With thieves being so creative with their tactics, it is difficult to figure out what is identity theft and what is mere fraud. For instance, if someone takes your credit card, there are several ways they can use your number to hurt you. However, identity theft may not be one of them.
Here’s the difference between the two:
Identity theft is when someone has taken your information—such as your social security number, your address and phone number or other information—and opened lines of credit in your name, such as credit card or bank accounts, mortgages or loans. They may buy a car, clothes, jewelry or other items, run up the bill and disappear, leaving the resulting mess with you.
The challenge for you is to detect the theft in the first place. An identity thief can use your credit for a long time before you realize it. Once they run up the bills to a certain point you will start getting mysterious collection calls, unless they changed your phone number on the offending accounts.
The other way you will find out is when you go to make a major purchase or ask for a loan and they look at your credit report. Instead of finding stellar credit, you will be denied because of all the unpaid bills. This is even muddy today, because of the current credit crunch—you may think you’ve been denied credit simply because the banks aren’t in a lending mood!
Credit Card Fraud
Credit card fraud is a much larger problem, both for both businesses and consumers. It is simply the theft of your card or your number to make purchases. In the United States, fraudulent credit cards were responsible for $3.6 billion worth of online transactions with North American merchants in 2008, according to Javelin Strategy & Research. That’s just online sales!
However, credit card fraud is much easier to detect because you will quickly realize when your card has been stolen. If your number but not your card has been stolen, the fraud will be discovered when the merchant can not collect payment, or if your credit card bill is much higher than you thought. In either case, contact the credit card company immediately. By law, you are only responsible for up to $50 of fraudulent purchases on a stolen card.
How to Avoid Credit Card Fraud
Identity theft and fraud are difficult to stop all together, but you can protect yourself with a few diligent moves. To avoid identity theft, keep close tabs on your credit reports. This is the best way to see whether there are fraudulent charges in your name.
To protect your credit card information, it is best to know the several tactics thieves use to steal your information in the first place:
Skimming – A dishonest employee may copy credit card receipts, or scan your card through an electronic device that stores hundreds of numbers and is later retrieved by the thief. A new generation of credit cards with microchips are designed to prevent the “skimming” of information from the magnetic stripe on the back of the card.
Shoulder surfing – More common with debit cards, a thief may look over your shoulder to memorize your PIN number. As credit cards become more like debit cards, (in that signatures are being replaced by PIN numbers), this becomes more of a concern. Use your hand to cover the other while inputting your PIN, and make sure nobody is taking special interest in you.
Phishing and Pharming – These strange-sounding names use tactics from simplistic to dangerously advanced. Phishing is when you receive an email from a company posing as your bank or credit card, and includes a legitimate-looking link asking you to click to enter your personal information—either because you need to “check to see if your account was compromised”, or that “your account was closed pending further investigation”. Basically, the thief is trying to find a way for you to panic and click the link.
Pharming is the fake website behind the link where you enter your personal information. If you go through with this, you have just given the thief all the information they need to commit a crime using your name.
There are a variety of ways to prevent being lured into this scheme—first, realize that your bank or credit card company would never send you emails like this—they have all your information on record, so why would they ask for it? Secondly, you can easily spot a fake address by placing your mouse over the link and checking the bottom left of your email program. The real link will appear there. Better yet, if in doubt, simply close the email and hand-type the company address into your browser.
Your mailbox – A surprisingly low-tech and still very effective method, a thief simply steals your mail. They can then apply for any pre-approved credit card offers you receive, changing the address so you never realize that such a card exists in your name. A thief can also steal your credit card statements and use this information to copy your number or cover up any unusual expenses if they have already stolen your card. Combined with other mail, they can find your birth date and other information to successfully pose as you.
The best way to stop this is by using a secure locking mailbox. This serves as a great deterrent, as a thief scanning your neighborhood will not bother to spend the effort trying to break into your mail if there are so many easier targets nearby.
Credit card fraud is a huge problem simply because it is so easy to commit. By following some preventative measures, you can greatly reduce your chances of being a victim of identity theft, and help be part of the solution for reducing credit card fraud.