for errors and/or fraud.