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Concerned about Identity Theft? You Should Be

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May 6, 2015
Identity theft is increasingly common. Learn to protect yourself

It has become a matter of when, not if, your identity will be breached, experts say. But there are steps you can take to better protect yourself.

Identity theft topped the Federal Trade Commission’s national ranking of consumer complaints in 2014 for the 15th straight year, according to the FTC. At the same time, the agency has seen an alarming surge in so-called “imposter” scams, in which con artists impersonate government officials or others.

“While identity theft remains a huge issue, consumers should also keep a close eye out for imposter scams,” says Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Whether it’s pretending to be the IRS during tax season or making false promises of a lottery win, scammers are increasingly sophisticated in their efforts to deceive consumers.”

Protecting your personal financial information isn't as easy as flipping on the home security alarm and bolting the front door on your way out. Here’s what you should be thinking about:

Not all plastic is created equal. When choosing between debit and credit, there are pros and cons to each. For the budget-conscious, debit cards can help prevent overspending, while credit card fans point to many reward bonuses, like cash back and airline miles. But when it comes to safety, credit cards are king.

The Fair Credit Billing Act protects you if a hacker has accessed your credit card account number. Thanks to federal law, your responsibility for unauthorized charges is limited to $50.

Mari Frank, attorney and author of The Complete Idiot’s Guide to Recovering from Identity Theft, encourages consumers to ditch debit cards. "I never let my bank issue me a debit card,” she says. “I use an ATM card for getting cash when I travel—it doesn’t have the Visa or MasterCard logo and can’t be used as a credit card. The safest thing to use is a credit card.”

There are protections for debit cards under the Electronic Fund Transfer Act, but they’re not as strong as for credit cards. Moreoever, a thief could empty your account before you even know your card has been stolen.

"You are not well protected with a debit card,” Frank says. “It’s very dangerous since it can be used online or by phone or fax without a PIN.” What’s more, if you don’t report a missing debit card to the bank within two days, you could be responsible for up to $500 in losses over a 60-day period, or all your money after that. The initial two-day period protects all but $50 of losses.

Road map to recovery. If your identity has been compromised, contact the three major U.S. credit bureaus and request a free fraud alert, which will notify lenders to take additional steps to verify your identity before opening new accounts. The initial alert is good for 90 days. If there has been a serious breach, contact the police and fill out a report.

Lock the door. For an additional layer of security, you can request a credit freeze, which is free if you have been a victim of identity theft. This will put your credit file on ice and will prevent lenders from gaining access to your report unless you give permission with a special code. The costs range from $3 to $10 per bureau if you haven’t been victimized.

Clean up your credit report. Finally, request access to your credit report at annualcreditreport.com and scrutinize it closely. If you find a lender you don't know, dispute the account and take steps to have it removed. Request letters confirming the accounts have been closed because of fraud.

"Keep those letters,” Franks says. “Scan them into your computer, as something may resurface and you may need that evidence."

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