APACS reviews some popular payment myths in order to separate fact from fiction. 

Myth 1: If you are at a cash machine and you enter your PIN code in reverse it will send a signal to the police to alert them that you are in danger

Fact: This urban myth spread far and wide thanks to the power of the internet. It isn’t true, if only because many PINs will be the same when reversed i.e. 6226. 

Did you know?

• There are more than 90 cash machine withdrawals per second from the UK’s 63,420 cash machines
• Cash machines supply 70% of all cash acquired 

Top tip:

• Stand close to the cash machine and always shield your PIN with your free hand and your body to avoid anyone seeing you enter your PIN

Myth 2: You can’t use a debit card overseas

Fact: If you are going overseas, you can almost always pay by debit card wherever you see the card scheme symbols on your card being displayed – such as Visa, or MasterCard and Maestro.  These worldwide brands ensure that you can use your debit card globally whether in shops or at cash machines.

Did you know?

• Generally it’s cheaper to withdraw cash overseas using your debit card and cheaper to make purchases using your credit card – however you should always check your terms and conditions for overseas charges on each of your cards before leaving 
• Total spending on plastic cards abroad amounted to £25 billion in 2007, with £11billion on debit cards and £14billion on credit and charge cards

Top tip:

• Before going abroad, always ensure that your bank has your up-to-date emergency contact details and that you have their 24-hour contact number or your card protection agency’s number

Myth 3: Your card can only be used fraudulently in a foreign country if you are abroad, in that country, with your cards.

Fact: Chip and PIN has made it harder for fraud to be committed in UK shops and cash machines. Fraudsters have instead had to turn to stealing our magnetic stripe details and PINs in the UK and then making fake cards, for use abroad in shops and cash machines still without chip and PIN protection. That explains how your card can be fraudulently used abroad with a PIN without you. As more countries roll out chip and PIN – European banks have committed to do this by 2010 – opportunities for this type of fraud will start to fall.

Top tip:

• Regularly check your bank statements, and if you notice anything irregular on your account, contact your bank as soon as possible

Myth 4: Cheques can now be processed on the same day through The Faster Payments Service

Fact: The Faster Payments Service only relates to standing order or phone or internet payments – all fully automated payments. Cheques however, are paper items, which need to be physically transferred between banks so that they can be examined by the paying bank for security and fraud prevention purposes. This process takes time and cannot be done on the same day. 

Did you know?

• In its first 6 months of operation, the Faster Payments Service processed 62.9 million payments with a value of £26.3 billion

Top Tip:

• If you can make a Faster Payment, but need to check whether the person receiving your payment can, visit www.canipayfaster.co.uk to test their sort code number. Remember to always double check you have used the correct account number and sort code, because a Faster Payment is irrevocable

Myth 5: Cash will cease to exist in ten years time. 

Fact: Cash is still the dominant payment method in terms of the number of payments being made- 22.4 billion cash payments were made last year, compared to 14.3 billion non-cash payments. The amount we spent in 2007 in cash, for personal payments, was also higher than that by any other payment method.

That said, the total volume of cash payments are in slow decline as both the number of payments we make and the amount we spend is falling. This is largely attributable to the increased reliance on plastic cards, and with the introduction of contactless technology on payment cards; the move away from cash for low value transactions is expected to accelerate.

Myth 6: Changes to the cheque clearing process in November 2007, known as 2-4-6, have speeded up the clearing process.

Fact: Changes to the cheque clearing process in 2007 have done two things- given customers maximum clearing timescales and certainty, rather than speeding up the clearing process.

Research* revealed that only 13% of customers placed value on quicker withdrawals. Instead, clarity on what was happening at each of the stages of the cheque clearing process was deemed to be more important, as well as certainty that by the end of the sixth day after paying in a cheque, it could no longer bounce and the funds could not be reclaimed from the beneficiary if the cheque turned out to be fraudulent. This is provided that they are not a knowing party to a fraud.   

The 2-4-6 changes clarified the process that two days after a cheque has been paid into your bank account you will begin to earn interest, four days after you can withdraw funds (or six days after if it is paid into a savings account that allows withdrawals), and by the end of the sixth day you can be sure that the money will remain yours.

Myth 7: You have to give your bank details in reply to a phishing email to fall victim to online banking fraud

Fact: Fraudulent emails claiming to be from your bank or other organisations are called ‘phishing’ emails. They typically ask you to click on a link - that will direct you to a fake website set up by the fraudster - and then to verify or update your security details. Not many people know that you do not need to reply to the email with your bank details in order to fall victim to the fraud.  You also run the risk of a getting a computer virus and having spyware installed on your PC, without your knowledge. Spyware is capable of monitoring your PC activity, and eventually capturing your passwords and other personal information, including online banking information. To make sure you don’t become a victim of spyware, make sure you have up-to-date anti-virus and anti-spyware software installed. 

Did you know?

• Phishing attacks have become far more frequent?  There were over 20,000 reported incidents in the first half of 2008 – an increase of 180 per cent from the same period in 2007

Top tip:

• One easy way to spot phishing emails is that they are usually addressed to “ Dear valued customer” instead of using your name. This is because phishing emails are usually sent out at random as the fraudsters only have very limited information such as your email address
• For more information on the various types of computer viruses and spyware that can capture your online banking details, as well as any preventative steps that you can take, please visit: www.banksafeonline.org.uk and www.getsafeonlline.org

Myth 8: If you have set up a recurring transaction to pay for a service with a supplier, and then choose to cancel that service you should contact your credit company directly. 

Fact: A recurring transaction is a way of making a regular payment, with a credit card, to a third party. Unlike Direct Debits, where a customer is authorising their bank to allow a third party to collect a payment, recurring transactions enter the consumer into a direct relationship with the merchant. That explains why you should cancel your contract directly with the business and not your card company. Conversely, Direct Debits need to be cancelled directly with your bank or building society, and it is good practice to also notify your service provider that you are cancelling your Direct Debit, remembering that any outstanding costs need to be settled before you cancel the Direct Debit. 

Myth 9: It is fine to use post-dated cheques

Fact: It is advisable not to post-date a cheque, as it is likely to be outside the terms and conditions of your account and it may simply be cleared as soon as it is paid in. If there are insufficient funds in your account or you have already reached your overdraft limit, it may bounce and you may get charged.

*The research was undertaken in 2005 and supported by the Office of Fair Trading. It confirmed that there is no case for speeding up the central clearing cycle. Only 13% of customers placed any value on faster withdrawal and some customers use the current cycle to their benefit to delay money being taken from their accounts.