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Robert Siciliano Identity Theft Expert
Credit card fraud comes in two different flavors: account takeover
and new account fraud. Account takeover occurs when the identity 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. Technically, account takeover is the most prevalent form of
identity theft. I’ve always viewed it as simple credit card fraud,
rather than “identity theft” in its truest sense.
New account fraud, as it relates to credit cards, occurs when
someone gains access to your personal identifying information,
including your name, address and, most importantly, 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.
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 down the
victim, blame him or her for the unpaid bills, and demand the owed
funds. New account fraud destroys the victim’s 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. A 6o
day window covers two billing cycles, which should be enough for most
account-conscious consumers who keep an eye on their spending. 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.
But new account fraud is another story entirely - one that can and
will hurt you if you don’t protect yourself. You may not be held
financially responsible for the charges themselves, but you will pay in
time, and time is money. In some cases you may pay lawyers or private
investigators, or you may need to take time off from work, depending on
how dire your credit situation becomes. Identity theft victims have
been denied credit due to the unpaid debts in their names, and have
missed opportunities to purchase homes as a result.
Protecting yourself from account takeover is relatively easy. Simply
pay attention to your statements every month and refute unauthorized
charges immediately. I check my charges online once every two weeks. If
I’m traveling extensively, especially out of the country, I let the
credit card company know ahead of time, so they won’t shut down my card
while I’m on the road.
Protecting yourself from new account fraud requires more effort. You
can attempt to protect your own identity, by getting yourself a credit freeze, or setting up your own fraud alerts. There are pros and cons to each. You
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Robert Siciliano Identity Theft Speaker discussing identity theft hackers