Credit card security

From what you hear in the news, it seems there’s a lot to be a afraid of when using your credit card. It’s not hard to see why.

In 2013, 40 million debit and credit card accounts were compromised due to a data breach at Target. Then it was Home Depot with a data breach that affected 53 million customers in 2014. It’s no wonder consumers are upset, and many are taking it out on retailers this holiday season.

According to a CreditCards.com poll, nearly half of shoppers with credit or debit cards said they’d avoid stores over the holidays if that retailer had experienced a data breach.

But despite this big news on data breaches, are they as bad for you, the shopper, as they’ve been made out to be in the media? I’m not so sure.

Here’s more about spending with credit cards, including what you can do and why you shouldn’t be so scared.

What’s the cause of the data breaches?

The main problem with the data breaches comes down to the magnetic stripe on your card. This stripe contains your account information. And when you swipe it at checkout, this information is used to process your payment.

In cases of the data breaches, the data stored on credit cards was stolen from the retailers when thieves broke into their stored data. The data stolen included credit and debit as well as other sensitive account information.

Once thieves have credit or debit card data, they can easily transfer the information to counterfeit credit cards.

Unfortunately, it’s out of your hands what happens with this information. The good news is that both credit card companies and retailers are making changes that will hopefully improve the security of credit cards (more on that below).

So what can you do for now? There are several steps to safeguard your information.

Embrace the new chip-and-pin cards once they arrive

Credit card issuers in the U.S. are finally starting to issue chip-and-pin cards, which have been widely used in Europe and Canada for years. These cards include a chip in the card that makes them much harder and more expensive to counterfeit than magnetic stripe cards.

While this changeover is taking place gradually, it’s expected to be more widespread by next year. Visa is pushing for retailers to have new point of sale systems in place to accept these cards by October 2015.

Once chip-and-pin cards are available to you, make sure you understand how they work. They’re different than the cards you use currently, but don’t let that stop you from activating your new card and putting it into use right away.

Check out alternative payment methods

One of your best bets to make sure your account information isn’t compromised is to keep it out of retailer’s hands. If retailers never take possession of sensitive customer data, it can’t be stolen from their servers.

While this might sound futuristic, it’s actually technology that’s available right now.

For making payments at retailers, ApplePay takes advantage of this technology. Instead of sending your credit card number to use for payment, Apple sends a unique transaction number along with a number generated by chip stored inside the iPhone. This keeps your account information secure and out of retailers’ hands.

Evolve Money uses similar safeguards. Rather than send your account number along with payment, Evolve Money makes the payment for you. This means your account never leaves Evolve Money’s bank-level security. Plus, rather than having dozens of accounts, you can make payments to thousands of companies using just one account with Evolve Money.

Shop online with care

If you’re shopping online, you’ll still need to be careful to avoid credit card fraud. PC Magazine has several tips, including:

  • Never give out your social security number. It shouldn’t ever be required for online shopping.
  • Stick to reputable sites that you recognize.
  • Look for secure sites that have “HTTPS://“ (instead of just HTTP://) and display a lock on your browser.
  • Use mobile apps, which can be more secure than using the internet
  • Avoid public computers or open WiFi networks. It’s easier for thieves to swipe your data from here.

If an online store seems sketchy or strange, you may be better off shopping elsewhere.

Watch credit card statements, and dispute fraudulent charges

Having a fraudulent charge show up on your credit card can be a hassle, but it doesn’t have to be a large expense. Thanks to credit card consumer protection laws, your liability is typically limited.

For credit cards, this limit is capped at $50. If you report a credit card lost or stolen before a charge occurs, there’s no liability at all.

Even better, most credit card companies set your liability to zero in all cases. All you have to do is call to dispute the charge, and your card issuer will likely remove it right away.

But beware: debit cards don’t always offer the same consumer protections. Your liabilities for a stolen card could be higher. And if you wait over 60 days to report the fraud, you might be liable for unlimited losses.

However, some debit card issuers carrying the Visa or MasterCard logo may offer the same protections as they do for credit cards. Either way, be sure you understand your debit card’s terms and conditions.

Get a replacement card any time you’re worried

If you’ve gotten any indication that your credit card information has been compromised, request a new card right away. There’s typically not any cost to do so, and you’ll get a new account number to replace the old one that may have been stolen.

Yes, it’s pain to change auto payments on all your accounts. But you can make it easier by keeping a list or reviewing statements to find which credit cards are linked to each autopay account.

Monitor credit report

Any time your identity has been stolen, you’ll want to monitor your credit report to make sure additional fraud doesn’t occur. While fraud related to your social security number or credit report is less likely to be the result of a data breach, it’s still possible.

What you’re looking for on your credit report is new accounts that you did not open. Typically criminals will have to get a hold of your social security number to do this. This information is never stored on a credit or debit card, so it’s unlikely to happen from a retail transaction. 

You can receive a credit report from each of the three credit bureaus once a year for free. This means, at the very least, you should check your credit report every 4 months. If you identity has been stolen, you’ll be able to check your credit reports more frequently.

Just go to AnnualCreditReport.com, which is the only truly free source for your credit report.

You can also sign up for alerts when a new account is opened. Sites like CreditKarma.com will do this for free.

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