When it comes to banking and shopping convenience, Canadians love their debit cards. According to Industry Canada, debit cards are used millions of times each day across the country at banking machines and point of sale terminals.

And while the vast majority of transactions are completed without any problems, debit card fraud is a growing problem. In fact, some reports estimate that it is more than double the rate of credit card fraud.

10 ways to avoid debit card fraud 

1. Protect your debit card and personal identification number (PIN). Never share your PIN with anyone, including financial institutions, law enforcement agencies, friends and family members. Memorize your PIN – and do not write it on or near your debit card. If you suspect someone has discovered your PIN, change it immediately.

2. When selecting a PIN, don’t use obvious information. You could be liable if you use your name, address, telephone number, date of birth or social insurance number.

3. Try to use terminals you are familiar with. If possible, use terminals inside banks rather than independent terminals.

4. When using an ATM be aware of your surroundings. Look around before you begin your transaction. If you notice any suspicious activity, cancel your transaction and look for another ATM. When making a transaction from your car, make sure the car doors are locked.

5. After hours: if you must use an ATM after hours, be sure it is well lighted. Try to use one that is not isolated and is frequented by other users.

6. Protect your privacy. Use your body as a shield from “shoulder surfers” as you conduct your transaction.

7. Never walk away from the ATM with cash in hand. If you want to count your money, do so at the terminal. Take your time putting your money away – and be sure to collect your card and receipt.

8. Report lost or stolen cards as soon as you notice they are missing.

9. Check your receipts against your monthly statements.

10. Tear up your receipts as soon as you no longer need them.

How does fraud occur?

Here are some common methods used to steal or duplicate cards and obtain the PIN:

Easily identified PINs. Your purse or wallet is stolen and the thief finds your PIN written down somewhere close to your card, or successfully tries a commonly used PIN, such as your birth date, based on information found in your wallet.

Surf and Pick Pocket. A thief watches as you enter the PIN and subsequently distracts you and steals your debit card.

Card Jam. Various devices are used to jam your card in the bank machine. After your card becomes jammed, a helpful stranger suggests that you try to input your PIN a few times, but the card remains stuck. After you leave, they remove your card and have your PIN.

Skim and Clone. In this case, equipment is set up at a business to illegally collect your PIN and card information. When you give the clerk your card to make a purchase, the card is run through a device that sends your magnetic stripe information to the financial institution. The person then swipes the card a second time to record the information into a hidden device which allows them to make a duplicate of the card. At the same time, a camera records your PIN information.

Bogus machines. This scam involves a bogus machine that replaces the real PIN Pad, lifts your card and PIN information and issues a transaction receipt but does not actually send the transaction to the financial institution. The thief, in this case a store employee, covers your purchase by putting cash in the till so that the owner is unaware of any fraud since the outlet’s books balance. At a future date, the employee uses the stolen data to create a card to empty the funds from your bank account. If your purchase does not appear on your bank statement, this could be an indication of this sort of fraud.

Note: In all the above instances (except for the first), you would not likely be liable for any losses.

If you’re a victim

If you think you’re a victim of fraud notify your financial institution immediately. (You may also want to keep a written record of the circumstances of the incident, who you spoke with, etc.) Your financial institution will probably ask questions about the circumstances of the loss to ensure that you did not authorize the transaction or that you did not contribute to the loss.

While financial institutions may cover losses in cases of fraud occurring in Canada, you can be held liable for losses if you are negligent with your PIN and card.

Losses could be more than your bank balance

And in some cases, your losses may be more than the balance in your account. As incredible as it seems, a thief can accomplish this by keying in an amount to increase your balance – and then inserting an empty deposit envelope. The scammer then proceeds to withdraw the cash from your account.

For more information on protecting yourself, click here.

When are you liable?

You may be liable for losses if you have contributed to the unauthorized use of your debit card by:

1. Writing your PIN on or near your card.

2. Keeping a poorly disguised copy of your PIN in close proximity to your card. For example, writing down “Bank-1286″.

3. Selecting an unacceptable PIN selected from your name, telephone number, date of birth, address, or social insurance number.

4. Voluntarily giving your PIN to someone who subsequently contributes to the fraud.

5. Failing to notify your financial institution, as soon as you are aware, that your card has been lost, stolen or misused or that your PIN may have become known to someone else.

6. Failing to cooperate in the investigation of the loss.

If you cannot settle the matter with your local branch, you can contact the Ombudsman for Banking Services and Investments (OBSI), formerly the Canadian Banking Ombudsman (CBO). An Ombudsman is an impartial body that investigates complaints from individuals and small businesses about financial institution services.

You can also contact the Financial Consumer Agency of Canada  (FCAC) if you believe your financial institution has not lived up to the Canadian Code of Practice for Consumer Debit Card Services or to find out about your financial institution’s complaint resolution process The FCAC is the federal government agency that monitors banks and trust and loan companies’ adherence to the Code.

by Cynthia Ross Cravit The Toronto Star