We have new security features on our credit cards, but are they actually working? And what can we do to better protect ourselves if they’re not?
Credit card fraud still a major problem in the U.S.
First things first: Yes, the chip embedded in your card is helping to reduce fraud — sort of!
The average card fraud incidence in 2016 was $961, down a whopping 30% from just four years ago. That’s according to a new report from research firm Javelin and identity protection company LifeLock.
But even still, more than 15 million Americans fell victim to identity fraud last year at a cost of $16 billion in losses. That’s up 18% year over year and the highest its ever been since Javelin started keeping track 14 years ago.
Here are some of the biggest dangers…
New account fraud
New account fraud is when a criminal opens a new line of credit in your name as if they were you, but they do it without your knowledge. This kind of crime skyrocketed by 40% year over year.
Fortunately, there’s a simple solution to this particular problem: Doing a credit freeze. Credit freezes are one of the most effective tools against identity theft available to consumers.
A credit freeze allows you to seal your credit reports with a personal identification number (PIN) that only you know. With that PIN, you can temporarily ‘thaw’ your credit so that legitimate applications for credit and services can be processed. That added layer of security means thieves can’t establish new credit in your name even if they are able to obtain all your other info.
Continuing to be a problem are all the fraudulent online purchases that result when criminals make counterfeit cards to use after they’ve stolen your information. This is also called ‘card-not-present’ fraud.
For this problem, there’s no easy solution because the chips we all have in our newer credit cards are not useful for thwarting online criminals.
In order to stem the tide, you’ll probably have to do what Clark recommended this past holiday season: Using only one card for all online shopping.
By doing this, you can closely monitor your transactions when you check your bank statements daily.
Make sure the card you use is not your main card. That way, if it is shut down at least you won’t be stuck without the card you use to make your most important transactions.
One final tip: When shopping in stores, be sure you’re inserting your card into chip-enabled terminals. Unfortunately, more than 60% of stores still only accept the magnetic strip cards, according to Javelin/LifeLock. If that’s the case where you’re shopping, consider paying cash to limit your risk.