Wednesday, 14 September 2016

Once you cancel your credit/debit card, it cannot be used again, right?... WRONG!

OK, this is nothing to do with USB drives (but you might use a card to buy a USB drive...;-)

So you lose your credit or debit card (or it is stolen). You contact the bank and they cancel it and issue you a new card. You check your next card statement at the end of the month and it looks OK. Panic over and you are safe, right?

WRONG! Actually someone could use your old card for months afterwards by using it for multiple 'contactless payments'. You could lose £100s.

The card details are not checked online at the time of payment. All the small payments  (<£30) that are taken by the store's card reader, are batched and then, hours later, they are sent to the bank. Even then, some banks do not seem to check that a cancelled card was used and just debit your account! This seems incredible to me. I repeat: Some bank systems do not check if your card has been cancelled (but some do) - how can this be allowed!

The bottom line is that for some cards, you need to check your statement for many months afterwards and report any suspicious transactions (you should be refunded - I would suggest you ask for compensation too because their software really should check - it is just sloppy systemware and entirely their fault!).

What is more, even if you don't lose any money, the banks are losing money. These fraudsters cannot be stopped and the card can continue to be used, until it has been used for a certain number of times, perhaps 10-30 times, when the PIN will again be requested (unless they clone it). This seems to be a major loophole in the system and it seems the banks are willing to bear the loss (I have seen a figure mentioned of 0.7% loss due to this problem but this will grow as more people realise they can use any card they find in the street like this - but who ultimately pays for this loss?).

There is a UK article about this on MoneySavingExpert.com here. Checkout the table of banks listed. Some (good) banks will not deduct the money from your account or will reimburse you a day later, but many other banks just deduct the money from your account and expect you to flag the problem to them!


So as well as the possibility of being 'scanned' as you walk past a fraudster carrying a card scanner (they can get the card number and expiry date which is enough for some online sites to accept), you also have to be careful about cancelled cards as well. I always check my statements carefully each month but maybe these contactless cards are just not worth the convenience they offer us over card+PIN?

Living in a rural village in the UK  as I do (we still chew on straws, ride horses and greet others with 'ello chap'), I rarely use the contactless feature of my card, so I think I will ask my bank for a 'normal' card instead of a contactless one, the next time it is renewed.

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