Americans Are More Afraid of Credit Card Fraud Than Terrorism

As the holidays approach, more and more consumers are clutching their purses and wallets. But that anxiety has little to do with budgetary constraints. In fact, according to a recent Gallup spending forecast, retailers can expect an above-average shopping season this year.

The thing that’s got consumers on edge these days is digital fraud.

Gallup first started asking consumers in 2000 about their worries around the interlocking of technology and credit. The results from this year’s annual Crime Poll, though, are particularly noteworthy: More than two-thirds of those who were surveyed said they were apprehensive about having their credit card accounts compromised. Almost as many said they’re concerned about smartphone and computer hacking.

Our preoccupation with cybercrime has swelled so that it significantly overshadows our fears of being mugged, becoming the victim of a terrorist attack or having our houses burglarized. But less than half of those who’ve had their accounts hacked take the time to file police a report, while more than two-thirds of all mugging and burglary victims do so as a matter of course.

There are also certain age and household income disparities. For example, those who are most nervous about these crimes are between ages 30 and 64, and earn more than $30,000 per year. But the prize for the most freaked out goes to 50- to 64-year-olds whose earnings exceed $75,000.

Although I can identify with that demographic, frankly, I would describe myself as being more annoyed than anxious.

To be sure, a hacked credit card is a pain in the neck. But it’s not the end of the world. I’ve had cards take a dirt nap when I was attempting to check out of a hotel, book a flight and buy groceries. In each of those cases, however, the fraudulent charges that prompted the issuers to cancel my cards were promptly wiped from the record, thanks to the Fair Credit Billing Act.

Under the FCBA, consumers are entitled to demand the immediate removal of unauthorized charges, dispute those for goods and services that were returned or never received, and to call for corrections to amounts that were incorrectly tabulated.

The best part about the law, though, has to do with the transfer of cash. There is none. That’s because paying a credit card bill requires an affirmative action on the part of the consumer, such as by writing a check or conveying funds between accounts.

By contrast, debit and ATM card use—which is governed by the Electronic Funds Transfer Act—diminishes a consumer’s cash balance nearly as soon as the card is swiped. Consequently, in each of the aforementioned instances, the account is left wanting and waiting either for the bank to restore its balance (which can take a statement cycle or more) or for the merchant to refund the money.

One more thing: Hackers often test the validity of the account numbers they’ve hijacked by initiating a series of low-dollar value charges in quick succession. There are two reasons for that: to gauge the extent of the account holder’s available line of credit and to detect the presence of security alert levels, if any.

Some card issuers offer to text or email the account holder when his or her card is charged without its being physically presented. The key is to set a low threshold. For example, I set mine at $1, which helped me to detect my most recent breach.

Four charges of less than $100 each were initiated and tentatively approved by the card company over the course of a few minutes, followed by a $700 charge. Text and email alerts immediately popped up on my cellphone and computer. The issuer also called to ask if I was in possession of my card and had authorized the expenditures. All five postings were reversed and the card was replaced.

So as you gear up for the coming season’s shopping extravaganza, remember to:

Safeguard all of your cards;
Verify the charges that are posted to your account;
Promptly report discrepancies;
Password protect your smartphone, laptop, desktop and tablet;
Encrypt the data on each of these devices, and
If your smartphone software permits it, consider setting a limit for the number of login attempts that may be made before the device deletes the data that’s stored on it.

If you’re worried about identity theft in general, not just unauthorized use of your credit cards (and if you take a deeper look at the Gallup poll, theft is a major theme), it’s important to check your credit regularly so you can spot any accounts you don’t recognize. You can get your free annual credit reports on AnnualCreditReport.com and you can check your credit scores for free every month on Credit.com.

Tedious? Perhaps. But taking these simple precautions can save you from having to close out your accounts, redirect all of the auto-pays you’ve set up, contact the credit bureaus to place a fraud alert on your profile and to report the crime to the authorities.