Don’t Panic: How You Can Protect Yourself Against Credit Card Fraud

Using a credit card has become second-nature for most Americans. Who carries cash, anymore? But thanks to the popularity of plastic, fraud has flourished. Ten percent of all U.S. citizens have been a victim of credit card fraud, according to the Department of Justice. Worldwide, it’s a crime valued at more than $5.5 billion. With so much money at stake, criminals are using more and more elaborate means to reach into your pocket and snag your credit identity.

How Fraudsters Operate

The extent scammers will go to in order to steal personal information is simply amazing. A recent case in the FBI files proves the point. The crime ring was spread among dozens of states and several countries with the criminals maintaining some 1,800 “drop addresses” for the gathering of false identities. Using 7,000 fake IDs, the perpetrators obtain tens of thousands of credit cards and stole roughly $200 million, all while doctoring credit reports to expand credit lines. We’re talking about a massive, serious organization spending millions to make millions more.

The example shows just how sophisticated criminals have become in the commission of credit card fraud.

  • How thieves get your information: Crooks will stop at nothing to hijack your identity — it’s just that valuable. In order to get your name, address, Social Security number, and financial account information, they will steal your purse, wallet, and mail. Some rummage through your trash, while others stalk you on social media and send phishing emails. “Skimming” devices attached to an ATM machine to lift your info are also common, and some hackers have access to electronic databases containing online purchase information.
  • How they use the stolen information: Now that they have your most personal financial information in hand, the sky’s the limit. They can call your creditors and change your mailing address, apply for and open new credit card accounts, and go on lavish spending sprees without you even knowing it.

How to Protect Yourself

Considering how sophisticated these criminals are, you may feel defenseless. However, there are strategies you can employ to protect yourself from credit fraud, as well as measures to help you recover from identity theft if you are victimized.

  • Federal liability protection: The Fair Credit Billing act limits your liability to $50 in the event of credit card theft. Some banks will even waive this amount when you provide additional documentation regarding the theft. If you see unknown transactions on your credit card statement, but still have the card, it may have been cloned. You have 60 days to report such transactions. The Federal Trade Commission has additional information including a sample notification letter.
  • Protect your privacy: Shred pre-approved credit card offers and documents containing personal information. Keep your purse or wallet in a safe place at work, at the gym, and in your car. Use passwords on every account accessed by a computer or smartphone, and use a password keeper program or app; never keep passwords written down where they can be found.
  • Use “zero liability” credit cards: It’s becoming more and more common for credit card issuers to provide “fraud protection” or “zero liability” cards. Make sure your credit cards have this feature. With a prompt report of a stolen card or of bogus charges, you won’t suffer any loss at all.

Your Responsibilities

Even if you report fraudulent activity, credit card scams will rob you of a great deal of time, if not money. And then there’s the matter of repairing your credit report for any damage done. Here are some helpful tips:

  • Diligently monitor your accounts: Remember, you have to report suspicious activity within 60 days, and the fact is, every day fraud goes unreported. Bogus transactions can mount rapidly, and you’ll have to verify and report each one. In the meantime, your credit score could also be suffering.
  • Regularly check your credit report: The Fair Credit Reporting Act (FCRA) requires each of the three major credit agencies to provide you a free credit report once a year upon request. You can order all three reports at once, or rotate your requests to receive a new credit report every four months. The only official site for obtaining free records is AnnualCreditReport.com. Watch out for bogus sites claiming to be the official “free credit report” website. You can also call (877) 322-8228 to order a free report.
  • Make sure you practice safe online shopping: If you enjoy shopping online – and according to research by eMarketer, nearly 150 million U.S. shoppers do – make sure your computer is safe. Install reliable and automatically updated virus software on your computer and be sure to use a secure wireless network. When paying online, make sure the website is secure by looking for “https:” at the beginning of the web address and use passwords that are at least 10 characters long.
  • Choose “credit” over “debit.” When using your debit card, always choose the “credit” option when you are asked at the register, “Credit or debit?” Even though the purchase will still be drafted from your checking account, you will be offered the same fraud protection of a credit card purchase, including the $50 maximum liability.
  • Protect your mail: If you are leaving town, have a friend, trusted neighbor, or family member pick up your mail daily – or have it held at the post office until you return. Also, don’t post the fact that you’re going to be away from home on your favorite online social network.
  • Be aware of suspicious activity: Look for signs of possible identity theft such as missing credit card bills, being denied credit for no reason, collections calls for accounts you don’t recognize, and new accounts or unfamiliar balances you don’t recognize on your credit report.

What to Do if You Are a Victim

If you get stung by credit card fraud, take a breath. Everything is going to be OK, but you have some work to do:

  • Contact all of your credit card providers: The faster you alert them, the more you can minimize the damage.
  • Place a fraud alert on your credit report: You do this by contacting Experian, Equifax, or Transunion and requesting that a fraud alert be added to your credit file. These companies will pass the notice onto the other two agencies and creditors can be on the lookout for suspicious activity.
  • Freeze fraudulent accounts: You will have to call all of your credit card providers and shut each one down to avoid further charges.
  • File a police report: Making local authorities aware of an instance of credit card fraud can help prevent more occurrences. You will also want a copy of the report to use when filing notices with credit agencies and credit card providers.
  • Notify the Federal Trade Commission: While the Federal Trade Commission doesn’t address individual cases, your circumstances may aid law enforcement agencies when investigating other cases.

The Better Business Bureau has additional resources, including contact information for the three major credit agencies.

The Big Finish for Fraud

With all of the protection built into credit cards today and federal regulations to help protect you, credit card fraud has evolved from a substantial financial setback to more of a major inconvenience. Still, despite all these protections offered to consumers, being vigilant at all times can help you avoid becoming the victim of fraud in the first place.

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