debit cards

There’s a general rule of thumb for financial products that you should run away from:

“The fancier the product verbiage used in its marketing literature, the faster you should run away from it.”

Let me ask you a question.

IDBI_Bank_Magic_Card_Rounded_Corner
What’s the first thought that comes to your mind when you see a big bold ad for “IDBI Bank Magic Card” in the morning paper? As soon as I saw the ad, my mind started to scream “this definitely has to be magic at your expense.”

And indeed it turns out to be one. Here’s why (emphasis mine):

(From the product flyer — the first danger sign.)

A first-ever debit card with a credit limit that charges you much less than a regular credit card. It supports your salary account. Allows you to spend you salary and then some more. A card that believes in stretching its limits so that your salaries never end.

(From the product FAQ — more danger signs.)

What is IDBI Bank Magic Card?

IDBI Bank Magic Card is a Debit Card with inbuilt credit facility. Magic Card allows the cardholders to spend on the card even there are no funds available in their Savings Bank account.

How the interest will be recovered on the utilized amount?

Such interest (together with the principal outstanding) would be recovered from the salary credited to the customer’s account.

See where the magic’s happening?

Salary credited into your account. Card balance debited from that account. Poof! Magic! There you go! Your hard-earned money magically disappeared even before you realized it.

QED.

Need I say more?

Yep. A couple of closing thoughts — why you should not own a credit card from a bank where you have other deposits and the order in which your credit card payments are applied while settling dues.

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The other day, I was having lunch packed at Hotel Pai Viceroy (in Jayanagar 3rd Block, Bangalore). Since I wasn’t carrying enough cash, I handed over my Debit Card. A couple of minutes later, I received a transaction alert SMS on my mobile. So far so good. A couple of minutes later, I received a second transaction alert SMS for the same amount. Now, given all the distractions/worries that we have on our mind, our first reaction is typically to brush aside such issues since duplicate SMS delivery happens every now and then.

In this case however, the Sender ID for the second alert was different from that of the first alert. That raised my suspicion. And luckily, my bank also includes the account balance in the alert. The two balances were different with the difference being equal to the bill amount. Figured out that someone must have swiped the Debit Card twice.

Immediately brought this to the hotel’s attention. The restaurant staff disappeared for some time only to come back with a lame excuse that the accountant was newly employed and blah blah and that the second transaction had now been voided (they did give me a Void Sale transaction receipt as proof and having worked for many years in the electronic payment industry I knew that the amount would be credited back into my bank account).

But newly employed or not, why you’d swipe the Debit Card again when you already have the transaction slips from the first swipe is beyond my understanding.

Soon as I went home, I verified the reversal by logging in through Net Banking and by looking at the mini-statement. This hasn’t happened to me before, but now I know the value of having mobile alerts enabled (but what does one do when due to network congestion and other reasons the alerts are often delivered quite late?).

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D asked,

I know there are clear-cut rules on your liability and what you should do upon losing your credit card. But what are the rules with respect to debit cards? What’s your liability and what should you do? I’m asking because my debit card doesn’t have my photo on it. Nor does the merchant even attempt to verify my signature. [Nor is it PIN verified.] A transaction on my lost debit card will immediately debit the funds from my account.

I don’t know the answer. It’s especially scary given the fact that many banks have hiked up the daily limits for shopping with your debit card. With a daily shopping limit of over Rs 1.5 lacs, would you even want to carry such a debit card in your wallet?

Coming back, what are the liabilities and lost-card reporting rules for debit cards? Do you know the answer?

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