I want you to do something for me. Take a minute to make a mental list of all the places (websites included) where you’ve used your credit or debit card this past week. Did you link your card to any personal finance apps? Did you hand it to a server at a restaurant? Did you use your card to buy gas? Not to freak you out or anything, but each of those situations opened you up to credit card fraud.
Scams and data breaches are so prevalent that there’s a pretty high chance that you’ve already been a victim of one of them. Even companies who should be safe, like Equifax, can have holes in their systems that leave you open to fraud.
The good news? It’s now easier than ever to spot, report, and fix credit card fraud.
What is credit card fraud?
If someone gains access to your credit or debit card number to make a purchase you haven’t authorized, that is fraud plain and simple. It could happen after losing your wallet, after a thief skims your card at a restaurant or gas station, or if there was a major security breach at a company you use.
One of the scariest things about major security breaches is that most of these companies hold a significant amount of your personal information, beyond just credit card numbers. Fortunately, many companies are offering more complex encryption software and using read-only files to prevent fraud.
Also, now that many of us have EMV chips embedded in our credit and debit cards, it’s become more difficult to create cards with stolen numbers, but you may still be at risk if you lose your card or it’s stolen. The other thing is that EMV chips haven’t combatted how your card information is accessed online by thieves.
How to prevent credit card fraud
If your card is stolen or if you know that a breach has happened at a company or store you use, there are some steps you can take to protect yourself. In fact, these are all things you should be doing on a regular basis anyway – they can help protect you even before you’re aware your information has been stolen.
To prevent credit card fraud, you should:
- Closely monitor your transactions. Whether you get online or paper statements, it’s important that you regularly check them to make sure each transaction was correct and authorized by you.
- Check your credit report. Many of us already do this to see what our credit score is, but regularly checking your credit report will keep you aware of any new accounts that are opened in your name. This can protect you from identity theft. (BTW, that credit score link is 100% legit and free. It’s where the FTC sends you for a copy of your credit report.)
- Only carry the cards you need. If you’re like me and have several credit cards, you’re likely not using all of them on a regular basis. Keep the ones you aren’t using in a safe place at home to limit your risk of losing or having every one of your cards stolen.
- Only shop online at reputable websites. You’ll want to know a website has security systems in place to protect their customers. I’d also avoid online purchases if a website looks scammy or doesn’t have “https” at the beginning of the URL.
How to report credit card fraud and what to do next
If you notice fraudulent credit card activity, here are the steps you should take next:
- Immediately contact your bank or credit card company. The Fair Credit Billing Act states that you are only responsible for up to $50 of fraudulent charges, but many companies also offer zero-liability policies that mean you aren’t responsible for any fraudulent charges at all.
- Change your online passwords and pin numbers. This will prevent future fraudulent activity, but it’s also a good idea to regularly change your passwords as a preventative measure.
- Keep monitoring your accounts. Continuing to monitor your account activity will keep you aware of new fraudulent charges, and it will help you when you aren’t sure how your information was compromised.
- Check your bank statements. Because knowing the scope of fraud isn’t always obvious, regularly checking your bank statements will help protect all of your accounts.
- Add a fraud alert to your credit report. Most credit reporting agencies will let you create fraud alerts to prevent future fraud.
- Consider freezing your credit report. Placing a freeze on your account will protect you from new accounts being opened in your name, but you’ll still want to keep a close eye on your open accounts.
The big bummer about credit card and identity theft is that it can continue happening even after you think you’ve addressed the issue. I remember hearing from family and friends after the big Target breach in 2013 that they continued to see fraudulent activity after they first reported it. If you are keeping an eye on your transactions, statements, and credit reports, fraud will get easier to spot and fix.
What about credit card fraud and personal finance apps?
I’m a big proponent of using personal finance apps to help you manage your money, but with how vulnerable we are to credit card fraud, you might be wondering if these apps are safe to use in the first place.
The thing is, using these apps is going to be pretty similar to giving your information to any other reputable website or app – all of them are working as hard as they can to protect your information. But to know you’re making a good choice by using these apps, here are some things to consider:
- Look for apps that use end-to-end encryption. This is one way these apps protect your information. Personal Capital, for example, says their “data is encrypted with AES-356 with multi-layer key management, including rotating user-specific keys and salts.” You can read my full Personal Capital review here.
- Look for two-step authentication. Apps like PocketGuard ask you to enter a password and pin to help protect your information.
- Most of these apps are read-only. This means that even in the event of a security breach, a hacker could only see the amount of money you have in the bank, losing the ability to move money out of your accounts or to see your full account numbers.
- Set up credit card alerts. Some personal finance apps will let you set alerts for different types of transactions. You can also set alerts with your credit card companies to add extra protection.
- Keep your phone and laptop secure. Protecting your phone and laptop with strong passwords is one step you can take, but you shouldn’t just leave them around. They’re valuable pieces of technology with valuable information inside.
Weigh the pros of using the app up against the risk of credit card fraud
The point of using personal finance tools and budgeting apps is that they will help you become a better money manager. They can help you gain control of your debt, save more money, and work towards larger finance goals. These are all noble uses, and while you don’t need to use apps to help you, they do make it considerably easier.
We can’t protect ourselves from everything, and even the things we know are good or helpful can come with some risks. Fortunately, now you’ve read how to protect yourself against fraud and know how to report it.
Personally, I’m going to keep using apps like Personal Capital and Mint to keep my wife and me in the know about our finances. We also use LifeLock for extra protection.
Questions for you:
If you’ve been a victim of credit card fraud, what did you do?
What do you think about fraud and personal finance apps?
I got my first credit card at 18 years old through a program at my Credit Union to build credit for teenagers. I used it to buy a PS3 map pack for Call of Duty on the Playstation Store. Then the Playstation store got hacked in 2011 and they got my credit card number. A few months later, I got a call from my Credit Union asking if I just bought a tank of gas in some town in Saudi Arabia. I told them no, and they asked where my card was. I said it was in my hand. And they said they assumed that was the case and they already cancelled my account and had a new card on the way. Thankfully that card only had a $300 limit so they didn’t get off with much. But thanks to that level of protection, they didn’t get access to my Debit card, which would have wiped out my entire (3 years of working) short life’s savings! I now always buy things with Credit Cards just for that protection.
Another save from credit cards was when I received a phone call from a travel agency saying I won 2 free vacations from a festival I just attended. I got really excited, but it seemed to good to be true. So as they were talking the trips up my girlfriend googled the company, and their website was sketchy at best. Unfortunately, she found their website just after I gave my credit card number. So right after I hung up the phone, I called my credit card company and explained what happened. They actually did a 3-way call to the travel company and forced them to undo the transaction. It was pretty awesome! Although, a week later I went back to the place that I “won” the trips and it turns out the company is legit so I called them back and they actually gave me 6 free trips. I’m planning to see if they’re real in April. Their website looks significantly better than it did before, I think we jumped the gun a bit. Still, credit card companies really do take care of their customers!
sounds like a timeshare to me