5 Ways an Identity Thief Can Use Your Social Security Number

Man's hand holding Social Security card. Computer theft on laptop.

Having your Social Security number or card stolen isn’t quite like getting your bank account information taken—though granted, both are stressful experiences. The major difference is that you can get a new bank account number, while the Social Security Administration very rarely issues new Social Security numbers.

Why You Need a Social Security Number

If you’re unsure what an SSN is, the Social Security Administration loosely defines it as a nine-digit number for identity-tracking purposes. Whenever you start a new job or apply for government benefits, you need your Social Security number: it will be used to verify your identity and record earnings. You can locate your Social Security number on your Social Security card—if you can’t find your card, make sure you reach out to the Social Security Administration directly.

How Social Security Number Theft Occurs

How someone finds out and steals your identity (or Social Security number) can happen in a variety of ways. They could gain your Social Security number by exploiting data breaches, sifting through the trash for personal documents, or using any number of other approaches. The thieves can then sell your identity to the highest bidder on the dark web.

What Happens When Someone’s Identity Is Stolen

Once an identity thief has your Social Security number, they can commit all sorts of financial fraud with it, potentially leaving you on the hook for their misconduct.

Look at it this way: Social Security numbers are wrapped up in most aspects of Americans’ lives—employment, medical history, taxes, education, bank accounts, and so on. Below is a list of just a few things someone can do with your SSN if they get their hands on it.

1. Open Financial Accounts

Your Social Security number is the most important piece of personal information a bank needs when extending you credit or opening an account. With that number, a thief can get credit cards or loans, and when it comes time to repay them, they won’t, damaging your credit in the process. Those missed payments are tied to your Social Security number, so they’ll end up on your credit report and could impact your ability to apply for any type of loan or new account in the future.

Once you spot suspicious transactions, you can use your credit scores and credit reports to detect fraud and put an end to it. Unfortunately, it could take years for the fraudulent information to be removed from your credit report and, as a result, for your credit scores to recover.

2. Get Medical Care

Someone using your Social Security number could also undergo medical treatment, effectively tainting your medical records. Inaccurate medical records can have deadly consequences—for example, imagine what could happen if you received treatment based on a false history listing the wrong blood type. Additionally, it’s possible for thieves to poach your health insurance coverage, which could leave you in a bind when you need it.

3. File a Fraudulent Tax Refund

Taxpayer identity theft is a growing problem. Identity thieves use stolen Social Security numbers to get a fraudulent refund, which then delays any refund the victim is rightfully owed. In 2016, the IRS identified $227 million lost in fraudulent tax returns, and this issue is bound to become even more problematic in the wake of massive data breaches like the 2017 Equifax hack.

So the sooner you file your taxes, the more likely you’ll get your refund before an identity thief has an opportunity to take advantage of your stolen identity. You’ll know someone stole your identity if your return is rejected as a duplicate—then you get to start the process of resolving the fraud and, if necessary, getting the refund you deserve.

4. Commit Crimes

Getting your Social Security number might just be a fraction of the thief’s crimes. If the identity thief gets arrested for another crime and gives your Social Security number to law enforcement, you’ve become tangled in their criminal history. Their criminal record could prevent you from getting jobs or interfere with anything else that requires a criminal background check.

5. Steal Your Benefits

A thief could also use your Social Security number to file for unemployment or Social Security benefits, depleting those resources and preventing you from accessing that assistance when you need it later on.

How to Find Out If Your Social Security Number Has Been Stolen

Thieves can operate under your identity for years without discovery, and some of these crimes are very difficult to detect. One of the best things you can do is regularly check a free credit report. Review your credit report thoroughly for unauthorized accounts or public records not related to you. These red flags could indicate clerical errors or identity theft. Either way, you want to watch out for it and act as soon as you see something suspicious. You can also check out these other ways you can find out if you’re a victim of identity theft. 

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14 Ways to Prevent Fraud on Your Debit & Credit Cards

There's no way to make yourself 100% safe from credit card or debit card fraud, but you can build some pretty tall walls. Here's how.

Every time there’s a large credit card breach, you’ll hear some expert say risks for consumers are low, because it’s easy to cancel a credit or debit card and get a new one. Not so fast. If fraud appears on your bill, but you don’t notice it, you’ll pay for it. More important, changing account numbers is a hassle. You’ll have to update all your automatic payment accounts, for example. Screw up one of those, and you could get hit with late fees from a merchant when your payment is denied.

Despite the liability limits, you’re better off avoiding all this in the first place. Below are suggestions on how to do that. Most involve limiting the number of times you have to share your plastic with someone, decreasing your “attack surface.” Some might be familiar. Others might seem extreme. Either way, there’s no way to make yourself 100% fraud proof. That’s why we’ve also provided tips on the earliest possible detection and reporting of fraud, which is the main way to protect yourself. For example, regularly checking your credit scores can help you spot fraudulent activities on your credit cards. (You can check two of your scores free on Credit.com.) Here’s how to keep yourself as safe as possible.

1. Avoid Using Debit Cards to Buy Things

When I asked Gartner fraud analyst Avivah Litan about her fraud-fighting tips, this is the first thing she said:

“Never use PIN debit, except for bank ATM machines attached to bank branches.”

PIN debit is the technical term for using a debit card as “credit” at a merchant. From a fraud perspective, the “debit or credit” question is meaningless. Either way, you are putting your debit card account information into databases criminals can hack. And recovering from a debit card fraud is much more of a hassle than recovering from a credit card fraud. With credit card fraud, consumers call their bank, dispute a fraudulent charge and don’t pay for that part of their bill. With debit card fraud, money is taken from the victim’s checking account, and the consumer has to argue with the bank to get it back. That usually happens quickly, but in the meantime, the consumer’s balance can dip below zero, leading to overdrafts and other potential problems, like bounced rent checks.

It’s a bad idea to buy things with a debit card. Use a debit card to withdraw cash at a bank ATM. Otherwise, use credit.

Some people use debit card purchasing as a personal finance tool to limit spending. That’s a rational reason to do so. If you must, don’t use PIN debit, so at least a criminal can’t gain access to your PIN at that merchant.

2. Be Careful With Stored-Value Apps

The latest trend in money is “digitized stored value.” You probably familiar with it if you buy coffee with your Starbucks app. Many merchants are now imitating Starbucks with their own digitized stored value apps. But app makers and merchants are not banks. They have less experience keeping money safe. The consequences have been obvious: Starbucks consumers have complained for nearly two years about criminals raiding their app-linked credit cards. Worst of all, consumers with auto-fill have seen criminals conduct rapid-fire conduct transactions through the apps. Starbucks says this impacts a tiny fraction of consumers, and they are quickly refunded. If you are using “digitized stored value,” manually reloading value is safer than loading your credit card and especially your debit card.

3. Have a Separate Card for Digital Transactions

Splitting your transactions among cards can limit the “spillover” if fraud occurs. This tip isn’t for everyone. Some consumers like racking up points on one card. Others are afraid they’ll miss a payment if they have more than one credit card bill each month. But separating out transactions can have fraud-fighting benefits. If you are the type to buy items from less popular websites that might not have the security protections of a larger site, consider having a card you use just for those higher-risk purchases. That way, if the small site is compromised, the impact on your life will be contained.

4. Google Second-Tier Sites

Speaking of second-tier sites, you should always Google them before making a purchase. Search “BobsWidgetSite.com and complaints,” then “BobsWidgetSite and fraud,” before making a purchase the first time. Scroll through a page or two of results, in case the site has done search engine optimization work to beat back complaints. I talk often to victims who do that search only after they are victims of fraud, and then kick themselves.

5. Place a Sticker Over Your Security Code

Here’s a novel idea from computer security expert Harri Hursti. Most credit and debit card credentials are useless without the security code numbers on the back of the card. To limit the risk of physical theft, place a sticker over the numbers and memorize them. They are usually only three or four digits. That way someone else who holds your card for a few moments can’t get enough information to steal from your account. Such physical theft is less common than it once was, but the sticker idea is a simple fraud-fighting tool.

6. Say No to ‘Free’ Trial Offers & Avoid ‘Gray Charges’

About five years ago, a credit card fraud fighting firm named BillGuard.com coined the term “gray charges.” These aren’t traditional fraud, but they aren’t transactions you approved, either. It might be a magazine you didn’t realize you purchased as a bundle at a checkout. It might be a subscription travel service that “accidentally” ended up in your shopping cart when you booked a trip. Or it might be a free trial you forgot about that has now converted to a $20-a-month charge. Either way, gray charges are a hassle, and the easiest way to avoid them is to never sign up for a “free” anything that requires your credit card. Check your shopping carts diligently, and uncheck all the “sign me up for XX” boxes along the way.

7. Don’t Fall for Phishing

Phishing emails have been around for a while – so long you might forget the risk they pose. Big mistake. A study by the University of Texas last year found that phishers “thrive” on consumers’ overconfidence. There was a 500% increase in personalized, social-media-based phishes in 2016. A common, credit-card stealing email might be an alert claiming your credit card on file with iTunes has been rejected, and asking for an immediate update. If you think you can’t be phished, you’re wrong. Never enter your credit card number into a website unless you have manually visited the site by typing the address into your web browser’s address bar. Never click on a link in an email – even one you are certain is real – and enter payment credentials.

8. Don’t Give Your Credit Card Number Over the Phone

This tip is similar: Never give your credit or debit card number to anyone who calls your house. Even if you are certain the call is legit. Always hang up and manually dial the company’s phone number, then give your payment details. That might sound like a hassle, but any reputable company will appreciate your efforts at security. If the person on the other end of the phone gets annoyed, that’s a good indication you are being hustled.

9. Get a Post Office Box

Mail theft is still a cause of identity theft. The simplest way to avoid it is to stop mail from coming to your house. Small P.O. boxes can cost around $100 per year and can offer peace of mind.

10. Use ATMs Carefully & Watch for Skimmers.

You know to make sure no one is watching while you enter your PIN code at an ATM. But how? It’s getting harder and harder to be sure, as hackers are inventing smarter skimmer devices that let them “watch” you remotely. The latest devices are designed to fit snugly over the slot where cards are inserted or even to be snuck inside that slot, invisible to the untrained eye. That’s one reason Litan only uses ATMs attached to a bank branch. ATMs outside grocery stores or gas stations can be easier to attack and often have higher fees. The risk isn’t only at ATMs. So-called “overlays” that fit on top of a merchant point of sale terminal have been spotted at major retailers across the country. Whenever inserting your credit or debit card into any machine, it’s a good idea to look for signs of tampering. You can take a moment to rub your fingers around the edges of a machine to see if an overlay of skimmer has been snapped on top.

11. Keep Track of Your Cards

It’s easy to forget your card at a restaurant after a meal. Develop a personal checklist so you avoid that. Each time you get up to leave a store, or before you go to bed at night, do a card count. If you can’t find your card but you are hopeful it will turn up, you might have better options than you realize. Many times, people are loathe to call and report lost cards because of the ensuing hassle. Some banks let you temporarily “freeze” your card while you look for it, then turn the card back on if it’s found safe. Discover has a feature called Freeze It. Visa and MasterCard also gives their banks similar options. Don’t be afraid to protect yourself while you are looking.

12. Sign up for Mobile Banking

Mobile banking is a great fraud fighting tool. If you aren’t using your bank’s app, you’re missing out. More people used mobile than used a bank branch for the first time in 2015, according to Javelin Strategy & Research.

Mobile banking lets you check your account every day for unusual activity. Use of mobile banking can reduce your attack surface, too, since mobile check deposits mean fewer trips to the ATM.

13. Set Text Alerts for Your Credit Card

Banking apps make it easier to use another trick that helps with fraud detection: text alerts. Most banks allow you to set up texts about transactions. Options include: A text with every purchase, a text for every purchase more than $100 or a daily text with the account balance. I prefer the last choice. Anything more frequent and the messages start to feel like spam, and can be ignored. The tool also helps with spending habits, as you’ll have a daily reminder of how much you’ve spent. Most banks can send the alerts via email, too.

14. Report Fraud Immediately

If you are hit by fraud, time isn’t on your side. You will likely be hit repeatedly until the card is canceled. Most importantly, if you don’t report the fraud in a timely manner, you can be held liable for some or all of it. Most of the time, financial institutions are responsive to fraud, and make reporting concerns and getting replacement cards easy, but early detection is critical.

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The post 14 Ways to Prevent Fraud on Your Debit & Credit Cards appeared first on Credit.com.

4 Mistakes People Make With Their Credit During the Winter

Here are some common credit mistakes people make during the winter.

No matter what seasonal holidays your family celebrates, we’re definitely in the festive season right now — it tends to start with Halloween and ends on January 1.

Over the last month or so, we’ve filled our pantries for Thanksgiving, hit the stores for Black Friday, and stocked up on gifts and food for Christmas or other family celebrations. (Not to mention all the pageants, concerts, get-togethers and parties that come with the season.)

During this time of year, many people get focused on gift giving and accidentally make these four credit mistakes, As we head into the home stretch, here are some not-so-smart spending behaviors to flag.

1. Overspending

‘Tis the season for giving, but some people give so much that they hurt themselves financially by spending more on their credit cards than they can pay back. That $25 gift for a friend that you thought you were getting a good deal on can suddenly cost $40 (or more!) once interest and fees are added onto an unpaid credit card. So be sure in these last few shopping days to stick to your budget. It’s okay to put things on your credit card … as long as you can pay off your credit card right away. (You can see how your holiday shopping has affected your credit by viewing two of your credit scores, updated every 14 days, for free on Credit.com.)

2. Not Watching for Fraud

There’s a lot of shopping this time of year – it starts with Halloween candy and costumes for the kids and ends with champagne for a New Years Eve celebration (and maybe a gym membership to go along with your 2017 resolution). Along the way, you’ve probably had your credit card in hand fairly often – shopping for a turkey for Thanksgiving or angling for a great deal on Black Friday or Boxing Day. With all that extra credit card use, it’s important to stay vigilant and monitor your credit card statements carefully for fraudulent charges. Also, be sure to report them to your issuer immediately to have the charges reversed and your card replaced.

3. Lending a Credit Card

If your spouse is running out to pick up some last-minute fixings for the annual family get-together, or maybe some stocking stuffers for the kids, it might be tempting to hand off your credit card to them if they don’t have their own. However, this common mistake can prove costly for so many people every year, because while your family member might be very trustworthy, a simple mistake of leaving behind a credit card they’re not used to carrying could lead to fraud. (Something else that’s important to note: Lending your credit card to someone else, though it isn’t illegal, could put you in violation of your card agreement and make it harder to reverse the charges made while the plastic was out of your hands. You can learn more about how this works here.)

4. Putting Your Credit Review on Hold

I always recommend reviewing your credit report at least twice a year — or even quarterly. But this season can be so busy that people will often put their good habits and responsibilities on hold so they can focus on the turkey, decorations, costumes and shopping that needs to be done. However, skipping a credit report check just once a year (especially during the holidays) can set you back dramatically and make it that much harder to check and clean up your report in the spring. (Remember, you can pull your credit reports for free each year at AnnualCreditReport.com.)

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Do I Have to Activate My New Credit Card? (The Answer May Surprise You)

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A lot can happen in the seven-to-10 business days it typically takes a new credit card to arrive in the mail. But if you’re having second thoughts about your chosen plastic, you’d be remiss to think that failing to formally activate the account negates its existence.

Issuers typically ask that new cardholders “activate” their cards by calling them or registering the plastic online once it’s in hand. This requirement helps to prevent someone from scooping the new card out of your mail and taking it on a shopping spree, but it doesn’t serve much of a purpose beyond that.

“Activation is simply a fraud protection measure,” Nessa Feddis, senior vice president and deputy chief counsel at the American Bankers Association, said. “It’s divorced from whether the account is opened or reported [to the credit bureaus].”

In fact, issuers typically start reporting the card to the credit reporting agencies once you’ve been approved. The application will almost immediately generate a hard inquiry on your credit report and, shortly thereafter, the card’s credit limit will factor into your credit utilization rate, whether you abide by the activation request or not.

Interestingly, there’s also a chance the card itself would work at a store, should you try use it without making that phone call or registering online.

“All American Express cards are flagged as pending confirmation of card receipt when a card is mailed. We strongly recommend Card Members confirm receipt when the card arrives to help verify their identity and mitigate against fraud,” a spokesperson for American Express said in an email. “However, because of our relationship with our Card Members, we are able to selectively approve charges that we evaluate to be of very low risk, even if the card receipt has not yet been confirmed. For example, if a Card Member receives their new card, puts it into their wallet and proceeds to use it at their local coffee shop they frequent, we might be able to approve the transaction.”

Making the Call

It’s still in a cardholder’s best interest to activate a new credit card, since that’s the quickest way to ensure you won’t hit any snags when trying to make a purchase. It also minimizes the odds of fraudulent charges.

If you haven’t received a card you applied for, you should notify the issuer — they can tell you if the account has been used and/or send you a replacement. It’s also a good idea to keep an eye on your credit to make sure someone else didn’t run up any balances or commit any other nefarious activity in the interim. You can do so by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com. A sudden drop in scores can be a sign identity theft is occurring.

If you are having second thoughts about an account you opened, you should call to formally close the card. Just be aware that doing so might affect your credit score.

Keep in mind, too, an issuer may elect to close a card if it remains inactive long enough, so you may want to address an unwanted account head on (or use it from time to time to make small purchases) rather than weather any damage a sudden, unplanned closure may do to your score. (You can find out more about the effects closing a credit card can have on your credit here.)

More on Credit Cards:

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Why Are So Many Credit Card Thieves Making Political Donations?

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If you’ve ever had your credit card number stolen, you may have noticed the first transaction the thief made was a small one. It’s a common tactic for testing the validity of the card, because if a little transaction gets through, the thief can probably make several bigger ones before someone notices and shuts down the account.

Apparently, thieves have made political campaigns their new testing grounds. It’s the latest trend in credit card fraud, according to fraud-detection company Kount. In a news release about the trend, Kount noted how the influx of political donations this time of year can make it trickier for organizations to detect fraud problems, which can cause problems for the campaigns once a bank or consumer flags the unauthorized transactions.

For consumers, it’s a reminder of how important it is to regularly review credit card statements so small transactions, like fraudsters’ tests, don’t go unnoticed. Not only is it a pain to have to get charges reversed and the credit card replaced, the damage can go so far as to hurt your credit score. Say a thief runs up a high credit card balance before you or your bank catches the problem, and that balance gets reported to the major credit bureaus. The closer your credit card balances get to your credit card limits, the more your scores can drop. That’s why a sudden drop in credit score, too, can be a sign of unauthorized activity on your credit accounts. (You can see two of your credit scores for free every 30 days on Credit.com.)

You should also be careful about where you enter your credit card information to minimize the odds of it getting compromised. Check to see if the site is secure (for example, look for a URL with https or a little lock sign next to it in your browser), and closely follow your transactions by checking your account information. As soon as you see something suspicious, contact your credit card issuer to minimize the hassle of reversing the effects of credit card fraud.

More on Credit Reports and Credit Scores:

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Visa Adds New Tools to Give You More Control of Your Credit Cards

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Credit cards are getting smarter — finally. Last year, Discover launched its nifty “Freeze It” feature, which acts like a temporary on/off switch for account holders who think-they-have-but-maybe-haven’t lost their card. Now, Visa is announcing a whole set of similar app-activated “switches” that give consumers even more granular fraud-fighting and allowance-permitting tools.

Called “Visa Consumer Transaction Controls,” the new tools will let consumers set spending limits (only $500 a month for Junior), block entire sets of transactions (no online shopping for Junior), or turn cards on and off, similar to the “Freeze it” feature on Discover cards.

While Visa makes the tools available, it’ll be up to issuing banks to add the capabilities to consumers’ accounts. Software development tools will make it relatively easy for banks to add the options to their online banking apps, meaning consumers can update the controls on their mobile devices in real-time.

“By putting the account holder in charge, Visa card issuers can provide their consumers peace of mind through innovative spending controls, and more effective fraud prevention,” said Mark Nelsen, senior vice president of Risk Products and Business Intelligence, Visa Inc.

The tools might also be useful in budgeting, too. Transactions over a certain dollar amount can be banned — giving the consumer a chance to second-guess a big purchase. More important, since spending controls can be applied to different transaction types and date ranges, the controls could be used to send an alert or to freeze all spending in one area – online, for example – notifying the account holder that he or she is over budget.

MasterCard said it offers a similar spending-alert tool, called In Control, to banks that issue its credit cards.

“Once an issuing bank agrees to offer In Control, the issuing bank can choose the most appropriate deployment form for their operation and then communicate to their cardholders,” said Seth Eisen, a MasterCard spokesman. “The cardholders can then access In Control either through the bank’s mobile app or website, or by registering on a separate app or website if the bank doesn’t offer this service through their own channels.”

American Express didn’t immediately response to a request for comment.

In a video accompanying its product launch, Visa stressed the ability of parents to limit their kids’ credit card spending with the tool.

“With new digital commerce experiences emerging daily, it’s important that we provide easy and convenient ways for consumers to direct and monitor how their accounts are used and help better secure the payment system,” Nelsen said.

It’s not immediately clear when the transaction controls will be made available to consumers (Visa didn’t immediately respond to a question about that). Here’s a full list of features Visa is offering, per its press release:

  • Temporarily stop transactions. At the touch of a button, the account holder can easily turn card authorizations on and off and take immediate action should their card become misplaced, lost, or stolen.
  • Manage specific transaction types. Consumers can block or request alerts for selected activity including purchases in-store, online or internationally, as well as ATM withdrawals.
  • Set spending limits. Account holders can limit transaction size, set spending limits over a period of time, or receive spending alerts based on transaction amount.
  • Manage multiple cards. Families or businesses can define individual controls or alerts for primary cards as well as companion cards that are given to family members or employees providing more real-time control and visibility into spending. For example, a parent can share a Visa account with a child by providing a companion card with spending limits and transaction alerts that are sent to the parent’s mobile device.

Protecting Your Payments

If you’re interested in beefing up the controls tied to your financial accounts, you can contact your bank or issuer to see what types of alerts or features they may offer. You can also minimize the chances of falling victim to credit card fraud by using a new EMV chip-enabled debit or credit card during in-store transactions, sticking to encrypted sites when shopping online and not storing account information on websites.

Remember, no matter what controls you have in place, you should still monitor your credit card or debit card accounts regularly for suspicious charges or fees. If you do spot fraud, contact your issuer immediately to dispute the transactions and to have the card replaced. Finally, if you have any reason to believe your personal information was compromised alongside your payment data, you should monitor your credit. A sudden drop in your credit scores is a sign your identity has been stolen. You can keep an eye on your credit by viewing your two free credit scores each month on Credit.com.

More on Credit Cards:

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Careful: 5 Credit Card Scams to Be Aware Of

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Identity thieves will do whatever it takes to swindle you out of your hard earned cash. But it doesn’t always stop there as credit cards are also a viable option.

In the past few years, we’ve watched as several big-box retailers, including Target and Home Depot, scrambled to make amends with customers who were affected by breaches to their payment processing systems.

Those stories were plastered all over the news, but we don’t see nearly as much coverage of the isolated incidents that cost consumers millions of dollars and sabotage their credit each day. 

Let’s take a closer look at some common credit card scams:

1. Fraud Alerts

Many credit card issues have fraud departments intact to monitor activity. So when you receive a call alerting you of an issue with your card, chances are you’ll be more than willing to do whatever it takes, including confirming personal information, to get the problem resolved. But proceed with caution as you may be at the hands of a fraudster.

A better option: call your card issuer directly to confirm an issue even exists and resolve it from there.

2. Skimming

This scam is the reason why I always try to use cash when dining out. It’s as simple as pie for perpetrators since all they have to do is swindle you out of your credit card and swipe it through a skimming machine to obtain all your account information. Once they’ve done so, new cards with your data can be created and used to fund a lavish dining experience, shopping spree, or whatever they choose to spend the money on.

3. Jury Duty

Have you been summoned to jury duty in the past? If so, you’ve received a court notice with instructions on the date, time and location to report. But what happens if you receive a call stating that you’ve missed an assignment and must confirm identifying information to avoid a trip to the slammer? If you’re wise, you’ll hang up the phone and give the court a call. Reasoning: fraudsters use this tactic to con you out of your social security number, address, date of birth, and other account information, creating the perfect opportunity to hijack your identity.

4. Chip Cards

Select credit card issuers recently welcomed the EMV credit cards to their arsenal. The deadline to switch was October 1, and fraudsters found a way to capitalize on the transition. How so? By contacting account holders via email and requesting that they confirm personal information in order for a new card to be issued.

5. Debt Consolidation

“For a low monthly fee, you can take care of all your credit card obligations and be debt-free in just a few short years. All you have to do is confirm your account information, make a one-time payment, and you’re all set.”

Wishful thinking. But unfortunately, scores of individuals succumb to this tactic out of sheer desperation and once they realize the alleged company is a scam, their deposit is already gone along with all their personal and account information.

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Are Chip Cards Exposing You to a Deeper Form of Identity Theft?

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U.S. consumers have finally been liberated from archaic technology that used to protect them and their credit cards from identity theft. Millions of Americans now have chip-enabled credit cards, and the results of this sweeping change are in.

An estimated 13 million consumers fell victim to identity theft fraud in 2015, according to Javelin Strategy and Research’s latest annual Identity Fraud Study. That represents a small (3%) increase over the firm’s 2014 findings, but a more serious type of ID theft — new account fraud — actually doubled last year. It’s too soon to know why exactly, said the folks at Javelin, but chip cards could be behind the shift.

A More Dangerous Kind of Fraud

“Fraud is changing in a way that makes it more dangerous,” said Al Pascual, director of fraud and security at Javelin. “There is some troubling news, but some good news, too.”

Chip credit and debit cards, also known as EMV cards, make creation of counterfeit credit cards nearly impossible for identity criminals. Fraud rings used to take stolen account data from big retailers like Target and print the account numbers onto fake credit cards for use by criminals. But that route is growing extinct as EMV use grows. So those criminals undertake other frauds, such as using stolen Social Security numbers to open up brand new credit cards in victims’ names.

“With the much-anticipated U.S. shift to EMV well underway, fraudsters are transitioning along with consumers,” the Javelin report said. “This drove a 113% increase in incidents of new account fraud, which now accounts for 20% of all fraud losses.”

New account fraud had declined for the past three years.

The results aren’t a big surprise; plenty of experts predicted that EMV wouldn’t end fraud, but rather shift it to other forms. It also doesn’t mean the shift to EMV was a mistake; it does mean that, as criminals move to other forms of crime, bankers and retailers have to react.

New Account Fraud Harder to Detect

In the meantime, there are new headaches for consumers. Detecting new account fraud and recovering from it is much more complex than disputing fraudulent charges on an existing card.

The Javelin report also found that victims of data breaches are now more likely to become victims of fraud than in the past. Last year, 1 out of 7 breach victims were hit by fraud; this year, the odds increased to 1 in 5.

Pascual said he wasn’t surprised by that finding because database thefts in 2015 often involved Social Security numbers and other personal information — think of the Anthem health care database theft — rather than merely credit card information, as in the Target and Home Depot thefts.

“We had been projecting this kind of change. But it was compounded by the fact that last year was a big year for theft of sensitive information. There were 64% more Social Security numbers exposed in 2015 than 2014,” he said.

Not surprisingly, victims of Social Security number data theft were dramatically more likely to suffer new account fraud — 4% of Social Security number theft victims versus 0.6% of the general public, Javelin said.

The news isn’t all bad. The overall amount of fraud continues to drop, from $23 billion in 2010 and $16 billion in 2014 to $15 billion last year. And the amount of existing card fraud dropped from $9 billion to $8 billion last year, the report said.

But in another shift expected by the financial industry, so-called “card-not-present fraud” — fraud where a physical card need not be presented, like online or telephone shopping — overtook point-of-sale fraud, Javelin said.

The banking industry isn’t sitting still. To combat increases in card-not-present fraud, merchants and banks are slowly turning toward digital token-based systems that would do for online transactions what chips do for in-person transactions.

But that shift is slow, so the usual advice to consumers is even more imperative this year: Check credit card statements every month for fraudulent charges, and check credit reports at least once each year for signs of new account fraud. You can get your credit reports for free at AnnualCreditReport.com and you can get your credit scores for free every month on Credit.com.

In the cat-and-mouse game played by thieves and the financial industry, things might get worse for consumers before they get better.

“Criminals have to find a way to get paid,” Pascal said.

The annual Javelin study of ID theft victims is in it 13th consecutive year. The firm surveyed 5,111 U.S. consumers in 2015 and has surveyed 64,000 respondents since 2003. The study is independent, the firm said, but funded by LifeLock Inc. 

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