Editorial Policy

3 ways to protect your identity this holiday season

Erica Sandberg

November 7, 2014

QHi Erica,

Now that Christmas is coming, should I be concerned about all the security breaches in the last year? Should I avoid the stores that were hit or only pay with cash? Basically, how do I protect my identity this holiday season? –Kyle

ADear Kyle,

I would say to be aware of what's going on, but not overly alarmed. Security breaches — or data thefts — are surprisingly common. According to the Identity Theft Resource Center, there were 614 such breaches in 2013 alone! Often, criminals use malicious software called malware to infiltrate a retailer's point-of-sale equipment. Once in place, it allows the crooks to access debit and credit card information.

What are thieves looking for and frequently getting? Customers' valuable banking information.Ask Erica

If you shopped at one of the many places that were hit and used a credit or debit card to buy something, your account numbers and other key data might have been put up for sale on the black market. Then, if someone buys that data (for as little as $1, found a Trend Micro report), they can use your card information to purchase items online or even create a fake card with someone else's name on it to use anywhere. At that stage, the fraudster could max out your credit card line, or delete the balance of your checking account with remarkably little trouble.

While all that sounds very scary, you have some powerful laws on your side. The Fair Credit Billing Act ensures that you are not responsible for any unauthorized credit card charges, and the Electronic Funds Transfer Act protects you against fraudulent activity made with a debit card. Even if the crooks do get your banking information and use it to their gain, you should not be out a dime if you report the damage quickly. That's why you should check your financial accounts frequently.

Usually, either the retailer or the bank has to pay for those purchases. Rarely do these thieves get caught, partly because so many operate overseas. Also, they are really good at what they do.

Now, for what you should do. Yes, the major shopping season of the year is nearing and if you're going to be participating, I encourage you to take proper protective measures. There is no way for you to prevent data theft on a grand scale (that's up to the stores and financial institutions, and they are all working on better security systems), but you can offset time spent disputing errors. Here are three ways:

1.) Use cash. Pull out dollar bills to pay for something and that's it. None of your private numbers or identification will be up for grabs. Of course, you lose out on the convenience (and rewards points) of credit, but if you feel safer using cold, hard cash, go for it. Be sure not to keep too much in your wallet, though. If it's lost or stolen, the money is gone for good.

2.) Use plastic — and keep an eye on statements. No store is immune to hackers, who can strike pretty much anywhere they please. Therefore, when you do use your credit or debit card, review all billing statements carefully. This becomes even more important if you find out that a breach has taken place at a retailer where you have shopped.

Look for balances that are too high and purchases you never made. Dispute inaccuracies with the retailer as well as the bank or card issuer. In particular, keep an eye out for small charges you didn't make. Thieves will sometimes run small charges in an attempt to see if you are keeping an eye on what's being charged or debited to your account before they make bigger charges.

3.) Check your consumer credit reports. You can get free reports from each of the three major reporting agencies once per year at AnnualCreditReport.com. Get one from a different bureau every four months, so you always have an idea of what is being reported. Pay close attention to the inquiries/pursuit of new credit section. If it appears that someone has tried to open a credit card or take out a loan in your name, it will show up there.

Also, read over the trade lines section. If there are loans or credit cards you did not apply for, dispute them with the creditor and the credit reporting agencies. Add a fraud alert to your file, too, which will force lenders to take extra steps to verify your identity before increasing credit lines or issuing other loans and lines of credit.

Please do not get the impression that I'm blasé about these crimes. I'm not. They are infuriating. Thankfully, changes are being made that should make a positive difference. Far more secure “chip” cards are becoming more common (as opposed to the less-safe magnetic stripes) and come October 2015, cards from American issuers should be embedded with them and most big retailers will have upgraded their point-of-sale systems to accommodate them.

Will the criminals find and exploit cracks in the new system, though? With so much profit at stake, I'm sure they're working on it.

Got a question for Erica? Send her an email.