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Crafty bank thieves hit Michaels

By Claes Bell, CFA · Bankrate.com
Friday, May 13, 2011
Posted: 10 am ET

Debit card fraud at Michaels is putting customers' bank accounts at risk.

Craft store Michaels sent out letters to customers last week letting them know that the PIN pads at some of its Chicago stores were modified by thieves to record and transmit customers' debit card information. From the letter:

Michaels Stores, Inc. has learned that PIN pad tampering may have occurred in its Chicago-area stores and that customer credit and debit card information may have been compromised.

The company was contacted this week by banking and law enforcement authorities after some fraudulent debit card transactions were reported over the weekend.  Authorities believe the fraudulent transactions may be linked to legitimate transactions in Chicago-area Michaels stores.

Then, earlier this week, Gregory Karp of the Chicago Tribune reported the fraud was more widespread than originally thought, encompassing stores in 19 other states:

The crafts-store chain identified 90 keypads in 80 stores that were compromised in Colorado, Delaware, Georgia, Iowa, Massachusetts, Maryland, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Utah, Virginia and Washington.

Michaels has removed the suspicious swipe pads and over the next two weeks plans to replace about 7,200 similar PIN keypads from its stores. Until those pads are replaced with upgraded models, the company said customers must use cash, credit cards or signature-based debit cards.

Michaels says the exposed PIN pad transactions occurred between February 8 through May 6 and has put up a list of stores affected available on its website. The craft chain has sought to minimize perceptions of the scale of the fraud, saying in a press release, "fewer than 100 customer PIN debit cards have been reported used in fraudulent transactions."

If you received a letter from Michaels or have reason to believe your debit card information may have been compromised, you may want to let your bank know and request a new debit card.

It's also a good idea to keep a close eye on your checking account transactions daily, and report fraudulent transactions to the bank as soon as possible. Debit card fraud can be worse for customers than credit card fraud because thieves can drain bank accounts, leaving customers with no funds to meet day-to-day expenses while banks take up to 10 days to restore their money.

If you are hit with fraud, as long as you notify your bank of fraud within 48 hours, your liability for debit card fraud losses is limited to $50. After that, your potential liability rises to $500, and if fraud isn't reported within 60 days, you could be liable for all fraudulent transactions made on your card.

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