Don’t start 2012 as the victim of identity theft.
It’s a $37 billion crime that affects 1 in 25 Americans, with the average victim suffering $631 in out-of-pocket costs, reports Javelin Strategy & Research. Identity theft and fraud has become more difficult to detect and resolve in recent years, resulting in even higher consumer costs.
Your bank account isn’t the only casualty of identity theft and fraud; time is another significant cost. The average identity fraud case will cost a consumer 33 hours to resolve—equivalent to more than four work days.
Whether or not you think you are susceptible, it takes just a few easy entry points for thieves to discover your personal information and abuse it at your expense. If you use mobile banking, social networking sites (such as Facebook, Twitter or LinkedIn), shop online, access Wi-Fi in public areas, discard sensitive documents like bill statements without using a paper shredder, pay your bills via traditional mail, or hand off your credit card at a restaurant, you’re already at high risk of identity theft. While that sounds extreme, it’s the reality of how vulnerable we are as consumers.
Don’t wait until you’re a victim to take action against identity theft and fraud. You can protect your finances and quality of life this year by taking the following key steps.
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1) Get credit monitoring. According to Javelin, consumers opening new financial accounts in 2012 may be responsible for nearly half of the total cost of identity fraud. This is primarily due to the fact that new accounts take longer to detect, which leads to higher consumer costs than other types of fraud.
How: The old way of checking your credit was to manually pull your credit report, which you can do for free through AnnualCreditReport.com. The new way is to use a credit monitoring service that automatically reviews your credit report on a daily basis to monitor for any changes. The longer identity theft and fraud goes undetected, the more time and money you'll suffer trying to resolve your case; detecting suspicious activity or fraudulent accounts as soon as possible allows you report these red flags immediately and cut your losses. The three major credit bureaus offer credit monitoring services that range from $120 to $180 a year. For a hassle-free, no-cost alternative, CreditKarma.com recently launched a new, free credit monitoring service that monitors your credit report on a daily basis and notifies you via email if a significant change is detected. Credit monitoring is one of the best safeguards against identity theft and fraud, and for the first time, it's totally free.
2) Switch to a smart card. While most credit cards and some debit cards offer zero liability fraud protection, identity fraud will still cost consumers an average out-of-pocket cost of $631 and 33 hours to resolve. A better measure than protection after fraud occurs is to prevent fraud in the first place with a more secure payment method. New “smart cards”, credit cards embedded with EMV microchip technology, have stronger fraud protection than traditional magnetic strip credit cards. Smart cards require the cardholder’s unique PIN—rather than, say, an easy-to-forge signature—to use it, and the encrypted microchip makes it much more difficult to counterfeit.
How: The U.S is slow to adopt smart cards, which are already the fast-growing payment standard in Europe, because of the high cost to upgrade merchant card terminals to accept the new technology. However, major credit card issuers are slowly making the switch by pushing merchants to support smart cards in 2012. WellsFargo, Chase, U.S. Bank, and several credit unions partnered with Fiserv have already begun introducing smart cards with dual features of both the EMV microchip and the traditional magnetic strip. Inquire at your bank or issuer if they offer cards with an EMV chip; the more consumers request it, the more pressure it puts on financial institutions to meet the demand for new technology.
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3) Lock down your smartphone. Your phone is essentially a one-stop shop for your data and, if stolen or exposed to thieves, can compromise your identity and financial accounts. Even if you don’t use mobile banking or financial apps, your phone could store sensitive data from online shopping, social networking and more. An unsecured phone poses a major security risk that is vulnerable everywhere you go.
How: Here’s a quick five minute checklist of how to protect your data from identity thieves by securing your mobile phone:
Password-protect your phone with a complex and unique password, and set your phone to auto-lock. Also, make sure any mobile banking or financial apps have passwords that are not auto-saved on your phone.
Enable a service with remote tracking, and in the event your phone is stolen will remotely lock your phone and erase its data. You can also set your phone to automatically wipe your data if your phone password is inputted incorrectly several times.
Turn Bluetooth off if you’re not using it. Thieves can pair their Bluetooth device with yours and hack personal information.
Be careful on Wi-Fi networks, another channel for thieves to remotely access your data undetected. Only connect your phone to secure networks with passwords.
Before downloading any apps to your phone, always do a quick search to make sure it comes from a legitimate site or publisher. Check user reviews on sites like appWatchdog for any complaints.
In the worst case scenario that you suspect you may be a victim of identity theft and fraud, follow the Department of Homeland Security's steps of what to do if your personal information is compromised.
Remember that your financial accounts, mobile phone and credit cards don’t have built-in protections to keep you and your identity safe. It’s up to you to take these three key steps to protect your identity in 2012.
Justine Rivero is the Credit Advisor for CreditKarma.com, a free credit management website that helps nearly 3.5 million consumers access their truly free credit score and free credit monitoring.
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