We've discovered that some small banks are banning debit-card transactions on purchases made in New York State, and it's impacting shoppers trying to purchase goods on Etsy, which is based in Brooklyn. Last fall, some banks put a similar ban on debit card transactions made at Walmart.
Many people now use debit cards for their transactions, and they may not realize that they could encounter these types of problems. The issue was brought to our attention by a reader who pointed us to a thread on the Etsy boards
. A shopper said she could not purchase items on Etsy using her debit card because her bank banned debit card use on all PIN-less transactions in the state of New York.
A large red banner appears on her bank's website
, and the announcement explains:
Debit Card Transactions Being Denied in New York
We are experiencing a high amount of debit card fraud in the state of New York. In order to protect our customers, we are temporarily declining debit card transactions in the state of New York unless a PIN is used.
Please use your PIN number when using your debit card in the state of New York.
We sincerely, apologize for this inconvenience and we hope to remove this block soon.
Many Etsy users were shocked to learn of the ban - some wondered if it were legal. Etsy sellers discussing the issue then found a bank in Indiana that was also blocking
New York State debit-card transactions.
It's not just New York - in 2014, Provident State Bank issued a warning to its debit card holders, advising them that, "When traveling to an area that is heavy with card fraud, such as the states of California, Texas, Wisconsin, Washington, New York and Florida, you may find your debit card (if used as a credit) is declined."
And not only can banks and credit cards prohibit PIN-less transactions in entire states, it can also ban retailers. An article in CSO Magazine
reported last year, "Consumers are being warned about an uptick in the number of fraudulent purchases being made at Walmart, which in some cases has resulted in their financial institution moving to deny debit card transactions unless a PIN is used."
The article has some great background that's a must-read if you use debit cards to do your shopping. It also had a warning for consumers: "If you don't catch (debit card) fraud within 60-days and notify the bank or credit union, your liability for fraud could jump from $0-50.00 to $500.00. After that, you may be liable for the entire amount."