Jewel glitch costs 2nd shopper $682.40; experts say stop using debit - Chicago Tribune

The recent payment processing glitch at Jewel-Osco highlights the risk of using debit cards, which expose consumers to a cash-flow crunch if their card is compromised by such a foul-up or fraud.

It's why many privacy advocates beat the drum against using debit cards, regularly warning of their dangers compared with paying by cash or credit card.

Consumer advocate, author and syndicated radio host Clark Howard calls debit cards "piece of trash fake Visas and fake MasterCards." He has for years railed against using them because of their risks.

The Privacy Rights Clearinghouse suggests that consumers never use — or even carry — debit cards, saying they are just too risky and offer limited consumer protections.

"The most important thing for consumers to know is that a debit card is a direct pipeline into your checking account," said Paul Stephens, director of policy and advocacy at the nonprofit consumer organization. Even if the problem is ultimately fixed, consumers could be temporarily without their money and incur overdraft fees from their banks.

Despite the repeated warnings — and fraud being so rampant last year that it was dubbed the year of the data breach — debit cards are popular. Bankrate.com last year in a survey of holiday buying habits found that 34 percent planned to pay with debit cards. And recent reports suggest debt-averse millennials are eschewing credit cards for debit.

Overall, more debit card transactions take place in America than credit card transactions, Stephens said.

Debit cards recently became a problem for some customers of Jewel-Osco, which said a third-party payment processor told it late last week that there was a "payment system outage" that resulted in "some customers' debit and credit cards inadvertently being charged twice or more for one transaction."

Among them was Tinley Park resident Debra Studzinski, who told the Tribune of being overcharged by more than $400 after the store had problems processing her debit card on a $300 grocery bill. She said she worried about not having enough money in her checking account to meet other obligations.

Jewel said Tuesday that it will likely take up to five days to reverse duplicate charges that some shoppers experienced when they used their debit and credit cards at the store last week. Jewel also said it was a "nationwide problem affecting many retailers," though it didn't elaborate.

Privacy advocates grant that debit cards are useful for controlling spending because consumers pay with cash already in their accounts, with no chance of racking up outrageous finance charges like on a credit card.

But debit cards are lousy for security because federal protections aren't as strong as they are for credit cards.

The main drawback is that if fraud occurs — or in the case of Jewel, a processing glitch — money is actually missing from your bank account, unlike with a credit card. And by federal law, banks can take up to two weeks to replace the money, potentially putting a stranglehold on cash flow, although card companies like Visa and MasterCard say they ultimately won't hold cardholders liable for fraud.

Besides paying cash, using a credit card and paying off the balance in full each month to avoid finance charges is the best payment method, Stephens said. "Our suggestion is to use your credit card as a debit card," he said. Prepaid cards aren't ideal but at least don't expose your whole checking account to being drained. Instead of carrying a debit card, request from your bank an ATM-only card for accessing cash machines. The cards work the same at the ATM but don't carry the Visa or MasterCard logo, he said.

Chicagoan Sarah Lisy also had a problem using plastic at a Jewel in Rogers Park last Friday and realized it when she checked the balance in her checking account on Monday.

"I tried three times at the cashier to process my purchase, once as a credit card and twice as a debit card," she recalled. "I ended up taking money out of the ATM to cover my purchase." She was assured that the charges on her cards wouldn't go through.

But Lisy said she is now out an additional $682.40 for the debit card transactions.

"I spent 45 minutes on hold yesterday to reach a customer service person by phone to register my complaint," Lisy said. "Everyone, including the store manager that gave me the phone number, has been very nice and polite, but I'm still short $682.40 with a promise that this will be resolved by Thursday."

Late Tuesday morning, Lisy said Jewel told her to return to the store and try to get the charges reversed and, if that fails, to get cash.

On Tuesday, Jewel reiterated that it was "extremely sorry for the inconvenience the electronic payment processing issue caused."

"The issue on Friday was a nationwide problem affecting many retailers, not just Jewel-Osco," Jewel spokeswoman Mary Frances Bragiel said. "We are investigating this issue with our payment processor."

She didn't name the payment processor or elaborate on other retailers.

"They are working to reverse all duplicate transactions," Bragiel said. "Some banks may take longer to credit individual accounts."

Customers with questions should call Jewel's customer service center at 877-932-7948.

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