Christmas Day has come and gone but the season continues until 5 Jan (Epiphany) when traditionally the Three Wise Men arrive (Eastern Orthodox celebrates that day as Christmas Day). The fallout from Target debacle continues as consumers find out their credit card numbers were used for unauthorized transactions. Some banks are either canceling credit cards used at Target or limiting the daily withdrawal limits on debit cards. Security experts believe the credit card processor was hacked but Target has not been forthcoming exactly how the criminals pulled it off. What is certain is they stole debit and credit card numbers giving then unprecedented access to millions of peoples credit and checking accounts, not to mention they use of whatever personal information they also were able to retrieve.

One good lesson out of all of this is many are going to realize how using debit cards is not wise when shopping, whether in-store or on Internet. Debit cards are not credit cards even when you enter to be used as one (that just means you do not use a pin ). Cash immediately leaves your account (exceptions are store debit cards that submit electronic checks to your bank so it takes 2-3 days to show up on your account) to the merchant. If thieves get access, then can easily take as much money as they can before the card is cancelled or account closes. Most debit cards have daily cash limits set by the bank and the thieves will try to hit that right away. If you are someone who goes paycheck to paycheck, that can really hurt you when checks cannot clear resulting in bank charges.

The one caveat is when you use the debit card to as a credit card. This occurs either when you select to use as credit rather than enter a pin. This is a good way to avoid people seeing you key in the pin number at the grocery store or at the gas station. Since it is processed as a credit card, it goes through either MasterCard or Visa system. That does not mean you get credit card protection in case of misuse (see next paragraph), just an added layer of security during processing. Sometimes it delays the charge appearing on your statement (though you might see a nominal hold on your account) for a few days

The rules governing their use are different. Credit cards have stronger protections in case of theft or misuse, and your liability is capped at $50.00 (many banks offer zero liability). Debit cards have higher caps (up to $500) and often take longer to get money put back in that was unauthorized. Some banks do offer higher protection for debit cards but not all. Check with your bank about their policy is on atm/debit card liability. Many advise, if you need to use a debit card as part of your budget, to use prepaid debit cards. You load a certain amount of cash on the card and use it like a debit card but without having it tied to a checking account Some banks offer them for free with direct deposit, some do not. The advantage of these cards is that you can only spend what is on them but with some places charging a fee, it may not be a good deal.

Credit cards are best for Internet shopping and certain high value transactions (like buying televisions). Using debit cards for online transactions is like opening up a door into your bank account. Do not use your debit card for online purchases even if it is from a reputable site. It is not worth the risk.

What about ordinary shopping like at the supermarket, the pharmacy or other places? Consider cash, checks or credit cards. Most merchants accept checks drawn on a local bank and has the requisite information on it: your name, address, and telephone number. They also will want to see your identification, usually a drivers license or id card. Cash is also good but it means either a trip to your bank’s atm or going inside to cash a check. Credit cards are easy, just swipe and go. You need to be careful though because you can rack up a larger bill than you thought if you do not watch what you charge. Use your banks credit card website to monitor charges and alert when when charges occur. I have mine set up for any charge above $5.00 so I get notified swiftly when a charge goes through.

Think strategically where to use cash, checks, or credit card. Perhaps the supermarket you frequent often is best for cash or checks. They see you often there and probably know who you are by now. Shopping at larger stores or national chains perhaps are best for credit cards (especially if you need to return) and cash. For high end products like televisions, computers, iPods, or smart phones, use a credit card. Often most credit cards have their own warranty information on many things you purchase on the card. Check to see what your card offers. For gas stations, credit cards and cash are the best way. If you have to use a debit card, use it as a credit card. But be warned! Many scammers have used gas stations to install skimmers and other ways to get your car info. If you want total security, just go inside and pay there rather than at the pump.

UPS/FEDEX Christmas Debacle
Not everyone was displeased with what happened. Some took the time to point out how the Post Office(USPS) delivered its packages on time over the private services. And they are wagging their fingers at politicians who want to privatize the USPS. What happened here was likely two things. One over promising delivery by online merchants and number two shipping companies not realizing how much was coming down the line until too late. Amazon and many merchants often notify shippers electronically when packages are being generated for pickup (which is why on tracking information you see that the shipping company has received the info but not the package yet). So something fell into the cracks here. Not surprising considering how many order online these days.

What is likely to happen is something old fashioned but works well. You set up hard deadlines for shipping for ground packages and express packages. You limit express packages (overnight and 2nd day) to being shipped three or four days ahead of the actual holiday. Using this last holiday, all 2nd day and overnight must be tendered to them by 20 Dec at 7:pm. After that no service delivery guarantee by Christmas. Merchants would have to follow hard deadlines as well so that the shipping companies (and that includes USPS) do not swamped with too many packages all at once. Those chortling at how the Post Office did so well ought to be careful in their gloating. If someone dropped 100,00o parcels into their system for 2 day or overnight delivery without much notice, they would be strained as well.

Now that being said, I got some parcels I ordered through Amazon (no presents, just some general stuff and in one case replacement for a broken computer accessory). One was scheduled to arrive Christmas Eve but in fact arrived a day earlier. One was delivered by UPS and the other by ONTRAC. Merchants like Amazon do use USPS to cut costs. Many packages I get from Amazon are through either Fedex SmartPost or UPS SurePost because they are small packages. In both these cases, they shipping company delivers them to the USPS distribution center for the zip code and USPS does final delivery. It works pretty well though one package was held up because a USPS employee forgot they handle packages for a couple of cities in the area.

Update-1April2014:You can shop for shipping deals online. The Raw Feed, for instance, has coupons good for Fedex shipping and probably if you check around online, UPS and other package delivery companies have them as well.

Sources:
1. Credit and Debit Cards:What You Need To Know (6 Jan 2009, New York Times)
2. Best Prepaid Cards For Holiday Shopping (13 Dec 2013, Forbes)