As evidenced by the Equifax data breach, the credit industry is having quite a time keeping people’s personal information safe.
Sonic Drive-In acknowledged just this week that its credit card customers may have been affected by a security incident after the company was alerted to “unusual activity” by one of its card processors.
One of the problems with the industry is that criminals have been able to access credit card numbers by exploiting vulnerabilities in the computer systems of merchants. In the case of Equifax, criminals hacked into a website application and gained access to “certain files,” such as Social Security numbers, addresses and names.
So what’s a consumer to do? When you swipe your card (or insert its chip) at an establishment you’d like to think that it’s protected with the full might and protections of the law. But what we’re seeing now is that, unfortunately, that’s not always the case. It may be time to think about putting away that physical credit card.
More merchants these days are doing transactions involving virtual credit cards, in a clear sign that the industry is trying to be proactive about the dangers of identity fraud.
Here’s how a virtual credit card works
Here’s how a virtual credit card works:
Consumer sign up for and receive a virtual credit card online. The card features a 16-digit number ,just like your physical card. The difference is the virtual number will expire on a date of your (or the issuing company’s) choosing. You can also elect to have a virtual card for a specific merchant or store, eliminating the risk that it could be used at other businesses.
A new report on Credit.com says that consumers who use virtual cards are generally protected from the same dangers and responsible for the same liabilities of a physical card holder. Purchases done via virtual credit cards may appear on your billing statement right alongside charges you made with your physical card. In other cases, the charges may appear separately, depending on the bank.
Here are some places that offer virtual cards:
Citibank has a service that provides virtual 16-digit account numbers. The company says that when shopping online or by mail order, you can use a randomly generated Citi card “Virtual Account Number” instead of your real account number. Click Enroll in/Get to sign up to use a Virtual Account Number.
Bank of America
Through its SafeShop brand, Bank of America allows customers to generate a temporary credit card number that links to your real credit card account number. Throughout the process, your card number remains private and protected, the company says.
To access the ShopSafe service, sign in to Online Banking and enter your spending limits and the ShopSafe service will automatically generate a temporary 16-digit account number, with a security code and expiration date.
Although major banking institutions have fiddled with the concept for years, in 2016 a tech start-up called Privacy introduced a virtual debit card that produces a 16-digit “burner” number for online purchases. The free service is designed to buoy consumer confidence because it never allows the chance for your real credit card number to get out there on the web.
Privacy has agreements with several big banking institutions, including Bank of America, Citibank, Chase and Wells Fargo. It is also available as an IOS app and via Google Chrome browser extension.
What makes Privacy pretty cool is that it works with subscriptions. And at a time when companies require you to jump through hoops to unsubscribe, including calling customer service and waiting long periods in many cases, with Privacy all you have to do is cancel the virtual card and – boom – payments stop.
Consumers can use any billing address, so there’s no way to trace the card back to your residence. Of course, the virtual card will be connected to your bank account to withdraw funds that you purchase.
There are also smaller companies that also offer virtual cards. One of them is called Final. The company says on its website: “With Final, you can generate virtual cards from your phone with the push of a button. Those virtual cards can be turned on or off in real time.”
Final CEO Aaron Frank told TechCrunch last year during the company’s public inception: “We chose to do the hard thing — build a consumer brand and behind it, a full-stack issuing company, from scratch.”
Another company is GlobalVCard, which is headquartered in Bonita Springs, Fla., but has offices in New York, Dallas and Toronto. The company offers virtual and electronic card payments catering to business travelers.
Of course, no matter how many safeguards you put in place, it’s always a good practice to monitor your credit card statements for fraudulent activity.
Protect yourself from identity fraud by doing these 2 things
All of that being said, money expert Clark Howard says there are two things you need to do right now to protect your credit: First, sign up for free credit monitoring at CreditKarma.com and, secondly, freeze your credit. Clark advises that this two-step process, in that order, be followed in the aftermath of the Equifax data breach.
In addition to free credit monitoring, Credit Karma offers a number of financial services aimed at protecting your data and making you a more informed user of credit. Another plus for users is that Credit Karma allows consumers to check their credit free of charge as many times as they would like. Other companies generally require a fee and/or block you from more than one inquiry a year.