How to prevent credit card fraud

Credit card fraudIn 2005, credit card fraud statistics showed that about C$2.8 million was lost due to fraudulent use of MasterCard and Visa alone, according to the Royal Canadian Mounted Police (RCMP).

Fortunately, consumers can take steps to protect themselves. Today, in total, credit card fraud costs consumers and credit card issuers as much as C$500 million a year. These dismal statistics indicate that credit card fraud is on the rise. And with the current state of the economy, credit card holders may be more vulnerable than ever to theft.

"Thieves have gotten smarter over the years," says retired private financial adviser Bill Christie. "They don't seem to target the rich people for the big hauls as much. They seem to target little bits from the most vulnerable or less savvy. And those little bits can add up to something very profitable."

Those vulnerable people, including new immigrants and the elderly, are who suffer most. That's why the Bank Of Canada, in collaboration with the RCMP, Canada Post, several commercial banks, Payment Card Partners (Visa, MasterCard, etc.) and industry associations joined forces to tackle fraud. They've put together a collection of self-education kits, including DVDs, for retailers and consumers, available on the Bank Of Canada's Web site.

In addition, many financial institutions and lending facilities offer tips on how to avoid fraud of all kinds, particularly credit card fraud. Christie thinks such companies may need to be more aggressive in their approach to getting the average consumer to sit up and take responsibility.

"Every approved credit card holder gets a little information package explaining the responsibilities of having that card," Christie says. "The most valuable part in that package is information on how to avoid credit card fraud. If more people read those sheets -- just took the few moments to read them -- I'd bet there'd be a great reduction in the amount of people who steal from them."

Here are a few tips from both Christie and Bank of Montreal on how to protect yourself from credit card fraud:

Online/Interac

  • Keep passwords/PINs secret.
  • Make sure nobody behind you can see what you're typing on Interac machines.
  • Always clear your cache after conducting any transaction online.
  • Don't allow your browser to store or "remember" your passwords.
  • Choose passwords that wouldn't be easy to guess, such as combinations of letters and numbers.
  • Always log off after finishing an online transaction.
  • Never respond to an e-mail asking you to click on a link to update or confirm important information.
In General
  • Only keep a couple of months worth of statements on hand and shred old ones.
  • Better still, go paperless if your bank offers this option.
  • Check your credit history every year. To do this, contact credit reporting agencies Equifax Canada and TransUnion. These reports show credit updates for everything with your name attached to it.
  • Check monthly statements very carefully and report any discrepancies immediately.
In addition to these tips, Tom Reid, director of consumer solutions at TransUnion Canada, says, "The more you know about this prevalent crime, the better prepared you will be to protect yourself." Reid suggests that identity thieves can get hold of your personal information in a variety of sneaky ways:
  • They go through your mail and take your bank and credit card statements, pre-approved credit offers and tax information.
  • They complete a change of address form and have your mail sent to another location.
  • They steal your wallet or purse containing your personal identification and credit cards.
  • They call your credit card company and ask to change the mailing address on your credit card account. Then, after requesting a new card to be sent out, they run up the charges on your credit card. Because your bills are being sent to the new address, it may take some time before you realize what's going on.
  • File for bankruptcy under your name to avoid paying the debts they've incurred.
Finally, Reid adds, "By managing your personal information carefully and sensibly, you can help guard against identity theft. TransUnion recommends that you do not carry extra credit cards, your Social Insurance card, birth certificate or passport with you unless needed, and guard all personal information. Additionally, it is critical that consumers monitor their credit report on an ongoing basis to ensure all of the information being reported is accurate. Monitoring your credit can also help to detect signs of fraudulent activity."

Unfortunately, the world may never be rid of fraudulent people. But Christie puts it best: "As long as there's money to be made, there will be some people finding an easier way to get it from you. The rest of us just need to be smarter than they are."

Written by Lily Wolf.

Updated July 10, 2009

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