Editorial Policy

Fraud Costs Rise: 6 Ways to Protect Yourself

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By Eva Norlyk Smith, Ph.D.
February 28, 2011

The number of people falling victim to identity theft in the U.S. dropped dramatically last year — from 11 million in 2009 to 8.1 million in 2010, according to the recently released annual survey of consumer fraud by Javelin Strategy & Research. This was a 28 percent decrease — marking the lowest incidence of fraud since 2007.

In 2009, consumer losses from identity theft schemes reached $53 billion; however, that number dropped to $37 billion in 2010. But despite the steep decline, victims of debit and credit card fraud lost significantly more money last year — with the average out-of-pocket costs for victims jumping by more than 60 percent, from $387 to $631.

The reason? Credit card cloning — in which criminals clone debit or credit cards in other people’s names – is on the rise. This type of credit card theft usually takes longer to discover, and, as a result, it often leads to higher losses for consumers.

Worldwide, credit card fraud and identity theft have long been on the upswing. In December of 2010, 29 percent of debit or credit card users worldwide said that they had experienced debit or credit card fraud over the last five years — up from 18 percent in the summer of 2009, according to a survey commissioned by ACI Worldwide, an electronic payment software developer. The survey polled 4,200 people in the U.S. and Canada, Europe, Asia, Brazil and Dubai.

People in China experienced the highest level of credit card fraud — with 43 percent of survey respondents saying they had been exposed to fraud over the last five years. In contrast, only 11 percent of consumers in the Netherlands reported having been hit by credit or debit card fraud in the past five years, likely because the Netherlands, like other European countries, uses the so-called “chip-and-PIN” security feature to protect against credit card theft. In the U.S., 32 percent of American respondents reported being exposed to card fraud in the past five years.

In the ACI Worldwide survey, 79 percent of the victims of debit or credit card fraud were happy with the way their card issuer had responded, and only 12 percent of U.S. consumers said that they felt their bank should be doing more. The level of satisfaction with banks and with fraud protection systems were much lower in countries such as China and Brazil, where security systems tend to be less sophisticated.

The incidence of identity theft may have decreased in the U.S. because banks have become better at spotting fraudulent card activity and alerting consumers. However, as financial institutions step up fraud prevention efforts, consumers should keep in mind that the best defense against credit card fraud is to remain vigilant about guarding sensitive personal information and keeping an eye out for suspicious activity.

To protect yourself against credit card fraud and identity theft, follow these precautions:

1. When giving out credit card information online, stick to reputable Web sites that display secure https:// pages. Also look for the security padlock logo that indicates that you’re on an authenticated, secured Web site.

2. Always keep your browser updated with the latest security patches that are aimed at blocking hackers and ensuring safe internet surfing. And, of course, make sure that your antivirus, antispyware and firewall software is up to date.

3. Phishing and other email scams are becoming increasingly sophisticated. Never trust an e-mail with a suspicious link or attachment — even it appears to be coming from a friend or a financial institution that you do business with. If anything looks unusual, contact the sender to verify that the e-mail is authentic.

4. Many cases of identity theft originate from people known to the victim, so keep personal information locked in a safe or drawer at home and shred documents with private information on them before throwing them out. When staying at hotels, never throw paper receipts showing credit card information in the trash; instead, dispose of them at home.

5. Check credit card bills and bank statements carefully each month, and if an activity looks suspicious — even if it’s a small amount — contact the bank or credit card issuer immediately.

6. Download a free copy of your credit report once a year to check for credit accounts that you don’t recognize at AnnualCreditReport.com, or enroll in a credit monitoring or identity theft protection service, which automatically alerts you to changes in your account.