When your personal information like your credit card data is obtained by someone and used to commit fraud or other crimes, identity theft occurs. The FTC estimates that every year, more than 9 million are exposed to identity theft.
There has been a build up of hysteria around identity theft as a result of so much attention by the media to data breaches. The truth is, every year identity theft really only affects a thin slice of the population in the USA – around 3 percent to be exact. According to FTC data, credit-card fraud makes up about one quarter of these cases, which aren’t full-blown identity theft.
In response to the concern over identity theft, many companies and financial institutions have brought various products that monitor your credit, guard your identity, and reimburse you for lost wages/funds. But prior to investigating the services that are offered, give these free, common sense measures to protect yourself against identity theft and fraud.
#1 Monitor your bank & credit card statements
Regularly check your accounts so you will know if anything is wrong. Any purchases you did not make should be clear.
#2 Guard your information online
These days, many of us do most of our shopping and banking online. With so many account numbers and passwords floating around, it’s easy for someone to steal your information and then go on a shopping binge. To reduce your risk:
- Clear your logins and passwords regularly. Change your passwords monthly. If you are using a public computer this is especially important.
- Pay for online purchases using your credit card, which offers better protection under federal law than your debit card or online payment services offers.
- Watch for phishing, which is a trick where pop ups or spam mimic legitimate businesses but especially banks to get your personal information, which are used to access your accounts. Always verify that you are on the legitimate website with security controls before you enter your personal data.
#3 Shred sensitive documents
Buy a shredder and then shred outdated bank statements, credit card applications, bills, and anything with your personal information regularly before you put it in the trash or recycle it. Don’t forget junk mail, which can contain your personal information.
#4 Monitor your credit report
The law ensures you are entitled to a free credit report annually from each of the three bureaus: TransUnion, Equifax, and Experian. Every four months you can request one rotating through the three credit bureaus. Carefully look over your report for any abnormal activity like credit cards you did not open.
#5 Decide between your bank and a dedicated identity theft protection firm
Today most banks offer customers daily credit checks that will warn them if there is any fishy activity going on with their accounts. However, be careful of these kinds of insurance as these policies can be filled with all kinds of exclusions that could actually stop you from being able to collect in the event of theft.
There are also specialty companies such offering a mix of preventive and reactive tools designed to help you protect your identity and credit, with the most common being credit freezes and fraud alerts.
If you detect fraudulent activity, first inform the financial institution where the fraudulent activity happened so they can freeze the account. While it depends on the situation, you may have to file a FTC complaint as well as file with your local police department.
Still looking for more? Feel free to check out our comprehensive personal finance guide to learn more about managing your budget and staying financially healthy.