The convenience of modern digital commerce comes with an unfortunate side effect: it makes identity theft more convenient as well. The 2016 Identity Fraud study from Javelin Strategy and Research found that 13.1 million consumers in the U.S. were victims of identity theft during 2015, to the tune of $15 billion. Over the last six years of available data, the identity theft totals have reached approximately $112 billion.
In the end, the fraud affects you and your creditors and card issuers directly, but your stolen card information can generate multiple transactions before you even see a dime of losses. Identity thieves can choose to sell your credit card information to others instead of using it for their own purposes.
If your credit card information is stolen as part of a large breach, it's more likely that your identity and information will be sold at least once as part of a package deal. Along the path to fraudulent purchases your card will be valued based on such factors as whether it is proven to be active (typically with small purchases that may go unnoticed) and whether other information is included — such as passwords, Social Security numbers, and birthdates that make it easier to open new lines of credit in your name.
Once your card information ends up in the hands of the final "user," the fraudulent action can take many forms. The thief may make a duplicate card, choose to open up fraudulent accounts in your name, or simply use your existing card to buy items that can be resold for cash. Common purchases include expensive items such as jewelry or high-end electronics that are lucrative to resell, gift cards that may be easily cashed in with retailers, online shopping sprees — even items that would be considered "costs of doing business" such as website and server expenses.
You probably do not care much about which thieves (or how many) take advantage of your stolen information or how they monetize it; you just want to minimize the damage and prevent further losses. That requires a mix of corrective and preventative action.
If thieves have already made fraudulent purchases on your account or opened new accounts in your name, you must take immediate action. Call your card issuer immediately to have your current account closed and a new card reissued, and file the police reports and other paperwork necessary for your fraud protection.
Use the MoneyTips credit monitoring service to check your credit report for any fraudulent accounts that have been opened in your name, and contact the credit issuer(s) to close any accounts. Apply either a fraud alert (requiring creditors to verify your identity before issuing new credit) or a credit freeze (blocking most access to your credit report) to lessen the chances of more fraudulent accounts being opened in your name. Since September 21, 2018, legislation has made credit freezes free of charge for all Americans.
If you have not had any problems with stolen credit cards or identity theft, count your blessings — and take preventative action to keep your good fortune intact. Use strong passwords and do not repeat passwords for each site. Make sure that online purchases are made through legitimate and secure websites, and do not give your credit card information over non-secure public computers or unsecured wireless systems. Check your credit card statement regularly for any fraudulent purchases, no matter how small.
Still unsettled about identity theft? Consider using services that monitor your account activity and alert you to unusual activity.
Take proper actions to protect your credit, and hopefully you will never have to find out firsthand what happens when your credit is compromised — and if you do end up with compromised credit, know what actions to take to limit the damage. Make sure that thieves get the lowest return possible on their efforts.
If you would like to prevent identity theft, check out our credit monitoring service.