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It’s natural to be nervous about your credit when you
see more news about breaches at major retailers in the headlines
every day. Now, even some processors for major hotel chains
are reporting breaches. In fact, there is an entire universe
of very-sophisticated-technology thieves trying to find weak
links in our nation’s payment system.
Credit card fraud is a huge problem. Javelin Research estimates that about 7.5
million Americans had a credit card compromised in 2012. The monetary loss from
this fraud reached $8 billion. Remember, we all pay for credit card fraud, even
if our card isn’t misused, in the form of higher prices and higher bank
It makes you think twice about entering your debit card to get cash out of a
non-bank ATM. In fact, it should make you wary of using the debit card linked
to your main checking account for purchases at any retailer. It makes you want
to designate just one credit card to make purchases online. It makes you wonder
about making a charitable donation via credit card for a radiothon. And it should
make you think twice about giving your teenager your credit card or adding him
or her as an “authorized user.”
All of those situations create an exposure to identity theft. It’s bad
enough that major retailers haven’t protected us. Don’t make it worse
by creating your own vulnerabilities.
You Already Have Protection
You should know that you already have a high degree of protection against fraudulent
use of your existing credit cards and even your debit card. Both VISA and MasterCard,
as well as American Express and Discover and other major card issuers have a “zero
fraud loss” policy, for both credit and debit cards.
But they require you to report the fraud immediately. And even so, your use of
credit could be disrupted for a while as they send you a new card. Plus, if you
have things like cellphone bills automatically charged to your credit card each
month, you’ll have to make a lot of time-consuming changes to contact those
You’ll note that the recent spate of losses is not because of fraud at
the card-issuing banks. It’s happening at the retailers. And that has the
banks angry, pitting them against retailers who have not secured their systems.
That’s why you’ll soon be seeing a new generation of more secure
Bill Hardekopf of LowCards.com says: “Issuers and retailers will move more
quickly than they planned toward a more secure credit card using the “chips” combined
with a PIN that are already being used in Europe. Also you might see bio-metrics
with your fingerprint, or even your eyeball as your ID.”
But until that time comes, what can you do to protect your identity? And how
much should it cost you?
ID Protection Doesn’t Have to be Costly
Despite the proliferation of services offering to protect your identity if you’ll
agree to pay a monthly fee that could be as much as $15, there are a number of
things you can do, without cost, to safeguard your credit and your identity.
Check your bank and credit card accounts online at least weekly. It may sound
like a hassle, but securely logging into your bank or card issuer’s website
lets you check for even small purchases that might be used to “test” the
information that has been stolen.
Don’t use the debit card that is attached to your checking account for
other purchases. If that card information is stolen, it can be used to dig into
your overdraft line of credit. While banks are required to make good on amounts
stolen in this manner, it could take days — during which you won’t
have cash available to pay your everyday bills.
Put a fraud alert on your account by contacting the credit bureaus. That will
require them to contact you in a predetermined fashion before authorizing instant
credit at a merchant.
Put a credit freeze on your account if you’re not planning to open new
credit, buy insurance or get a new cellphone. A credit freeze is free if you’ve
been the victim of identity theft. But it may cost about $10 to set it up and
another $10 fee to lift it even temporarily or to end the freeze. (It’s
free if you’ve been a victim of identity theft and can produce a police
report.) A freeze is done through each of the three major credit bureaus.
Check your credit report at no cost throughout the year by going to AnnualCreditReport.com,
where you’ll find links to each of the three major bureaus. You get
one free report from each, so space them throughout the year.
Get your credit SCORE free, by going to Credit.com, which gives you your Experian
score, or CreditKarma.com, where you get your free TransUnion credit score.
Notice that nowhere in this list did I suggest shelling out a monthly fee for
credit protection. That’s up to you. But if you practice safe credit use
and watch your accounts carefully, a monthly fee shouldn’t be necessary.
And you might even find that your auto or homeowners insurance policy gives you
some coverage for costs of identity theft, if it happens.
A final word from credit expert Gerri Detweiler, director of consumer education
for Credit.com: “These recent breaches illustrate that it’s up to
you to protect yourself. We can’t stop credit or identity fraud. The best
thing you can do is hope to catch it quickly and stop any further damage.”
I heartily second that advice. You can’t afford to be complacent about
your banking and credit card accounts.
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