A customer speeds into a gas station, waves a tiny black wand and the gas pump lights up to say that it’s OK to fill the tank. This scene may sound like something from “The Jetsons” (a ’60s era animated television program about life in the future), but it’s real.
Mobil service stations this month introduced a product called “Speedpass,” which allows customers, with a miniature electronic device on their key chains, to wave it at the pump, which sends electronic signals to your bank and back to the pump, debiting your credit card and allowing you to fill up without walking into the station or even swiping a plastic card through the pump.
And Mobil’s product is just part of a new wave of electronic payment systems that are both helping and harming American consumers.
Earlier this year, a host of major banks–including Bank of America, Great Western and Chase Manhattan–sent new plastic cards to holders of their automated teller cards. These new “check cards” can be used to get cash from automated teller machines, but they also double as a checking account–accepted by millions of merchants–with nothing more than a swipe and a signature.
And industry pundits maintain this is just the beginning. Soon to arrive in massive quantities are “stored value” cards, that you can use like traveler’s checks–not to mention a host of existing and promised payment systems in cyberspace.
These new products promise convenience–the ability to pay without cash in your pocket and without the necessity of tapping a costly credit card–but they are also widely misunderstood, consumer experts maintain. That’s because some of them operate just like the payment systems of yesterday. For all its technological wizardry, the Speedpass, for example, boils down to a credit card transaction. If someone steals your wand, the most you can be held financially liable for is $50, just like on any credit card transaction.
However, some of the other new payment systems–most notably check cards–operate under a different set of rules that are largely unfamiliar to consumers, says Linda Sherry, spokeswoman for Consumer Action in San Francisco.
Banks began sending these cards to their ATM cardholders nearly a year ago. But only some of those banks included helpful disclosure documents that spelled out how these cards differ from the so-called “debit” cards they replaced, or from the credit cards that they now resemble, she adds.
As a result, many individuals think the plastic ATM “replacement card” they received functions just like the old one–requiring a hard-to-guess personal identification number to use. Others, noting the Visa or MasterCard logos, think it provides the consumer protections of a credit card, ensuring that individuals are never on the hook for more than $50 in fraudulent charges.
Neither assumption is accurate, Sherry says. And those who don’t understand the differences could be in for a costly surprise.
Furthermore, still other consumers don’t understand that unlike the debit card that you may previously have used for point-of-sale purchases, the check card is an “off-line” product. That means check card transactions can go through–and generate bounced-check fees–when there’s not enough money in your checking account, says Ken McEldowney, Consumer Action’s executive director.
In fact, check cards are governed by a little-understood law called Regulation E, which spells out consumer rights and responsibilities with all electronic transactions, says Kurt Helwig, executive director of the Electronic Funds Transfer Association in Herndon, Va.
Where the consumer’s liability on credit card transactions is a maximum of $50 when the card is lost or stolen, even if you’re not tremendously prompt about reporting the theft, the consumer’s liability on a check card is limited to $50 only if you report the card lost or stolen within two days. If you wait longer, your liability can rise to $500.
What if you don’t know that the card is missing? You have two days from when you do notice to get the $50 liability limit. But, you had better be monitoring your bank statements, because if you don’t notify the bank of any unauthorized check card transactions within 60 days of receiving your statement, your liability becomes virtually unlimited. If a criminal cleans out your bank account and credit line after that point, there’s very little the law can do to protect your funds.
Some banks, such as Chase Manhattan, are trying to help their customers track fraudulent purchases by monitoring check card spending, just as they monitor credit card transactions. Then, if the card is used in unusual ways, they’ll call the consumer to make sure the charges are legitimate. However, not all banks provide this service and few consumers are aware of check card risks.
“People are just not hip to these electronic transactions yet,” says Sherry. “I know people who let their statements just pile up and people who just throw away their receipts. You can’t do that with these cards. A $500 liability–or unlimited financial liability–is a far cry from the $50 people are used to.”
