Credit Card Fraud Really Isn’t Identity Theft
With the holiday shopping season and after holiday season sales over, it’s time to review our credit card statements and make sure that everything that is on there was something you purchased. With most of us using our card a lot more during this time, there’s more chance of fraud or identity theft.
When most of us think of identity theft and being a victim of identity theft, we are really referring to credit card fraud. This form of credit card fraud is called account takeover and it occurs when a thief gains access to your credit or debit card number through criminal hacking, dumpster diving, ATM skimming, or perhaps you simply hand it over when paying at a store or restaurant.
Another form of credit card fraud is called new account fraud. This occurs when someone gains access to your name, address and, in the US, your Social Security number. With this data, a thief can open a new account and have the card sent to a different address. This is true identity theft as the thief has access to your personally identifiable information.
Once the identity thief receives the new card, he or she maxes it out and doesn’t pay the bill. Over time, the creditors track you down, hold you accountable for the unpaid bills, and demand the owed funds. New account fraud destroys your credit and is a mess to clean up.
Victims of account takeover are likely to discover the fraud in numerous ways. They may notice suspicious charges on a credit card statement, or the credit card company may notice charges that seem unusual in the context of the victim’s established spending habits.
Credit card companies have anomaly detection software that monitors credit card transactions for red flags. For example, if you hand your credit card to a gas station attendant in Boston at noon, and then a card present purchase is made from a tiny village in Romania one hour later, a red flag is raised. Common sense says you can’t possibly get from Boston to Romania in one hour. The software knows this.
Victims of account takeover only wind up paying the fraudulent charges if they don’t detect and report the crime within 60 days. During that time, you are covered by a “zero liability policy,” which was invented by credit card companies to reduce fears of online fraud. Under this policy, the cardholder may be responsible for up to $50.00 in charges, but most banks extend the coverage to charges under $50.00.
After 60 days, though, you are out of luck. So pay attention to your statements. As long as you do, account takeover should not hurt you financially. Protecting yourself from account takeover credit card fraud is relatively easy. Simply make sure you pay attention to your statements every month and refute unauthorized charges for purchases you did not make.
Robert Siciliano is an Online Security Expert to McAfee. He is the author of 99 Things You Wish You Knew Before Your Mobile was Hacked! See him knock’em dead in this identity theft prevention video. Disclosures.