Both credit card fraud and identity theft occur far too regularly. Sometimes the two get confused or conflated. However, while credit card fraud is a form of identity theft, true identity theft is far more serious. Learn how to tell the two apart and how to monitor for and handle each.
Credit (debit) card fraud occurs when someone steals and uses the information of a particular credit (or debit) card. Often these are just snatch-use-ditch affairs, where the thief will continue to use the card as long as possible and then ditches it. And it’s not only your physical card you have to watch out for. If your card # and information are stolen, the thief may attempt purchases online. The card can be in your wallet and still stolen.
Financial identity theft is a more serious crime of longer duration when someone financially impersonates you. You may not know about it for years until the person defaults on debts. In some well-publicized cases, identities were stolen by family members who were only caught once they stopped paying off the debt.
Identity thieves may access your bank or credit accounts, but they’re as likely to open new accounts using your name and social security number. It’s a more profitable strategem, since you can open a new credit card account under a person’s name, max out the card, and then default—leaving the victim holding the bag.
Monitoring for Credit Card Fraud
Obviously when your wallet has been stolen, you know that your cards have been compromised. But what about cybercrime? Entering your credit card information on the wrong site hands over everything that a thief needs in order to start making purchases on the account. An unscrupulous salesperson/waiter or an ATM with a skimmer can also steal your information.
Even if you don’t use a card or account, it’s a good idea to monitor your account by logging in at least once a month. Some people pick a day of the week to do a quick scan over their accounts. Before paying a credit card bill, check the charges on the statement.
You credit card company or bank may also notify you if they think your card is being used fraudulently. If you use your card in Delaware one day and Michigan the next, they may put a temporary hold on it and ask for verification. If you plan to be traveling, especially to another country, call your financial institutions and let them know ahead of time to save hassle.
Monitoring for Identity Theft
There are a number of services that will help you monitor for identity theft. You can monitor yourself by checking your credit reports. Each year, you’re allowed to get one free credit report from each of the three big bureaus. You can request these reports through annualcreditreport.com (the official site). Many people get one report every four months so they can keep an eye on things throughout the year.
If you’re particularly worried about identity theft, you can also request that security freezes be places on your account. While there is a cost associated with putting a security freeze on your account, in most cases it’s $5-$10 per credit bureau (if you’ve been a victim of identity theft, it’s free in most cases). You can find details on a state-by-state basis here.
After placing a freeze, you have to pay again to have it lifted. You can have it lifted for a particular date range (say one in which you plan to apply for a mortgage), or a particular lender (if you know who you’re applying with and want to be extra careful), or just have it permanently lifted.
After Credit Card Theft
When a credit/debit card or cards have been stolen, act quickly. Call your companies, debit & credit right away, report any fraudulent purchases, and ask that the cards be cancelled and reissued. If the cards are physically gone, you’ll have to get them reissued anyway.
But report as soon as you know the wallet is gone (or within a reasonable time-frame). If you wait too long to report a theft but know it happened, the credit card company may not reimburse you for the charges. After all, you didn’t make an effort to keep new charges from being made. However, if you report it shortly after discovering the problem, you should not be liable for the fraudulent charges (check with your company if you want to be sure).
After Identity Theft
When someone steals your identity, you need to do more than contact your own credit card companies and bank, though it’s a good place to start. Next, contact the three credit bureaus, Experian, Equifax, and TransUnion (links go directly to the pages with info on reporting fraud).
There are two kinds of fraud alerts you can have placed. The first, a 90-day alert, is easy to get set up and will alert lenders that you think your identity has been stolen. When someone tries to open a new account using your identity, they’ll have to take extra steps to prove they’re you. From Equifax’s site:
An initial 90 day fraud alert indicates to anyone requesting your credit file that you suspect you are a victim of fraud. When you or someone else attempts to open a credit account in your name, increase the credit limit on an existing account, or obtain a new card on an existing account, the lender should takes steps to verify that you have authorized the request. If the creditor cannot verify this, the request should not be satisfied. You may also request one additional free credit file disclosure.
The second kind of fraud alert lasts a full seven years. To get a seven-year alert, you’ll need a copy of a police report showing you’ve been a victim of identity theft. It includes a specific phone number which all potential lenders will have to call in order to verify your identity when you open a new account.
You can also place a security freeze on your accounts if you’re not planning to open any kind of credit in the future—or place the freeze and request temporary lifts when you’re trying to open new credit accounts. The cost of a security freeze varies state-to-state, but in many places you’re eligible for a free freeze if your identity has been stolen and you have a police report.
What steps do you take to monitor your credit cards and identity? Do you use a paid service or do it yourself?
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Excellent point.
The simple card theft seems to be going into the identity theft data/stats and making that issue seem larger than life.
I’ve had my CC number lifted, and the hassle was all of 15 minutes. True identity theft can ruin weeks of your time.
Great article. One of my big peeves is how much even professionals and, especially, journalist confused these two. Federal law limits your loss to $50 per card even if you don’t immediately report it. Major card companies, as a matter of competitive policy to keep customers, don’t even make you pay that $50. Check with your card company because policies and conditions do vary. So if your card is lost or stolen, you are out at most $50 per card and the time lost waiting for the replacement card during which you can’t use that card. All of this about little or no cost assumes you verify your charges on your bill because if you don’t report a charge as fraudulent, the card company isn’t likely to give you credit on it.
But identity theft may cost your weeks or more likely years of grief. It will ruin your credit rating. You will be unable to get a mortgage for a house or a loan for a car until it is cleared up. You will have no creditworthiness. It is the same boat as people who have misused their own credit into the trash except you won’t have the sad consolation that you did it to yourself. It will be all someone else’s doing and you pay the price.
Thanks for making the distinctions so clear and reducing the confusion on this important subject.
I haven’t had to deal with this… yet (knock on wood), but wasn’t aware of the steps needed to take for identity theft, so thanks for the advice. At the moment I only get my credit report once a year and am super cautious when using my credit card.
Oooo, oooo, I know, I know!
ID theft is when a family member knows your SSN and date of birth and you happen to have the same last name and same first two initials and he gets 2 Visa cards and an American Express in your name and charges up thousands of dollars and then, when you catch him and press charges, he calls you and blames you for his poor decision making (from childhood) and says THAT is what made him do it.
True story. It happened to me.
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