It looks like a credit card and acts like a credit card.
That is, until it’s stolen. That’s when a debit card takes on an identity of its own – and puts its owner’s cash on the line.
Consumer advocacy groups say the public isn’t getting the full story on debit cards – which have become so popular that 127 million are in use today.
"Debit cards are the pot of gold at the end of the rainbow for banks," said Ed Mierzwinski of the U.S. Public Interest Research Group, a consumer watchdog organization. "They’re a big risk for consumers."
Mierzwinski said the bank makes $2 on every $100 spent with a debit card – but banks don’t tell consumers how difficult it is to reclaim their funds after a theft.
"Consumers have no idea that a thief who just has their number can take all the money out of their checking account," Mierzwinski said. "Then they’re stuck fighting with their bank to get their money back. Banks are not disclosing the risks of debit cards to consumers."
Adelet Kegley was a victim of one such theft in Washington, D.C., when her wallet was stolen and her checking account was raided of $2,000 using her debit card number. The thief forged her signature on the card, but the bank told her everything would be all right.
"The speed with which this all happened just really unnerved me," she said. "They kept assuring me that I would get my money back eventually. Nobody ever told me how long it would take."
Mari McQueen, associate editor of Consumer Reports magazine, said customers get confused because most debit cards are marketed with a Visa or Mastercard logo.
"People are not really familiar with the difference between a debit card and a credit card," she said. "They could do a better job of informing consumers."
But the use of debit cards has skyrocketed. In the year 2000, there were more than 8.6 billion debit transactions – double the 1997 figure. A senior government security source told Fox News that debit card fraud is also on the rise.
The Secret Service not only protects the president, but now agents are working hard to protect consumers’ money. Fox News was given special access to the electronic crime labs of the Secret Service in Washington, D.C., where financial information can be stolen in the blink of an eye.
"Information is the world’s new currency," said Bruce Townsend, special agent in charge of the financial crimes division.
Townsend said thieves can use skimmers – small devices that hold credit or debit card data after the cards are swiped through them – to commit their crimes.
"Some of the places we see them are restaurants, gas stations, department stores," Townsend said. "A lot of times, we’ve seen waiters in restaurants actually Velcro these to the inside of their jackets."
Townsend said he and other agents have investigated cases in which skimmers have compromised as many as 100 ATM or credit card numbers at a time, which in turn can sell for sums as high as $5,000.
"It is very easy money," he said.
Technology is so advanced, there are even devices that can turn skimmed data into plastic cards in seconds.
"Most of the ATMs out there do not have software to be able to distinguish between a genuine card and a counterfeit card," Townsend said.
Secret Service Agent A.J. Burnett said the magnetic stripe on the counterfeits contains the same information programmed into the real cards.
"Now the card could still be in your wallet, but the bad guy has one copy or 10 copies of the card," he said.
Under federal law, consumer liability with a debit card is potentially greater than it is with a credit card. Many issuers do offer more protection, but some of those safeguards are only voluntary – and the industry likes it that way.
Experts say debit cards have become popular because they’re so convenient.
"You swipe it right through and it’s easy," said Catherine Pulley, spokeswoman for the American Bankers Association. "The key is you’ve got to use it wisely. You have to protect the card and remember (the money) is being taken directly out of your checking account. It isn’t a line of credit."
Catherine Herridge is an award-winning Chief Intelligence correspondent for FOX News Channel (FNC) based in Washington, D.C. She covers intelligence, the Justice Department and the Department of Homeland Security. Herridge joined FNC in 1996 as a London-based correspondent.