Southwest Ticket Debacle Illustrates Problems With Using Debit Cards For Big Purchases

A week ago, Southwest Airlines ticked off an awful lot of customers when a disastrous Facebook promotion resulted in people being charged multiple times — upwards of 24 or 25 times — for each ticket. While the airline responded quickly and says it will make things right with customers, many of those who paid with debit cards are still waiting to get their money back.

One Consumerist reader and her husband each bought tickets on different flights during the promotion. She was stung for $5356.80 when Southwest charged her nine times, while her husband ended up being wrongfully charged $13,156.80 after his credit card was hit 24 times for the same amount. By Wednesday, the $13K had been returned while the $5356 was still in refund limbo.

Why?

Because she had paid for her ticket using a debit card while her husband had paid with a credit card, and unfortunately credit cards provide much better protections in these situations than debit cards.

When you swipe your credit card, no actual money has been transferred yet. It’s merely a promise by one party to pay the other. So when there is an error, it’s merely a matter of reversing the transaction.

But your debit card is, as the name implies, debiting your actual bank account and moving the funds electronically. Thus, these transactions are ruled by the Electronic Fund Transfer Act.

We’ve had a number of readers write to us regarding the Southwest debacle claiming that the EFTA requires banks to correct an error within one business day.

Well, yes and no.

True, the act does say that banks must correct “the error, if any, within one business day after determining that an error occurred.”

We bolded those two words in the quote because the EFTA also states that “A financial institution shall investigate promptly and… shall determine whether an error occurred within 10 business days of receiving a notice of error.”

So that means that the banks actually have 10 full business days to investigate the report before deciding whether or not it’s an error. And only then does the 1-day clock start ticking for the bank to correct the error.

In the meantime, some people whose bank accounts are wildly overdrawn because of Southwest’s little glitch are now having to delay payments they would normally make from their checking account — you know, things like rent, food, utility bills.

The credit card protections are actually in the banks’ best interest because they prevent the banks from paying out money to merchants that they will later have to fight to get back.

But considering banks’ growing dislike of debit cards — which allow you to take money out of their vaults very easily but are now bringing in significantly fewer merchant fees to the banks — it’s unlikely that financial institutions will do much lobbying to improve these laws so that customers will enjoy the same protections as the credit cards that make huge profits for them.

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  1. anna1287 says:

    I made my original purchase using a credit card, but SW indicated it had been refunded, so I then used my debit card so I could get the sale price before it expired. My credit card has yet to receive more than a partial refund. I was charged 28 times for $457 on my debit card and they were reversed the following business day. Two days later, I was AGAIN charged 54 times for $228, overdrafting my checking account by over $12k. When I called SW, they indicated they had no record of the second round of charges, yet repeatedly stated they had been reversed. Eventually my checking account was credited, but my credit card refund is still in limbo. To top it off, after all that, SW has indicated no tickets were ever reserved.

  2. pgr says:

    That’s why I would never use a debit card for anything but withdrawing cash from an ATM!
    People just don’t seem to believe that debit cards are not credit cards (and they don’t get rewards either)!

    • IGetsAnOpinion says:

      My debit card does get rewards points (PNC). But I do use that only for physical purchases, for example, groceries. I use credit for most shopping (which is mainly online) and going out to dinner, gas, etc.

    • 180CS says:

      Well, with a grandfathered account at my bank, I avoid the fees by using the stupid thing five times a month. I simply only use it at stores where I can run it as credit though, and for small purchases.

      Yeah, yeah, I could switch banks or go with a credit union to avoid the fees, but Chase is the closest bank for me, and the only one where I can deposit checks 24/7 at the ATM.

    • bbb111 says:

      “That’s why I would never use a debit card for anything but withdrawing cash from an ATM”

      Then get an ATM card without the debit option – most banks have them, but you usually have to push to get it [sometimes it takes starting the process of closing your account.]

    • lyontaymer30 says:

      I get points and rewards as well (Wells Fargo), it just depends on the bank and what type of card you get

  3. ColoradoShark says:

    There something grossly wrong with the fraud detection at the bank when they approve 25 transactions for the same amount in a few hours.

    While Southwest clearly screwed up by trying to charge the cards, the banks should have noticed something fishy once about four separate charges for the same amount from a single vendor hit an account in one day.

    • sgtyukon says:

      Agreed. My Visa card won’t let me buy gasoline for two different cars in the gas station closest to my house within 24 hours although I’ve told them I own three cars and that if someone steals my wallet, they will have the other Visa card that they will let me use for the second purchase.

    • 180CS says:

      Agreed. I partially blame the bank here. I’ve actually had issues making big purchases like this before.

      On a side note, either the OP has a very large checking account, and can probably dip into savings without batting an eyelash till this mess clears, or there’s a bank offering thousands of dollars in overdraft protection and who is approving numerous overdrafts for…the same thing?

      Erroring on the OPs side and saying it’s #2, SWITCH BANKS NOW!

  4. do-it-myself says:

    ARGH*DEBITCARDSWHY*ARGH

  5. HogwartsProfessor says:

    Dammit, not everyone can get a credit card. How are you supposed to pay for a plane ticket without something? I can’t shove cash through the computer.

    I know perfectly well they aren’t credit cards. But I don’t have a choice.

    • Auron says:

      Then as all of the high and mighty Consumerist posters would say: Get a well paying job, pay all of your bills on time, improve your credit rating, and you too may one day know the pleasures of being able to have a credit card.

      • HogwartsProfessor says:

        I’m trying. Everything I do blows up in my face, no matter what. WIsh I was dead.

        • humphrmi says:

          Have you tried a deposit card yet? I re-established credit almost immediately after a bankruptcy with a deposit card. Yeah, you have to put money up front, but now my cards are deposit free and have plenty of credit available on them.

    • meltingcube says:

      A solution to that is a secured credit card. You can get a card with the same limit that you’re willing to deposit to secure the card. This builds credit and will help you to get a real credit card in the future.

      • Lyn Torden says:

        If you want to be ABLE to spend as much as $1000, then you have to commit $1000 to ONLY that form of payment. A debit card tied to a checking account allows you to make payments any way you like. A debit card is better than a secured credit card because you don’t tie up more than you are spending. The advantage of a secured credit card might SEEM to be that you aren’t stuck with the charges. But just see if you can actually take your securing amount back and use it while those duplicate charges are pending? You can’t. The only benefit of a secured credit card is that it is a separate account. But you can do that by having another regular account at a 2nd bank. I have FOUR accounts, each at different banks. So the protection of a secured credit card, that no one can drain me of all my money at once, is realized anyway.

        • AustinTXProgrammer says:

          A secured credit card is a credit building tool and not much more. The fact they charge interest if you don’t pay it off (even though they have cash backing it) is enough for me to stay far away.

          Fortunately I got credit cards during the days any college student with a pulse could. Free T-Shirts too!

          • nickmoss says:

            +1 Credit building tool only.

          • 180CS says:

            Honestly, if you’re in college, and you so much as say you’re making over 10k a year, you will see that the days of being a student with a pulse equivocating being approved for a card still exists.

            On that note, ANY introductory card is only a credit building tool imo. Seriously, if you want to help your credit and not hurt it, and you have a card limit of $500 (I don’t care how much you make, as a college student with a pulse, this is what they will give you) you can’t safely go above $200 in a billing cycle. In some cases, that’s not even enough to buy gas for a month.

            Your first credit card is ALWAYS a tool to show you’re responsible. Some of us have to ‘loan’ them $100-200 for this privilege, some don’t.

        • humphrmi says:

          “as much as $1000″ is a bit misleading. I got a card after bankruptcy for $300 down and they gave me a $600 credit line.

    • AzCatz07 says:

      Some around here would tell you that you then don’t deserve to buy anything.

      I am of the use my credit card and pay it off each month mindset, but I do understand that that’s not feasible for everyone. And a secured CC is not the answer.

      My advice would be to bank with a bank that is going to be more apt to work with you. I bank with USAA and my local credit union. I doubt USAA would have allowed these transactions to go through and, if they had, they’d have credited the money to my account while they figured out what went wrong with the merchant.

    • TasteyCat says:

      Just about anyone can get a credit card, even with bad credit or no credit. It’s easy to get a low limit store card, subprime card (First Premier or Orchard), or secured card. Once you have an established history with a couple of those, it makes the major banks easier to crack.

    • mulch says:

      When I did not have a credit card I went to this strange archaic creature called a “travel agent” and paid cash, it was quite amusing.

  6. Lyn Torden says:

    Simple solution … bill Southwest Airlines for the actual loses caused by their error that led to funds being unavailable for up to 11 days (if more, then the banks are at fault). This will include things like interest charged, late fees, or any other problems caused by being unable to pay obligations. If they don’t pay the bill, then sue.

    • ColoradoShark says:

      In an extreme case, someone will not be able to make their car payment and the car will be repossessed. No car, can’t get to work, and lose your job. It can spiral down the toilet pretty quickly.

    • nickmoss says:

      Sue in what venue? Small claims is different in every state. Where did the reason for the lawsuit occur? Texas? Your home state?

      Or, you can hire an attorney and file suit in any state or federal court. Legal fees are yours. Only in extremely rare cases will any court allow you to collect legal costs. So you are out maybe $8-10K.

      Still want to sue?

      • dcatz says:

        In order to sue a private party in federal court, you either need to sue under a federal statute (federal question) or you need to have diversity jurisdiction (parties in multiple states or countries) with the amount in controversy exceeding $75,000.

  7. keepher says:

    The word needs to get out there to never, every use your debit card for some purchases. Never use them for online purchases, never for gasoline, never for areas where it will be so difficult to get erroneous withdrawels reversed.

    I know better. I’ve known for years that my debit card is sacrosanct and needs to be used with care. How come I know that yet it seems so many others don’t?

    • 180CS says:

      If you can’t swipe it as a credit, hit the cancel button and use another payment option.

      Credit swipe = credit card protection.

      Debit swipe = bending over and asking them to not $*%@ you in the …

  8. ZukeZuke says:

    I still don’t understand people’s obsession with using debit cards for all purchases.

    To me, they simply don’t offer the same kind of protections as credit cards (especially if stolen and thousands of $’s are charged up), and you get to actually use the billing cycle float to your advantage (to earn interest on your money) and earn cash back on cards that have those benefits. Not to mention all the buyer protection and warranty doubling features several credit cards have that are unavailable on debit purchases.

    Unless you have crappy credit, what’s the advantage of using a debit card? I don’t get it.

    • ZukeZuke says:

      By credit card protections, I also meant the fact in the cases of fraud/overcharges, that money isn’t pulled from your account immediately, leaving you with having to go through the trouble of reporting it to the bank and waiting for them to restore you own money back to your bank account. With a credit card, you dispute the charge and your not out of pocket for any of the charges.

  9. DrPizza says:

    All this fear of debit cards – it really depends on the bank you use. We recently had dinner at a restaurant. We ran our card as a debit card; the pin thing wouldn’t come up. The cashier tried again – again, the pin thing didn’t come up. So, we said “try running it as credit instead.” She did, it worked. Before we got home, we had a call from a fraud prevention contractor our bank was using about us having 3 separate purchases for the same amount so close together. It was fixed immediately. Yes, banks have “up to 10 days to investigate.” My little bank makes attracts and keeps customers by offering excellent service. The very small handful of problems have all been investigated and reversed within the same day.

  10. Sad Sam says:

    I lurve my debit card, I use it for all day to day expenses, earn points, only spend my current dollars and avoid debt.

    But, when it comes to booking flights, I often use my credit card, but I’ve run into this new thing where some airlines now require you to verify your credit card by forking over your SS# and other identifying information. I had that happen when I was trying to book a JetBlue flight recently so I ended up using my credit card. I’m not interested in giving my SS# to JetBlue (who, when I called said I wasn’t giving it to them, but instead giving it to some other third party that would verify me).

    Regardless, I’m not forking over my SS# to some random third party and JetBlue wouldn’t book the tickets by phone without charging me extra. Anyone else had this problem recently?

    • Sad Sam says:

      Meant that I ended up using my debit card b/c there was no way I was handing over my SS# to book a flight.