If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

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hotpancakes
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If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by hotpancakes » Fri Jul 13, 2018 4:12 pm

I have both a Fidelity Cash Management account and a Fidelity brokerage account. The CMA account has a debit card attached to it, and I have my CMA account set up to use available margin in my brokerage account as overdraft protection.

What happens if someone steals and fraudulently uses my debit card, amassing enough charges to dip into the margin of my brokerage account? Debit cards have built-in fraud protections for the charged amount, but who's responsible for the margin interest accrued in the meantime, Fidelity or me?

stlutz
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Joined: Fri Jan 02, 2009 1:08 am

Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by stlutz » Fri Jul 13, 2018 7:54 pm

I would read their FAQ on the Cash Manager tool closely.

One helpful statement:
Note: Available margin or non-core money market funds are used to cover overdrafts only if you select that as an option.

daveydoo
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by daveydoo » Fri Jul 13, 2018 10:36 pm

These are exciting times for debit card fraud. Barely knew I had one but it was upgraded from an ATM card. Someone hacked or stole my or a relatives debit card data and ran up a bunch of charges this month. (I almost never use the card and it was never missing.) I saw it within hours. Chase closed/cancelled the card. Thieves kept opening it remotely. Over and over. Each time I called Chase and they eventually started saying "That's not possible, sir." But each of those delays cost them money. Then they moved to one of my kids' accounts, which is not even linked to my debit card. On the last day, when I was in my local branch getting "verified" in person for the nth time over 3 - 4 days, thieves were able to pop the card open every 15 minutes or so. My banker could watch it online and call Chase fraud folks. We changed all of our accounts and I'm still digging out. They now have all of our contact phone numbers and they call constantly and they're quite good -- not easy to tell who's Chase Fraud following up and who's Chase impersonator just phishing. So now we just tell them all to f off.

I will never have another debit card. Specifically asked for just a vanilla ATM replacement card -- would at least limit future theft to $1000 a day per account. But guess what just showed up in the mail...?
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

mptfan
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by mptfan » Sat Jul 14, 2018 8:35 am

daveydoo wrote:
Fri Jul 13, 2018 10:36 pm
I will never have another debit card. Specifically asked for just a vanilla ATM replacement card -- would at least limit future theft to $1000 a day per account. But guess what just showed up in the mail...?
I agree, I will never have a debit card that can be used for purchases either. In my opinion, anyone who uses a debit card for anything other than withdrawing cash from an ATM is just asking for trouble. However, I think you will find that most banks no longer offer a plan vanilla ATM card anymore. Here's my advice...get a Schwab Bank account. I have a Schwab Bank account and like you I wanted an ATM only card because I do not want my debit card linked to the Visa payment system, so I called Schwab and they were very helpful (their customer service is U.S. based and top notch) and were able to set my POS (point of sale) or daily purchase limit to $.01. Effectively this means that I was able to turn my Visa debit card into an ATM only card because no debit purchase transactions will be approved that are greater than one penny. For clarification, the debit card has two daily limits...a daily cash withdrawal limit, and a daily purchase limit, and Schwab can change them independently.
Last edited by mptfan on Sat Jul 14, 2018 1:01 pm, edited 1 time in total.

MikeG62
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by MikeG62 » Sat Jul 14, 2018 9:33 am

daveydoo wrote:
Fri Jul 13, 2018 10:36 pm
I saw it within hours. Chase closed/cancelled the card. Thieves kept opening it remotely. Over and over. Each time I called Chase and they eventually started saying "That's not possible, sir." But each of those delays cost them money. Then they moved to one of my kids' accounts, which is not even linked to my debit card. On the last day, when I was in my local branch getting "verified" in person for the nth time over 3 - 4 days, thieves were able to pop the card open every 15 minutes or so. My banker could watch it online and call Chase fraud folks. We changed all of our accounts and I'm still digging out.
How could Chase not have flagged the account in such a way that prevented this or thought of setting up a security word/phrase that would be needed to unlock the account? Changing all account numbers and online access username and passwords might help.

This is amazing and frankly freightening.
Real Knowledge Comes Only From Experience

megabad
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by megabad » Sat Jul 14, 2018 2:05 pm

hotpancakes wrote:
Fri Jul 13, 2018 4:12 pm
I have both a Fidelity Cash Management account and a Fidelity brokerage account. The CMA account has a debit card attached to it, and I have my CMA account set up to use available margin in my brokerage account as overdraft protection.

What happens if someone steals and fraudulently uses my debit card, amassing enough charges to dip into the margin of my brokerage account? Debit cards have built-in fraud protections for the charged amount, but who's responsible for the margin interest accrued in the meantime, Fidelity or me?
According to federal law you can be held responsible for up to the entirety of the drafts and associated charges depending on when you report the loss/theft/fraud. Fidelity's rules may go beyond this or they may not. Step 1 is to not have a debit/atm card. If you choose to have one, monitor accounts at least daily and report suspicious activity immediately to bank. In the case of my credit cards, bank instituted "POS limits" are very easily changed. Mine takes a quick phone call and very little personal information to change. Personally I would not rely on these for debit cards.

daveydoo
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by daveydoo » Sat Jul 14, 2018 2:12 pm

mptfan wrote:
Sat Jul 14, 2018 8:35 am
...so I called Schwab and they were very helpful (their customer service is U.S. based and top notch) and were able to set my POS (point of sale) or daily purchase limit to $.01...
Good idea -- thank you! I had mine set to alert me. The alerts kept coming!
MikeG62 wrote: How could Chase not have flagged the account in such a way that prevented this or thought of setting up a security word/phrase that would be needed to unlock the account? Changing all account numbers and online access username and passwords might help.
Yes, we did all this. Only in retrospect should we have thrown the whole baby out from the get-go. They kept thinking they had figured it out. Every time I called, I got a different story about how my account was accessed. They led me to believe that thieves has my SSN and my whatever -- but it was clear that they could just bypass whatever stops were in place. I was not able to change my own PIN because I had no access to the card. And eventually I was almost unable to get through to Chase support since I did not have a valid card number to enter! It was comical that I has to keep re-verifying in person to get the money back into my account but the thief never had to show his face anywhere!

Eventually, a security password was placed on the account and I was to use this with every call. I spent 20 min on the phone with a fraud specialist (I knew he was legit because he could tell me the name of the brick-and-mortar banker who just opened my accounts, etc). I reminded him that he was supposed to ask me for the password and he had not. He then repeatedly asked me for the password. He said, in his defense, that it's really hard to see on their screens whether one is set or not. I'm sure he's right -- like in some free-text field. I did not give it to him.

There was a thread (or many?) a while back about the risk of having all or most of ones assets at one custodian. We have been migrating everything to VG, and this Chase stuff was just a family of cash accounts with a low-ish five-figure balance, in aggregate. But I do think I will split my taxable brokerage stuff across two custodians now. I know no one is going to steal all $5 trillion from VG. But, in contrast to the credit card companies who are really good with this, I was amazed how clumsy and flat-footed Chase Banking was in their reaction to this obvious fraud. So we now have a lot less confidence that a brokerage house will fix this with credit card-like turnaround time or effectiveness.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

drk
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by drk » Sat Jul 14, 2018 2:40 pm

Maybe I underestimate the convenience factor, but it seems like the obvious solution is not to use debit cards that have access to any line of credit, be it overdraft protection or a margin account.

KlangFool
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by KlangFool » Sat Jul 14, 2018 2:54 pm

drk wrote:
Sat Jul 14, 2018 2:40 pm
Maybe I underestimate the convenience factor, but it seems like the obvious solution is not to use debit cards that have access to any line of credit, be it overdraft protection or a margin account.
drk,

The obvious answer is no debit card. Why debit card is necessary when a person has a credit card?

KlangFool

drk
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by drk » Sat Jul 14, 2018 2:59 pm

KlangFool wrote:
Sat Jul 14, 2018 2:54 pm
The obvious answer is no debit card. Why debit card is necessary when a person has a credit card?
That's reasonable, too. I'm conflating debit and ATM cards, but I do need one for fee-free cash access when traveling abroad.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by KlangFool » Sat Jul 14, 2018 3:06 pm

drk wrote:
Sat Jul 14, 2018 2:59 pm
KlangFool wrote:
Sat Jul 14, 2018 2:54 pm
The obvious answer is no debit card. Why debit card is necessary when a person has a credit card?
That's reasonable, too. I'm conflating debit and ATM cards, but I do need one for fee-free cash access when traveling abroad.
drk,

I explicitly put a restriction on my bank accounts that no debit card could be issued from my accounts.

KlangFool

mptfan
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by mptfan » Sat Jul 14, 2018 3:11 pm

daveydoo wrote:
Sat Jul 14, 2018 2:12 pm
But, in contrast to the credit card companies who are really good with this, I was amazed how clumsy and flat-footed Chase Banking was in their reaction to this obvious fraud. So we now have a lot less confidence that a brokerage house will fix this with credit card-like turnaround time or effectiveness.
I am amazed at how many people hear stories like this but continue to use debit cards.

AlphaLess
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Re: If my brokerage debit card is used fraudulently, who's responsible for margin interest charges?

Post by AlphaLess » Sat Jul 14, 2018 3:14 pm

Forget the original question. Answer these two:

1. Why is your brokerage account connected to a card. Even more so: why to a debit card?
2. Why are you using a debit card?

You are a fiduciary to your own household's finances. You are in breech of your own fiduciary duty by allowing yourself to use debit cards connected to *ANY* account, let alone a brokerage account.

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