Despite stability in the number of victims and losses last year, the ways that credit card fraud occurs have changed. With the switch to chip-enabled EMV cards in 2015, identity thieves are moving from cloning counterfeits of that existing plastic and, instead, are focusing on opening new fraudulent accounts with stolen Social Security numbers and other sensitive data.
In its 2016 Identity Fraud Study, Javelin Strategy & Research reports that new-account fraud more than doubled in 2015 from the previous year — and with that 113 percent increase, it now accounts for one-fifth of all fraud losses. Meanwhile, using stolen credit card numbers on counterfeit clones for in-store shopping dropped by 4 percent but increased by 5 percent for fraudulent online purchases.
Other trends worth noting from Javelin’s analysis, based on a survey of more than 5,000 consumers:
- More victims, fewer losses. More than 13 million Americans fell victim to identity fraud last year; that’s up 3 percent from 2014 and the second highest number in the past six years. But losses decreased by 6 percent to $15 billion, the lowest amount since 2010. Overall, identity thieves have stolen $112 billion in the past six years — roughly $35,600 per minute, or enough to pay for four years of college in just four minutes.
- Hacked here, used abroad. About 18 percent of identity fraud involves using stolen U.S. credit cards outside our borders. That amounts to $2.4 billion, with an average of $1,585 per incident. Because of government-mandated protections and zero percent liability policies offered by most providers, credit card companies, not their customers, typically eat those costs. Issuers are estimated to proactively detect two-thirds of these cases, according to Javelin.
- You may be your worst enemy. Consumers who say they don’t trust their financial institutions fare worse: Their stolen information is used 75 percent longer by fraudsters, with expenses averaging 185 percent higher than those of customers who use services such as transaction monitoring and alerts, credit freezes and black-market monitoring.
How to protect yourself
1. Get a credit freeze. Once enacted, a credit (also known as a security) freeze restricts access to your credit report, which creditors check before issuing new financial or service accounts in your name. Without seeing your report, creditors won’t approve accounts to ID thieves posing as you. A freeze must be placed with each of the three major credit-reporting bureaus — typically free for those 65 and older (state laws vary) — and can be unthawed when you are legitimately applying for credit.
2. Secure mobile devices. If your financial life is on a smartphone or tablet, apply software updates that patch known vulnerabilities as soon as they become available. Use security features built into Android and iOS devices, such as passcode or biometric (fingerprint) protection, and programs that encrypt data and remotely wipe contents if the device is lost or stolen.
3. Use strong passwords. They “remain the de facto first line of defense for most online accounts, which has motivated criminals to compromise them whenever possible,” Javelin notes. Using a password manager is a convenient way to maintain good password practices without resorting to writing these codes down, which could also place them at risk of physical compromise.
4. Sign up for account alerts. Offered by banks, credit card issuers and brokerages, these free notifications, via email or text message, provide you with real-time alerts of suspicious activity. When fraud occurs, contact the account issuer immediately.
5. Take data breach notifications seriously. One in 5 data-breach victims suffered fraud in 2015, up from 1 in 7 in 2014. While data breaches at retailers remain an issue, the biggest jump in breaches was at government agencies and health care organizations, with a 64 percent rise in exposure of SSNs.
For information about other scams, sign up for the Fraud Watch Network. You’ll receive free email alerts with tips and resources to help you spot and avoid identity theft and fraud, and gain access to a network of experts, law enforcement and people in your community who will keep you up to date on the latest scams in your area.
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