January 15, 2008
Never, Ever Use a Debit Card in The Cloud!
Do you do business on the Internet using a debit card account? Or do you have an account with someone using automatic debit? I would advise you reconsider. –
Dreamhost would like you to know that its very very sorry for accidentally billing its customers $7.5 million it wasn’t actually owed. You see, someone typed 2008 when they really meant 2007 and their billing system decided to charge all of their customers in advance for the entire 2008 calendar year. This included debiting huge amounts of money from people’s checking accounts and all the “worst possible scenario” situations you could possibly imagine.
Tom, friend of the blog, and master of the internet, was among those affected:
Well, this morning I got a billing email from them:
This is just a notice that your DreamHost [redacted] (”zug’s Account”) has a balance of $380.87 (including any charges not due until 2009-01-14), with $340.97 due (since 2008-12-14).
Dreamhost is a very reputable hosting service and has been around longer than most. But they billed out erroneously $7.5m to all their customers. Granted its not a lot of money nor is any individual account a lot of money. But many live on the financial edge. So getting hit with a $500 unexpected withdrawal on the 20th could be the difference between paying the rent or mortgage or not.
Alternatives –
- Get a low value credit card, say no more than $500. Use it only for internet purchase/services. Any merchant who is unwilling to take it does not deserve your business.
- Along a similiar vein get a reloadable cash card with MC/Visa linkage. WalMart, Walgreens and others have these available. Just walk in and reload it in any increment you desire.
Keep in mind that credit cards have certain protections that debit cards lack. Like total exposure is $50 if fraud is reported quickly. But the bigger issue is the debit system is in the merchants favor. Try to get a debit cycle cancelled. It near impossible. So they can keep sending you erroneous bills even after you have terminated service. Eliminate the credit card account however and there is little the merchant can do.
Someday an intelligent secure payment system will arise. But till then be very wary.
[Update] Just to reinforce the point. Read this over at Consumerist.
Comments on Never, Ever Use a Debit Card in The Cloud! »
I’ll add my 2 cents as a multi-event victim of goofy billing.
One warning about “low limit” cards. Many of the issuers love accepting larger charges as a “courtesy” and than add a hefty over limit charge for their “help”.
My advice is to use single use virtual numbers either on a credit or debit card used online - many banks, brokerages, and pay pal offer them with to cash accounts. If the company you are doing biz with insists on auto billing you, visit with their competitors. Often, you’ll get your terms and a better price to boot.