How to Protect Your Credit and Prevent Identity Theft this Holiday Season
The modern world is filled with convenience that would have been nearly unimaginable twenty years ago. From where I sit in Montpelier, I can have food delivered from five different grocery stores within two hours. I can place an order online at a local store, have my items gift wrapped, and sent to my family on the other side of the country in only two clicks.
Unfortunately, our modern world can also have its drawbacks. Much of the convenience we experience every day relies on putting our personal information on countless websites, order forms, phone trees, social networks, and mobile apps. The more places our information is stored, the more we open ourselves up to fraudulent activity. Luckily, there are some simple ways to reduce risk and keep your information private without sacrificing convenience.
SHOP WITH A CREDIT CARD
Credit cards are a great way to keep your hard-earned money safe when paying for things online or in stores. Rather than you paying the merchant directly with funds from your accounts, the credit card company pays the merchant and you reimburse the credit card company for that service. This important distinction means that your funds are completely isolated from the merchant you are conducting business with. Should a transaction turn out to be fraudulent, you won’t have lost any of your personal money and can rely on the credit card company to handle the dispute.
Because of this, you can remove much of your personal liability by shopping with a credit card. According to the Fair Credit Billing Act (FCBA), the liability for unauthorized use of your credit card tops out at $50. If you report a lost or stolen credit card, you have no liability! This even includes the use of your credit card number. As long as you pay your bills on time and don’t spend more than you have, a credit card is a fantastic tool for keeping your money safe.
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USE CHIP CARDS AND MOBILE WALLETS
Even if you do shop with a credit card, you may still worry about the safety and security of the merchant that you’re conducting business with. For example, who knows if a rogue employee could write down the card numbers from recent transactions and use them to buy stuff online? Two recent innovations provide an additional level of protection: the chip card and the mobile wallet. Both technologies work in a similar fashion.
When you dip a chip card, tap for contactless payment, or scan your mobile wallet, a unique code is created for each transaction. Because this code is different each time you pay, the merchant never knows your real card number! This means that the transaction is more secure than if you just swiped your card, since the data on the magnetic stripe never changes and is the same for every retailer. If someone tried to re-use that transaction code from your chip card or mobile wallet, your financial institution would automatically flag it as fraudulent.
Mobile wallets also require an additional level of security in the form of a unique device identifier. Without that identifier and the unique code mentioned above, the transaction will not go through successfully. Should you lose your phone, you can always remotely disable these payment options. It’s also worth knowing that many phones use a secure authentication chip to keep your payment data isolated from other apps and services.
MONITOR YOUR CREDIT
The methods outlined above are just a few examples of how financial institutions are hard at work to protect you and your money. While innovations throughout the transaction process have made shopping online or in-person much safer than in years past, the rise of personal data entered online has fraudsters looking for other ways to steal your information and identity.
Using credit and keeping your personal information as private as possible is a good way to reduce your risk, but it isn’t foolproof. There are just some cases where living in the modern world means sharing personal information. In recent years, there have been several large-scale data breaches in which Social Security numbers and other personal information have been leaked to the public or sold online to scammers and fraudsters. One such example is the September 2017 Equifax credit bureau hack that exposed the data of 147 million people.
If your information has been leaked or sold, it is possible for fraudsters to open credit accounts and take out loans under your name. Preventing this can be difficult since many identity theft cases arise from data breaches at large organizations that have to keep your information on file. However, it is possible to monitor your credit so you can catch this type of fraud when it arises.
Two tools that are popular and useful for monitoring your credit are AnnualCreditReport.com and Credit Karma. These services monitor your credit reports with the three major credit bureaus (Experian, TransUnion, and Equifax) and can let you know when there are changes to those reports. If someone tried to open a loan or a credit card under your name, you would see evidence of that in your credit report and could immediately take action to protect yourself.
PROTECT YOUR CREDIT
Should you see suspicious activity on your credit report, a great first step is to contact the lender involved directly. Since lenders sometimes use third parties to execute credit inquiries, you may learn that you did in fact authorize the inquiry. If the inquiry was made in error or the lender cannot confirm the account, you can ask them to reach out to each reporting credit agency and request to have the inquiry removed. Be sure to take notes during your call with the lender, including the name of the customer service representative who you spoke to—this makes any follow-up conversations easier, particularly if you can speak with that person again.
The next step would be to contact the Federal Trade Commission (FTC), which can help recover your identity and stop further fraud from happening. Most identity theft victims do not need to file a police report in order to begin the process.
You can also reach out to the three credit bureaus directly and explain what is going on. Asking them to enable fraud alerts on your identity can be a useful way to keep track of any suspicious credit inquiries. If you don’t plan on applying for a new loan or a credit card in the near future, you can also request that they freeze your credit. This prevents new accounts from being opened in your name and is a great way to reduce your risk. Don’t worry, though—if you freeze your credit and decide you need to open an account or apply for a loan in the near future, you can temporarily lift the freeze for a set period of time.
LAYER YOUR SECURITY OPTIONS
If all of this feels overwhelming, you’re not alone. The reality is that doing just a few things to protect your money and your identity can immediately make you less of a target for fraudsters and scammers. Here are some general recommendations to keep your information safe:
Use a credit card when shopping online or in person. Wherever possible, dip or tap your card, or pay with a mobile wallet, rather than swiping. It’s more secure!
- Turn on notifications for all your financial institutions. This way you’ll be notified immediately of any transactions. If you see one you don’t recognize, you can immediately report it as fraudulent.
- Sign up for a credit monitoring service like AnnualCreditReport.com or Credit Karma. Some types of accounts, including debit and credit accounts, have additional identity theft protection and credit monitoring built right in.
- If you get a phone call from someone claiming to be from an institution that might reasonably need your information, tell them you’ll call back and find the phone number from a trusted source. It’s easy to fake caller ID and you should always be the one to initiate a call where personal information is shared.
- Keep your digital devices up to date and secured with a password or passcode, especially if you have chosen to store your credit, debit, rewards, and transit cards on them.
- Use a password manager to keep track of where you’ve shared personal information and randomize all of your passwords. If one account is hacked, your other accounts will be safe. This is especially important given the number of websites and services that request our personal information.
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