How Consumers Can Guard Against Credit Card Fraud
DON GONYEA, HOST:
The recent data security breach at Target got us thinking about the plastic cards we use to pay for so many things. Just how safe are they really? And how can we protect ourselves from fraudulent charges?
To get some advice, our colleague, David Greene, called Chi Chi Wu of the National Consumer Law Center, which recently put out an advisory to consumers.
DAVID GREENE, HOST:
So every time we use a credit card or debit card when we're shopping are we opening ourselves up to some kind of risk?
CHI CHI WU: You're opening yourself to some risk, but the risk is limited under federal law. For credit cards, the risk is limited to $50 if your card if your card or your card number is lost or stolen, and in some cases your liability is zero. It's a little different with debit cards, it's a little more complicated.
GREENE: And why is it debit card more risky and how much might I be out of if I'm using my debit card?
WU: If your card itself is lost or stolen, your liability is limited to $50 if you reported within two days. If you report it after that, your liability goes up to $500. And if you don't report the theft within 60 days after your statement is mailed, then your liability is unlimited. Now if your card is not lost or stolen, just the number - which was the case in this Target data breach, then your liability is zero if you catch the theft within 60 days of your statement being sent.
Now the problem with debit cards, while the problem is being resolved your added use of your money. And so during the meantime, if your balance is low, or if the thief cleans out your account, your other payments will start to bounce or overdraw the account and you may be charged overdraft fees, which can be very expensive.
GREENE: And is it a straightforward process if you go to your credit card company and notice that you've had an unauthorized charge and you want to get the money back? Or do the credit card companies give you a hard time and dispute it in some cases?
WU: It probably depends on the individual credit card company. Sometimes they do give consumers a hard time, especially if the unauthorized charge is from a family member or someone the person knows. Now, in the case of this Target security breach, because of the heightened awareness of what's gone on, their probably less like to give people trouble.
GREENE: And are there risks about your identity being stolen? I mean if we set the money aside. I mean I know a lot of customers who were part of this at Target were really worried that there might be some personal data stolen as well.
WU: The risk of what we call new account identity theft -in other words, the thief opening up a completely new credit card account in your name from a data breach like this is not that significant because the data that was stolen wasn't the key piece of information that a thief needs to commit new account identity theft, and that's your Social Security number.
Now if you're worried, there are some steps you can take.
GREENE: What are they?
WU: You can order your credit report for free. Make sure to use the official source, which is AnnualCreditReport.com. Don't use these other sources because you may end up signing up for a paid credit monitoring service and that's going to cost you money.
GREENE: It sounds like the biggest risk of someone actually taking information and going and setting up new accounts; that was not a risk in the case of Target. When is the risk? Where are those kinds of situations that we can try and avoid?
WU: There are only limited steps you can take to prevent new account identity theft.
WU: You know, when you get promotional credit card offers, make sure to shred the applications so nobody can use it. Make sure you're getting your statement. Check your credit report. And if you're really, really worried about new account identity theft, put a security freeze on your credit report. This is something provided nationwide. You can basically lock down or freeze access to your credit report to new creditors, so that when a thief tries to apply for credit in your name they won't be able to. It does take some extra steps when you have a security freeze. When you open a new account you're going to have to thaw it. But if you're really worried, you know, that's probably the best protection against new account identity theft - a security freeze.
GREENE: Chi Chi Wu is an attorney with the National Consumer Law Center. Chi Chi, thanks so much for joining us
WU: Thank you, David.
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