Unfortunately, credit card fraud is common – and the odds are high enough that it will likely happen to you at least once in your life. You can stay ahead of the game by having a plan for avoiding, detecting and responding to fraud.
To avoid fraud, you want to reduce the chance of your credit card information (number, expiration date, security code, pin) or your personal information (social security number, address, date of birth, mother’s maiden name) ending up in the hands of fraudsters.
As a general rule: I try to avoid using my debit card as much as possible. If fraud hits me, I would rather it hit my credit card limit rather than cash in my bank account. Even if you get your money back, losing your cash (even for a few days) can be a lot more painful than losing your credit card limit while the bank investigates. (You can also benefit from earning cashback or airline miles on your everyday spend by using your credit card).
Here are a few important tips:
- Don’t carry all of your credit cards with you at all times. I tend to carry my primary credit card and a back-up credit card. No more. That way, if my wallet is lost or stolen, I limit the potential damage, and I have my other back-up credit cards at home.
- When you use your card for cash at an ATM, always cover your pin code. A deadly combination occurs when the card information is skimmed, and the person behind you in line (who put the skimmer on the ATM or is paid by the person who did) observes your pin code. They can then use the skimmed card information and the pin code to withdraw cash. Even worse: you probably won’t get that money back, because the pin code is used.
- Avoid sketchy ATM machines. The best ATMs are on branch premises. Why? Because they have 24 hour CCTV and a team of fraud enforcement that likes putting people in jail. They will work to defend their equipment.
- Avoid making online purchases at public computers (airline lounges, internet cafes). The chance of having your information stolen is much higher.
- Never share your credit card information via email. Never write down your pin code or your password.
- Phishing is a common type of online fraud: the site looks like Amazon, or your bank – but it isn’t. Especially if you are clicking on an email offer – make sure you are going to the actual website of the company. Email offers that then ask for lots of personal information are big red flags.
- People steal phones to get your information, which is more valuable than the phone itself. Do not store your social security number, credit card information or other personal information on your smartphone.
- Change your passwords regularly!
- Update your operating system regularly – especially when you are told that it is a critical security fix!
Fraud can happen to even the most careful person. I used to run the Fraud Department at a bank, and I was hit with fraud. The key is early detection. And as soon as you detect, call the bank!
You need to be alert to 2 worries:
- Someone stole your identity and applied for new credit.
- Someone stole your credit card information and is going shopping with your money.
For 1: sign up for services like CreditSesame, Quizzle and CreditKarma. You will then be able to see when someone applies for new credit. If you see that someone applied for credit, then you can take action before the credit is approved. You should look at your credit report every month, to make sure nothing surprising shows up.
For 2: sign up for alerts on your credit card and regularly check you balance. As soon as you see suspicious activity, make a phone call to your bank and let them know.
If you discover fraud, the most important thing is not to panic. Here is what I recommend:
- Change all passwords on your accounts.
- Make sure you call your bank and have any card that could have been compromised blocked and re-issued.
- If you haven’t already, sign up for credit monitoring services so that you can continue to watch for any suspicious activity.
If you think you identity was stolen, and the fraudsters are looking to apply for new credit, then consider a Credit Freeze. This can be painful if you are planning on applying for credit any time soon – because your credit bureau will be frozen. But, if you want complete peace of mind to thwart the fraudsters, this is certainly an option.
When I experienced fraud, I had my effected card re-issued. I suffered no loss (because I called the bank right away to report). And I felt comfortable because I never saw a new credit application appear in my name. There are enough tools out there to help you take control and feel comfort. Just make sure you sign up for them and guard your identity and your credit cards wisely.