In Part I of this post, I described how I was interested in the Target REDCard Debit Card, which offers 5% off on all purchases everyday*. It sounded attractive but I wondered about safety, given the fact that it would be tied to my checking account. In this second post, I look at what would happen if a Target REDCard Debit Card was lost or stolen and used fraudulently.
Next, I looked up the Electronic Funds Transfer Act (EFTA) which spells out liability limits when debit cards are lost and stolen. It appeared to me that Target REDcard debit cards would be covered by the EFTA, but I also checked with consumer finance attorney Justin Hosie of the Chambliss Law Firm, one of my go-to sources for questions about consumer credit regulations. He took the time to help me better understand how the EFTA works.
I still had some questions about how the process would work if my card were compromised, since the entity issuing the debit card (in this case, Target National Bank) is different than the one holding my account from which the funds would be transferred when a purchase was made. (By contrast, with a typical Visa or MasterCard debit card, the card issuing institution is also the one holding the underlying deposit account.) I was concerned that cardholders might be stuck between the bank and the card issuer, with each holding the other responsible.
So I decided to go to Target and apply for the card. It took only a few minutes to be approved and when I was, I was given a detailed card agreement. It’s long – about 18 pages – but it covers both Target Credit Cards and Target Debit Cards. I took the time to read through it and found a pretty clear explanation of how it works. (I am not sure I would have been motivated to read through the whole thing if it weren’t for this blog post, but it does provide a good example of why it is helpful to read the agreements you sign.)
Here’s an excerpt:
You will tell us that once if you believe your Card, Card number, or PIN has been lost or stolen. Telephoning us is the best way of keeping your possible losses down. You could lose all the money in your deposit account (plus your maximum overdraft line of credit) that can be accessed by the card. If you tell us within four business days after you learned of the loss or theft of your Card, Card number, or PIN, you can lose no more than $50 if someone used your card, card number or pin without your permission.
If you do not tell us within four business days after you learn of the loss or theft of your Card, Card number, or PIN, and we can prove that we could have stopped someone from using your Card, Card number, or PIN without your permission if you had told us, you could lose as much as $500.
It then goes on to detail the circumstances under which you could lose more than $500.
The language in the cardholder agreement mirrors the liability limits established by the EFTA, so it does appear that transactions made with the card are covered by that federal law.
Some advocacy groups like Privacy Rights Clearinghouse say that debit cards are too risky and urges consumers not to use them. However, because this card requires the use of a PIN, it seems to me it would offer a level of safety that signature-based debit cards don’t. I also couldn’t find any complaints online from consumers who had experienced a compromise of their Target REDcard Debit Card, or who had trouble resolving that kind of issue.
My Take On The Target REDcard Debit Card:
- A 5% across the board discount is a great deal. Even the most generous reward cards don’t offer 5% off every purchase every day.*
- A debit card can be a good option for someone who doesn’t want to sign up for another credit card, or for someone who can’t qualify for one.
However, the law that governs liability in the case of debit card fraud is not as strong as the law that covers liability in the case of credit card fraud. For that reason, be smart if you get this card. Don’t choose an easy PIN (not your address or phone number please!), don’t write it down in your purse or wallet (or store it in your cell phone), and review your bank statements frequently to identify any fraudulent transactions quickly. If you do spot problems, notify Target immediately.
- Make sure you have enough money in your account to cover the purchase amount so you don’t overdraft your checking account.
And finally, you’ll have to make sure you don’t use the discount as an excuse to overspend. Knowing how I shop at Target, that’s going to be my challenge.
*The discount does not apply to gift cards or prepaid cards, prescriptions, Target Clinic services, Target Mobile, and Target Optical Eye Exams.
Update – After receiving numerous questions about what Target does with the information it collects from purchases on these cards, I wrote a third article:
Target REDcards Offer You a 5% Discount: But At What Cost?
Image: Kevin Dooley, via Flickr.com
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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Thank you for the information. This was very helpful. I was recently asked to consider getting a target debit card by a cashier, but it just sounded too good to be true, so i declined until i could do some research on it.
I’m doing research on the Target debit card as well. I don’t feel that a PIN-based debit card is any safer than a signature-based debit card for one main reason: If someone has your card number and the know-how, they can make a duplicate card with any pin number they want attached to it. This happened to my husband’s regular debit card (signature-based or PIN-based, depending on how you want to use it at the cashier, but for an ATM is solely PIN-based), and the thieves simply created a physical card with my husband’s debit card number information (he didn’t know anything was up since he still had his actual card) and a new PIN and went on an ATM spree with it. Luckily we check our accounts regularly, so we caught it fairly early, but the person had already hit seven or eight ATMs in the one day before we caught it (and since it was a Friday when it started, they hit several more before anything was really done by the bank on Monday).
I’m a bit wary of linking another card to my debit account, especially one not backed by my own banking institution. If Target decided that I didn’t act early enough even if I notified them the minute I found out about the problem (which I’ve heard of bank officials saying to people even when the person notified the bank the same day they actually discovered the breach), I could be liable for much more than $500. I don’t know if this is too new for people to have many breaches of account information to happen, but I would love to find information on how Target has handled breaches that have already happened, if such accounts exist.
Thanks for doing so much research on this and explaining the information you’ve discovered so well.
Jess,
Thank you for sharing your experience and valuable insight.
You are right that there is no 100% foolproof way to protect yourself. With the Target Red Card debit card, under the scenario you mention, it could be even more problematic since purchases don’t show up in the bank account for a couple of days. It would give them plenty of time to go on a shopping spree.
Thanks for weighing in.
Please take note that your financial institution’s debit card – if a Visa debit card – has $0 (zero dollar) liability.
THANK YOU SO MUCH for doing all this research for us! I myself have been tempted to get this debit card since I go to Target enough to benefit from the 5% discount. I appreciate everyone’s input!
Just a quick comment- i see there that it says it doesnt apply at Target Mobile. I manage a Target Mobile kiosk, and we do accept the redcard. Its a great way to get an additional 5% off your cell phone purchase (not the monthly plan) and I encourage all my guests to get a debit card especially if they are getting the more expensive phones
That’s good to know Jenn. That came from Target’s disclosure, but it must refer to the monthly mobile plan. Thanks for clarifying it.
I have just had the worst experience!
I opened my card less than two months ago. I tried to pay my balance when it was due and it kept getting returned (because they entered in their own check numbers with my phone/online payments & my bank threw them back because those numbers had already been used by me). I tried to pay it 4 times online and over the phone 5 times with no luck.
I got a phone call yesterday from someone claiming to be from Target, demanding I give them my credit card number to pay my balance. When I said that I wasn’t comfortable giving my information to someone who called me, because I don’t know if they are who they say they are, the person on the phone was harsh with me. I asked the person to please mail me a statement (since I was signed up for paperless) and he said he couldn’t do that, that I needed to give my credit card information to pay my balance now. Turns out it was a Target rep who called me, but still, demanding I give my personal information on the phone, without verifying who I was and then getting harsh with me is not the way a corporation’s customer service should be handling things.
So I went to the store to pay it and even had trouble paying it there. Today I called to make sure that my payment last night had finally gone through, which it did, and I tried to cancel my card and she would not let me – she basically said; “Well you should give it another chance since the holidays are coming up. Thanks for being a Target card member” and she hung up the phone.
Wow! Not good. I assume this is the Target Redcard Credit Card and not the debit card?
I believe the target card now includes prescriptions and very little exclusions. I too am considering one – I have a good friend who used to work at Target and she loves hers.
I finally gave in and applied for a Target Debit card. I was making a big purchase for my daughter’s first apartment off campus at U of A. I knew I’d be making many more and I shop in Target at least 3 times a week. The savings of 5% sounded pretty good. On my 4th shopping trip within the week my card was declined for a $167.00 purchase. All the purchases previous to that had already cleared my bank. I asked the woman at the register if she knew if there was a cap on using the card: too many transactions/over the limit or anything else. She said she didn’t know but proceeded to shout to a “Team Leader” across two aisles, “her Target debit card was declined, do you know if there’s a limit to using it.” The response was a stern “NO”… I would have walked out at that point without my stuff but I was getting a nightstand that my daughter really wanted. I went to Customer Service to close the card and she told me I had to call the 800 number in the morning. I called and they had no clue what happened and couldn’t give me an explanation for my card was declined. I was then referred to another company who handles the card. I called and after listening to a woman recite her script about 4 times without answering my question, I asked her to just answer …”Why was my card declined.” She told me that there is a limit to how many times the card can be used but that’s between their company and the merchant and that I cannot know that information. I started to ask her something else and she interrupted me to ask if there was anything else she could do for me. UGH! So, I called the Target 800 number again and told them that since they will not tell me what the limits are to the card that I will never be able to use the card in confidence and always fear the embarrassment of being declined for using it…BECAUSE I SPEND A FORTUNE IN THAT STORE AND I’M IN THERE ALL THE TIME! I closed the card. BUYER BEWARE!
That doesn’t sound like a good experience for a loyal Target customer. Maybe the solution is to find another rewards card and just use that. (And get the small satisfaction of knowing they are paying another bank for accepting that card!)
I had the same experience this past weekend. I am, or rather, was a loyal Target Customer. My Target Red Debit card, which is tied to MY bank account, was declined for a $167.00 purchase. I called the 800 call center and was told that “they” had decided not to authorize the purchase based on statistics??? Computer models?? All I know is prior to Sunday I had been in there every weekend with my bank debit card. I suppose I will be spending the majority of my shopping $$ at Kroger and WalMart from now on.
I have had this card for several months now. I use it ONLY on Target purchases because a) I save 5% every time which is awesome cause Target purchases add up and b) my school gets a kick back for every purchase I make. I think there are no guarantees with any debit/credit card but for the perks, I am doing it. I watch my acct very carefully and I am also very aware of where my card is after every purchase
i work for target in newyork . I applied for a card about 2 half moths ago and i have not heard anything. I am still waiting to see what is going on. they did not send any letter or try to get in touch with me. i work for this company and i enjoy it. so can you let me know whats going on. thank you darryll
Instead of using either, I buy a giftcard at cardpool.com, and save at least 3% off of the list price. Then, I don’t have to open a credit or debit card, and still save money. And if it’s stolen, I’m only out the amount on the card, and not a credit rating.
Thanks for all the comments I’m thinking of getting this card for the 5%…
One thing you guys should also realize is this target debit card can only be used at Target, super target, and target.com
So if your card is compromised, they can only use it at target and they must know the pin. You cannot sign at the register with this card.
I have one and love my 5% savings on all my shopping including an additional 5% off after every 5 perscriptions!
This card is fantastic. Have never had a problem with the card or Target. Top notch company! I shop Super Target so much, that it is amazing how much I actually save using this debit card in place of my check card.
I had a Target visa card a long time ago. Let it go, never again will I get again or advise anyone else to do it, I don’t think u saving anything & interest rate is out of this world, no thank u, I am cool. Been there & done it, use gift cards from now one that how u save.
I signed up for this last night, and the in store customer service said that it takes a while to build up “loyalty points” – not sure if that is a real thing or not
In any case he said it takes a while for Target to trust your card – so large purchases have the chance of being denied.
Is the target debit card reported to credit bureaus Does it affect one’s credit score
Bill –
No the debit card is not reported on credit reports so it doesn’t affect your credit score. However, I will note that it typically takes 2-3 days for a purchase on a Target debit card to clear your checking account. If you don’t keep a record of the purchase, you could potentially overdraw your account. That won’t directly affect your credit reports unless it creates an overdraft that winds up in collections. Just something to be careful about.
I. Don’t. have. a. checking. account
Buyer beware,beware,beware
We thought this card sounded great.
This is not a debit card transaction from your bank account. It is considered a electronic check if you ask your financial institution.if your account is set up to opt out on debit/credit transactions if there is no money in the account your card will decline at the register,preventing you from costly overdraft fees.The target card will not decline and takes days to hit your account.My experience in the last two weeks has been a nightmare for me and the bank,hours trying to figure out why I’m getting overdraft fees(38.00 per)they seem to let them go through when your funds are low. I would not recommend this card to any one,instead of saving 5%, I spent 30-50% more on the stuff I bought there,I will no longer shop there either,I think Target and the financial institutions were counting on the extra revenue generated from fees. This is the first time I have had overdrafts for over 4 years(I’m pissed) cost me over 300.00 in fees alone.i could go on but you get my point. BEWARE
Mark,
You do raise a very important point. It takes several days for purchases made with a RedCard debit card to hit your checking account .If you haven’t kept enough money in your account, it will bounce and you can end up with costly overdraft fees.
Important warning – thanks for sharing it!
Simple solution, don’t spend money you don’t have.. Not sure how you can blame target for that
I was offered to open up a target debit card in order to save 5% on future purchases. So I did – the cashier took my information and stated I would get my card in the mail…I received a “regret” notice indicating that there was some negative reporting from a reporting agency called “Certegy”. I called Certegy and they said they had no negative reporting on file for me. However, there was a decline by Telecheck. I called Telecheck and they said they could not find negative reporting but they found a unpaid debt that was transferred to ACCS Bad Check Resitution. I called them today but they are only open M-F. I’ve run my free credit report and find no negative reporting from Experian. Now I need to find out what is going on…I suspect fraudulent activity since I know I don’t have an unpaid debt. Thanks to Target I have my work cut out for me but Target can KEEP THEIR DEBIT CARD…..I’ll stick with using my bank’s ATM card!
Chalia,
Ugh – sounds like a mess. Let me know what you do find out.
Gerri
Well, I have to say that the security in their processing is poor. I printed out an application, putting me as the primary and my wife as the secondary. My wife was going to target so I let her submit it. Everything went fine, no problems or questions from the target person. About a week later my wife gets a red debit card in the mail. Hmm. Unusual, I thought I would get mine first since I am on the account as primary. Moreover, it says there is only one card for the account. I waited a few more days. I called. They said I had to close the account to add me. I called back to try to get a supervisor. I got to the automatic prompting this time. It asked me for the last 4 of my SSN. I gave my wife’s last 4 digits. Nope. Did it again. Nope. I tried the last 4 of my SSN. Bingo. I now had a card with my wife’s name on it but associated with my SSN. Evidently you have to be there when you submit the application to show ID. The person behind the customer service counter didn’t say anything about this requirement. I can’t imagine the logic he/she used to get to adding my wife’s name and my SSN. My wife and I are joint on the checking account. I’m disappointed the Target system allowed this AND I’m disappointed my bank didn’t stop it either. Moreover, when I notified target customer service, they would not fess up to it being a target problem, but they also cancelled the account immediately. Seems like an admission of a problem to me. Given that I was on my way to Target, it was unfortunate that I could not take advantage of the 5% discount. So, I went to another store and will continue to.
Interesting Don. Thanks for sharing your experience.
What about extra charges that you don’t remember making, yet Target insists that you made? I am currently experiencing this. I keep all my receipts, because I do make returns, and because I have actually been double charged by a merchant in the past … so I KEEP RECEIPTS. A receipt for a REFUND in my hand wasn’t posted to my account by Target until I phoned in, 1 week after I made a return. I asked “where is my refund into my account” and got the answer that she saw it in her computer and that it should appear in the next few days. Since getting my refund posted, I see an additional $13.++ posted as a debit and I saw before my refund a $83.70 posted as a debit … both transactions that I do not have receipts for and do not have recollection of making. But Target states, you made the purchases. I wish there could be a monthly receipt print out, like with our Credit Cards, that would show a list of each item purchased. NOTE: This particular Target is already known to be thieves, because for the past 1 year, whenever I purchased something ON SALE the sale price NEVER showed up at the register. I started taking a pen and marking the sale price on each item, so I could remember what the sales prices were that I should be receiving. After complaining to checkers, then a manager, yet never seeing them stop this thieving procedure, I finally phoned corporate … who seemed to NOT CARE AT ALL that this procedure was taking place. And now TWO suspicious withdrawals from my bank account. I will not shop there purposely for the next few weeks to see if any more transactions show up in my banking account. Such a fight will need a huge “good luck” to win that battle since debit / bank institutions have been known to state, “You just don’t remember making the purchase” … which sometimes may be true. So, BUYER BEWARE indeed, as someone already wrote. Giving a known THIEVING company direct access to our bank accounts isn’t very smart. I misplaced my common sense and good judgment, all because I THOUGHT I could save 5%. May not be any savings here after all, if they screw around with your account.
My minor son was issued a card being told it was the same as his debit card.
This is false. My bank account does not allow overdraft when balance is below zero.
This card is processed not as a debit card that will look at the balance available and only draft if money is available. This card will continue to accumulate debits even if balance is below zero. Because it does not work the same as a debit card. The demand for payment is submitted as a charge card purchase through the bank.
Because of this my minor son’s checking account was charged over $200.00 in overdraft fees because of $2, 3. Charges.
Why and how can Target give these cards to minors without parents’ permission
Scott,
That doesn’t sound right. Generally minors can’t get credit cards without cosigners so why should they be getting debit cards? If I were you I’d go into the store and ask to meet with the manager. Based on the other comments we’ve received, you may not get car with the customer service phone number.