It's natural to be nervous about your credit when you see more news about breaches at major retailers in the headlines everyday. 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 fees. 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 cell-phone bills automatically charged to your credit card each month, you'll have to make a lot of time-consuming changes to contact those billers. 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 credit cards.
Bill Hardekoph 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."
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 cell phone. 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."
"Protecting Identity Is Your Responsibility" was written by Terry Savage. Terry is a nationally recognized expert on personal finance, the economy and markets. You can follow her on Twitter at @Terrytalksmoney. This article was originally posted on The Huffington Post on February 5th 2014 and is reprinted with the authors permission.