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Capital One’s New Breed of Debit Cards: Would You Use It?

This article was written by in Credit. 10 comments.


Capital One has created a new kind of debit card, and the company is hoping it will replace traditional debit cards or even credit cards. This new debit card can be linked to any account at any bank and can be used for purchases or ATM withdrawals. There will be no fees, and Capital One will offer rewards similar to their credit card program.

Consumers who have a Capital One credit card, for example, will be able to pool their rewards from the two products, earning the same level of points, miles or cash back no matter which type of card they use.

Right now, the new debit card is in the process of being offered to those who hold credit cards with Capital One, but it will be later be available to the wider marketplace.

The main problem I have with debit cards is the lack of consumer protection. If my debit card is stolen, my bank account can be drained, and the banks may not credit my account until conducting an investigation. That’s a scary proposition. This debit card apparently offers a benefit similar to credit cards.

If the card is stolen and fraudulently used, consumers should contact Capital One, not their bank. Capital One will reimburse the fraudulent charges to the linked checking account within a day.

This is not enough protection for me. If my number is stolen, not my card, then I’m not going to know that any fraudulent charges have been processed until I see a statement or check my activity online. While I normally check my activity almost every day, not everyone does so, and I can’t be confident that I will always have the ability or time to do so. I think I’ll stick with credit cards (and paying off the balance each month) for now.

Updated February 6, 2012 and originally published June 15, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar Ian @ FamilyFinanceBlog

To me, no matter how much protection they try to give you, when something is connected directly to your bank account, Bad Things can happen. It’s much much easier in my world to just keep using credit cards that I don’t keep a balance on. It gives my money 20-30 more days to sit in a bank and earn interest, and I never lose money to fraudulent charges.

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avatar Chris

I would use a product like this (a debit card with credit card features/rewards) since I use debit all the time. But I certainly wouldn’t do it with a company with a reputation that Capital One has. If my bank offered it I would consider it, depending on the specific terms.

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avatar MikeVx

A debit card connected to your household account is sheer stupidity. I have two debit cards, connected to dedicated accounts that exist to support the cards. If anything goes wrong, my important payments will not bounce, because there only an ATM card on the main account.

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avatar creditunionlady

I guess most of you are not aware of the “zero liability” that comes with debit cards that are branded with the MasterCard or VISA logo. This is the same protection that is offered with credit cards so can you see there is not any additional risk involved using a debit card vs a credit card? If someone steals your cc number, they can charge up to your limit. If someone uses your debit card, they can charge up to the balance or daily limit. HOWEVER, both have zero liability so the funds would be reimbursed or credited within 3 days. That is required. Think about it: if you have ‘zero liability’ why NOT have a debit card?

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avatar Luke Landes ♦127,455 (Platinum)

Protection or not… any card linked directly to a checking account can cause trouble, even in the day or two it takes for the company to reimburse you for a fraudulent charge. If my rent payment, for example, is being directly debited on the same day my debit card is used fraudulently, not only am I out for a day, two, or three for the fraudulent charges, but also the overdraft fees. That’s an unnecessary risk.

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avatar Tara

I don’t know about this card, but I have had a Capital One Debit Card for about 4 months now. It is NOT linked to ANY bank account. I load money on it each month (there is a $5.95 monthly service fee) and use it. If someone else were to obtain the card info and use it, they would only be able to use the amount of money I loaded on the card, which is usually $500 or less. They would have no access to my bank account. So far, so good with the debit card.

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avatar Samantha

Tara, the problem with prepaid debit cards like yours is that if someone does steal the card/number, you LOSE the money loaded on the card and there is NOTHING you can do to get it back. A linked debit card like most banks offer carries the same protections as a Visa/MC credit card. Banks like to make you think you only have 30 days or less to dispute unauthorized charges and that simply isn’t true. As a chargeback rep for a major credit card processing company, I can assure you that timeframe is much longer… 120 days for Visa/MC and a whopping 365 days (for fraudulent charges) for Discover. I’m actually considering getting one of these Capital One debit cards for my current checking account and using that card instead of my Visa check card that comes with the account. My Visa card doesn’t offer rewards and I use it for probably 95% of my purchases since I don’t like taking the risk of losing cash or having it stolen. My husband has been mugged before and lost $200… gone… no way of recovering it. If he’d had the money on his Visa check card instead of cash, we wouldn’t have been out a dime. Neither one of us carries more than $30-40 in cash now.
The only thing that bothers me is HOW is Capital One making any money off this? What’s in it for them unless it’s just advertising. There must be some vital piece of info that isn’t in the adverts.

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avatar Pam

Completely untrue. My Netspend card was stolen, the thief bought gas, I filed a claim-my money was returned 10 business days later.

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avatar Glendon Cameron

The reasons banks are pressing hard into the debit card market are two fold. First the lack of regulation on debit cards, therefore making it is easier to get off the hook , when things go wrong with a debit card, than with a credit card. You have 180 days to correct a problem with your credit card. 30-60 days with a debit card, if you are aware of the problem in time.

Secondly, banks know first hand how many people can’t get checking accounts and how large the prepaid debit card market has become. American Express recently launched a prepaid debit card, ( yes that American Express) which tells me there is a lot of money in debit cards, expect much more to come.

I have a dedicated debit card for getting cash and cash only, otherwise I use my credit card for purchases and I have never had a problem in 10 years since I adopted this strategy . I would not expose myself to that type of risk.

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avatar ScrewedbyCapitalOne

creditunionlady

That may be the law, but reality at least at Capital One is another matter entirely. I opened a prepaid Mastercard debit card in the fall of 2011. Although I wasn’t using it, because I was approaching 45K points on my Amazon card and that translates to an air ticket to the Caribbean for up to $600, I kept adding $500 each month to the Mastercard, so I would avoid the $5 monthly fee.

After 3 months, I was either prompted or I elected to change my password. After doing so, even it was automatically stored in my encrypted password manager, it wouldn’t work when I tried to log back in. Apparently, their website only accepted a truncated portion of the long password I used, although my password manager can save a password of virtually any length. Of course, their website didn’t tell me I used a password which was too long for them to accept.

Even after several attempts to use the “Forgot my password” function to regain access, I was denied. I called customer service and told them I had been locked out of my account after too many wrong passwords, because that’s what the screen told me. They said I wasn’t locked out and they wouldn’t change my password for me; I would have to use the method which had already failed several times. It failed again.

BTW, I’m an IT consultant and programmer. I have been designing and coding user interfaces and websites since before Windows 95 was introduced. I know how to use the forms on a website.

In frustration, I gave up. After being hit with another $5 monthly fee, I decided to call and tell them to close the account. They asked if I wanted to spend down the balance (of course, because the collect a percentage from the merchant that way). I said no, I just want a refund check for my balance of over $1,000. I was told to expect the check within “7-10 days” and that is precisely what they said. They never tell you to count only “BUSINESS” days until after the check seems to be overdue.

Instead, I received a letter on March 23rd, the same day an email arrived, and both told me, “Thank you for choosing the Capital One Prepaid Mastercard”. (then in BOLD): Even though your card was recently approved, our subsequent reviews have triggered an alert and locked your prepaid card ending in XXXX. Until the restriction is removed, you cannot load funds onto the card or log into online servicing.”

Of course, I called to inform them that it wasn’t recently APPROVED; it was recently CLOSED, and to ask where my refund check was. Coincidentally, they told me an adjustment had been made on the day before (March 22nd) and a check would be going out the day we spoke, the 23rd, so I could expect it within 7-10 days from 3/22, again no mention of “BUSINESS” days. After all, the USPS isn’t that slow!

Instead, they mailed the same letter again on March 27th, and waited until the day the letter was delivered on April 2nd, to send me an email telling me the same thing again. “Thank you for choosing the Capital One Prepaid Mastercard”. (then in BOLD): Even though your card was recently approved, our subsequent reviews have triggered an alert and locked your prepaid card ending in XXXX. Until the restriction is removed, you cannot load funds onto the card or log into online servicing.”

Why do they bother using email if they wait as long as it takes to deliver the mail before sending the email message anyway?

Again I called, and after waiting 15 minutes on all 4 calls before I would speak with a person for 5-10 minutes to explain all of this, I was placed on hold, only to wait several more minutes before getting a busy signal. On the 4th call, I was told that I should wait until April 5th, which they claim is 10 BUSINESS DAYS from March 22nd. I haven’t bothered to confirm their math, because their logic escapes me anyway. Why would a letter postmarked March 27th arrive on April 2nd, if the check, supposedly mailed on March 23rd isn’t expected to arrive until April 5th?

On the last call, I refused to be placed on hold until they had taken my phone number for a manager to return my call. Of course that may take up to 24 to 48 hours, but that would still be faster than anything else Capital One has done to refund my balance of over $1,000. I won’t be surprised to learn later that she meant the call would come after 24 to 48 BUSINESS HOURS.

If I don’t have my refund by April 5th, I will drive the 71 miles to the nearest Capital One and walk through the doors shortly after they open. I won’t need a bullhorn for everyone in the building to here me, and I won’t leave until I have my refund. Although the round trip is 142 miles and the travel time will be about 3 hours for the round trip, that’s just how angry they have made me feel, even for only a little over $1,000!

Needless to say, I will never be doing any business with Capital One again. With all of the money the banks are paying their executives in bonuses, why can’t they employ enough people to answer calls in less than 15 minutes. After all, they’re already forcing us to wade through several layers of menus, trying to feed us pre-recorded or automated scripts, before we can even request a live representative. Better to waste OUR time, than to pay a phone receptionist to answer the call and direct it to the appropriate department. That’s what customer service is all about, wasting the customers time, as long as it saves the bank a few shillings.

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