Data breaches and identity theft are becoming more common and widespread. Recently, 111 suspects were indicted in New York's Operation Swiper, a $13 million identity theft ring that may be the biggest in U.S. history. A network of skimmers posed as restaurant workers, bank tellers, and other store employees to steal customers' IDs. The thieves had ties to global crime rings and created forged credit cards with stolen account numbers. They were used on vacations and shopping sprees to buy high-end luxury items to be resold on the internet. The victims are still trying to repair their ruined credit ratings.
There is no way to predict where and when it will happen next, but you can take steps to protect yourself to avoid many of the consequences of identity theft.
Here are some of the protections available:
A credit freeze is the best way to protect your credit score and to prevent someone else from opening an account in your name. Only you can place a credit freeze or remove it. Before an event occurs, you can put a freeze on your account at the three major credit bureaus, TransUnion, Equifax, and Experian. If your account is frozen, only the companies that you already do business with can look at your report. It will block any new accounts, so you will have to temporarily remove the freeze to apply for new credit.
The credit freeze is free for identity theft victims and also for senior citizens in some states. The cost for non-victims varies by state, ranging from $3 to $20. The same fee applies for removal.
The only downside is that a freeze may interfere with applying for anything that pulls a credit report, such as an application for a credit card, mortgage, insurance, apartment rental, or a job.
A credit freeze is a good protection for older adults against scams as well as friends or relatives who could open an account in their name.
Credit cards offer the strongest protections against fraud. As soon as you discover the fraud, contact your credit card issuer. Once you report the loss or theft, you have no further responsibility for unauthorized charges. Your maximum liability under federal law (Fair Credit Billing Act) is $50 per card. If the loss involves your credit card number, but not the card itself, you have no liability for unauthorized use. Contact your bank or credit card issuer as soon as you learn about the fraudulent charges made to your account.
Under federal law, if you report an ATM or debit card missing before it's used without your permission, the card issuer cannot hold you responsible for any unauthorized transfers. If unauthorized use occurs before you report it, your liability under federal law depends on how quickly you report the loss. Some banks, like Bank of America and Capital One, reimburse you for any unauthorized debit card transactions up to the amount of the loss, when reported within 60 days from statement date.
Prepaid cards are not regulated and consumer protections offered by prepaid debit cards are voluntary. They can be revoked or revised by the issuer at any given time and for any given reason.
Credit Card Fraud/Loss Protection Insurance
You do not need credit card fraud protection insurance. It can cost hundreds of dollars, but federal law already gives you free protection. The law limits your fraud liability on credit cards to $50 per card before you report the credit card missing; many cards have zero liability policies and you don't owe anything if your card is stolen.
Credit Monitoring Services
Credit monitoring services track your credit report at one or more credit bureaus and will notify you if there is an inquiry or activity made in your name. Some monitor websites, databases, and public records, which can be helpful for someone who has already been an identity theft victim.
Before signing up for a credit monitoring service, make sure they check your credit report from all three credit reporting agencies (TransUnion, Experian, Equifax). Check with the Better Business Bureau and your state attorney general to see if complaints have been filed against the credit monitoring service.
Credit monitoring services charge $10-$15 per month, but you can do a great deal of this yourself for free. You can get free annual credit reports from the three major bureaus at AnnualCreditReport.com. Credit agencies also provide their own credit monitoring services that daily monitor the three credit bureaus for $14.95 per month ($16.95 at Equifax).
If you subscribe to a credit monitoring service, don't assume that you are completely protected. There are gaps in the coverage and it takes time for a creditor to report a new fraudulent account. If you pay for a credit monitoring service, you still have to watch out for yourself.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.
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