Here's more on the debit card fee issue.  If you want to avoid these fees
and the merchant doesn't accept credit cards or signature-based debit
cards, you could always get cash from a talking ATM.

Kelly

The Wall Street Journal
June 19, 2002


PIN Numbers Are Helping Inflate The Hidden Costs of Debit Cards

By CALMETTA COLEMAN
Staff Reporter of THE WALL STREET JOURNAL

Think twice before using your debit card in the checkout line.

Debit cards, which take money straight from your checking account, are
one of the most successful financial products in years. Most can be used
two ways: with a signature like a credit card or with a PIN, just like an
ATM card.

But as the popularity of the cards soars, so have the fees charged to use
them. In effect, banks have now devised a PIN penalty. A recent survey
found that in New York state alone, 57% of the banks surveyed charge a
fee for transactions that use a PIN. As a result, just using the card to
pay for groceries or movie tickets can tack on as much as $1.50 per
transaction. Often, cardholders don't realize they are being charged a
fee until they get their statement at the end of the month.

In recent months, some of the nation's larger banks, including FifthThird
Bancorp and KeyCorp, have added such charges. The issue affects a growing
number of people. At the end of 2001, there were 242.1 million total
debit cards in use, according to the Nilson Report, which tracks the card
industry.

Behind the PIN penalty are lucrative transaction fees paid by merchants.
Debit transactions with signatures are processed by the same costly
networks that handle normal credit cards. Transactions with a PIN are
handled by lower-fee ATM networks. A Jefferies & Co. study found that
retailers pay about 15 cents for each PIN transaction -- but must pony up
nearly 60 cents for each one done with a signature. The result: The bank
gets a bigger payout when customers use a pen rather than a PIN.

Legal wrangling that could affect those fees is under way. Last week, the
Supreme Court opened the way for a massive antitrust lawsuit against Visa
and MasterCard International that gets to the heart of the issue. The
nation's largest retailers, led by Wal-Mart Stores, sued in 1996,
alleging the two companies use their credit-card market dominance to
force stores to accept their debit cards.

DODGING PIN FEES Here's a selection of big banks that don't charge
customers a fee for using their debit card with a PIN:

* Citibank

* Bank of America

* J.P. Morgan Chase

* Bank One

* Northern Trust

Source: the banks

The merchants contend that the charges associated with signature debit
transactions ultimately cost consumers billions of dollars a year and
force the market to use an inferior product that is slower, less-secure
and more costly. The Supreme Court's refusal to review a lower-court
opinion on the suit sends the case back to federal court in Brooklyn,
N.Y. If retailers win the lawsuit, merchants wouldn't be required to
accept debt cards with a signature. That means consumers would have to
use PINs when they make purchases with their debit cards.

Separate from the court proceedings is a security issue. Since the cards
draw money directly from your account, unlike a stolen credit card, which
won't deplete your personal funds, a stolen debit card can wipe you out.
Although most banks promise to make restitution, that can take weeks,
leaving you without funds and with checks bouncing.

The PIN serves as something of an electronic combination lock. Cards that
permit signatures have less security. Since retailers generally don't ask
shoppers for photo ID, a lost or stolen debit card can be used by any
crook who can duplicate the signature on the back of the card.

"Consumer protections haven't kept up with the technology," says Jean Ann
Fox, a spokeswoman for the Consumer Federation of America. "Debit cards
have weaker protections than credit cards."

Drained Account

Some cardholders are finding that out the hard way. While traveling
abroad in March, Elizabeth Burger, an art professor from Baltimore,
realized her wallet was missing just before she boarded a train in Paris.
After the 45-minute train ride, she phoned her husband back in Baltimore
and soon learned that the issuer of her MasterCard credit card had taken
note of unusual charging activity and quickly shut down the card.

But Allfirst Bank, which issued her debit card, didn't catch the
irregularities, and within 15 minutes a thief had drained her bank
account, making off with $2,188. "I had no idea anyone could take money
from my checking account," says Ms. Burger.

Marketing Push

Ms. Burger, an Allfirst Bank customer for 15 years, eventually got her
money back after filing a complaint with the Federal Reserve in Richmond,
Va., which oversees Allfirst. An Allfirst spokesman said, "We take these
situations of debit-card fraud very seriously."

Compounding the problem, say critics, is a marketing push by banks to
persuade people to forgo PINs. Commerce Bancshares, has been giving away
$1,000 a week in a promotion called "Skip the PIN and win." Several big
banks award points toward merchandise or airline miles with every
debit-card purchase. Citibank issues the points only when cardholders use
a signature for purchases.

Write to Calmetta Coleman at
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