Credit Card Protection

by Gary Foreman

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Over and over, we hear "never give out credit card information over the phone." I understand that. But if I place a phone order, I need to give my credit card number. Then we also hear "never give out the security code on the back of your credit card." To place an order recently, I had to give the last three digits of the security code. The clerk told me, "I can't ship your order without it." She didn't know why it was needed. The only other option was to mail a check or money order, which would have extended the shipping time by two to three weeks!

I'm doing everything I'm advised to avoid identity theft. I check our credit reports often. I call for my credit card balance weekly. Yes, I shred (cross-cut, of course). I've "opted out" of every mailing and phone nuisance possible. In reality, what's a person to do?
Corinne in Las Vegas, NV

Corinne is correct to be concerned with identity theft. Experts estimate the costs to consumers at more than $2 billion each year.

But she's also correct that we need to deal with reality. We take "acceptable risks" every day. For many of us, including Corinne, shopping by phone is a valuable convenience. One that exposes us to extra risk. What can we do to keep those risks to a minimum?

The first rule is simple. If someone calls you, do not give him or her your card number. No matter what reason they give. Often, they'll say that they're not "selling" anything. They'll claim to only be "verifying information." Don't fall for it.

Do not respond to any email that asks you to make a phone call or visit a website to verify your credit card information. No honest business will ask you to do that.

Be very suspicious of any offers that come to you via email. Thieves have been known to send out emails pretending to be from a well-known store. The email offer will contain a phone number. The phone number belongs to the bad guys, not the store. If you call, you'll be giving your card information to a thief!

Bottom line: any incoming contacts by phone or email should be treated with suspicion if they ask for personal information.

OK, so we know not to respond to people coming to us and asking for our credit card information. But let's suppose that Corinne sees something in a catalog she received in the mail and wants to order it by phone.

The first thing is to make sure that you have the right phone number. Get the number from the catalog.

When placing phone orders, avoid using a cordless or cell phone. It's not terribly common, but it is possible to eavesdrop on those calls.

If you have more than one credit card, you may want to choose one to be your Internet/phone card. Make sure it has a low credit limit and notify the bank that you only want the limit raised with your written permission.

Corinne can expect to be asked about the "security code." It is a three- or four-digit number printed on the card. It is not embossed like the rest of the credit card number. Its purpose is to verify that the person placing a phone or Internet order actually has the credit card in their possession. The idea is to protect you from someone who's trying to use your credit card number on a phone or Internet order.

The clerk was correct in saying she couldn't process the transaction without it. If your card has a code, the banks require merchants to use it. If Corinne doesn't think the store should have her security code, she really shouldn't give them her credit card number, either.

She is already taking some other protective measures. Corinne is wise to shred old statements or anything else that displays her credit card number.

She probably also has a list of all of her credit card account numbers and the phone number of the card issuer stashed in a safe place. That'll be handy if her card is ever lost.

A quarterly check of your credit score is a good idea. Checking her credit account balance is fine, but probably not necessary unless you use your cards frequently in risky situations.

If someone does get your card number, you are only liable for $50 in fraudulent charges on your credit card as long as you report it promptly according to federal law (the Fair Credit Billing Act). However, the damage to your credit report could be substantial. And, could take months to clear up.

Finally, if Corinne needs more information on this topic or other consumer issues, she can get help from the Federal Trade Commission at 1-877-FTC-HELP.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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