How to Protect Yourself from Identity Theft and Credit Card Fraud

 

The 2017 Equifax data breach rattled the entire nation, exposing the personal information of 147 million Americans. That includes Social Security numbers, driver's license numbers, credit card numbers and home addresses. In other words, a lot of incredibly private information that doesn’t belong in anyone else’s hands, much less the mitts of a hacker.

Unfortunately, the Equifax hack was not an anomaly. In 2020, the Federal Trade Commission (FTC) received 4.7 million reports of identity theft and fraud.

The thieves behind these crimes might open new bank accounts and lines of credit, steal your tax refund and tank your credit score in the process. It’s a major disruption to your life.

In light of this, you may be wondering what — if anything — you can do to protect yourself from identity theft and credit card fraud. Fortunately, we have good news: there are ways to safeguard your personal information and fight back against fraudsters...for free.

Let’s start by defining identity theft.

 

What Is Identity Theft?

Identity theft is the unlawful act of stealing personal information with the intent of using it to commit fraud. Identity thieves often use this information to apply for lines of credit, file taxes or even to get medical services.

 

What Are the Different Types of Identity Theft?

People have a variety of official documents and identifying numbers. For that reason, identity theft is a broad term that applies to several situations. Let’s walk through the different types and common signs of identity theft.

Card ID theft

If someone uses your debit or credit card without permission, this is called card identity theft. The identity thief doesn’t need to have your physical card in hand to do this — they can use your card information to make unauthorized transactions online as well.

If you notice that your account balances are unusually low or your card is constantly declined, you may be a victim of identity theft. It’s a good idea to keep an eye on your account activity and balances. If you spot suspicious activity, contact your card issuer immediately.

Child ID theft

These days, children seem to be born with technological know-how. That said, it’s safe to say that the typical toddler shouldn’t have secret bank accounts and lines of credit. If they do, it’s likely that your child has been a victim of identity theft.

A disturbing fact about child identity theft is that family members or others who are close to the child are sometimes the culprits. The thief can use the child's personal information to open a fraudulent account, apply for government benefits or rack up debt under the child's name.

If you receive calls about bills in your child's name or letters from the Internal Revenue Service (IRS) addressed to your child, child identity theft has likely occurred. If your child applies for a student loan and the application is denied, consider checking if child identity theft may be the culprit.

Taxpayer ID theft

Taxpayer ID theft occurs when a thief uses your Social Security number and other personal information to file a tax return. They do this with the purpose of claiming a fraudulent tax refund.

Typically, the warning signs of this type of identity theft involve contact from the IRS, such as a letter about a tax return that you did not file or a tax transcript that you did not request. You might also receive notices from the IRS regarding changes to your online account or that you received income from an unrecognized employer. Finally, if you e-file your tax return and receive an error due to a duplicate social security number, this is a cause for concern.

Medical ID theft

Medical identity theft occurs when an identity thief steals your personal information to submit fraudulent claims to health insurers, receive medical care or fill prescriptions.

There are some clear signs to keep an eye out for. A common red flag is receiving an Explanation of Benefits from your health insurance company regarding unrecognized medical care. Similarly, if you receive calls from a debt collector asking you to pay for medical procedures or drugs that you didn't receive, you might be the victim of medical fraud.

Unemployment ID theft

Data breaches can also expose you to unemployment identity theft. This is when an identity thief uses your information to fraudulently collect unemployment benefits in one or more states.

For the typical person, unemployment benefits aren’t top of mind or even relevant. As a result, this type of theft often flies under the radar.

One red flag could be receiving a letter from a government agency regarding an unemployment claim or payment when you haven't filed for unemployment benefits. Another sign could be getting an unexpected 1099-G tax form reflecting unemployment benefits or a notice from your employer indicating that a request was received about an unemployment claim in your name.

 

How to Protect Yourself From Identity Theft and Credit Card Fraud:

So far, we’ve discussed various signs of potential identity theft — but what about proactively safeguarding yourself from fraudsters? Let’s walk through a few measures you can take to prevent identity theft and credit card fraud.

Take proactive measures

• Be smart about physical security. An easy and prudent way to protect yourself from identity theft is to shred sensitive documents. You should also keep track of your electronics — laptops, thumb drives and smartphones can be easily stolen and used for identity theft. In public, you should be wary of others’ ability to look at your credit card or social security card. If memorized, this information can be used even without the physical device or identifying card.

• Be vigilant about digital security too. Make sure to regularly change logins, passwords and PINs. If your information was involved in a data breach, you should be especially diligent about changing these codes. You may also want to avoid storing your credit card number anywhere online. And, when using public devices or unsecured WiFi networks, you should refrain from inputting any personal information, such as your phone number, bank account numbers and other financial information.

• Consider filing your taxes early. Since identity thieves can use your information to file a tax return, it's a good idea to file your taxes early to "get there first." Otherwise, if someone uses your information to claim a fraudulent refund, you’ll likely face complications because someone else has already filed taxes under your name.

If you’re already a victim of identity theft

If someone is misusing your personal information to open new accounts or make unauthorized purchases, consider taking these steps:

• Report identity theft and get help at IdentityTheft.gov. Additionally, check out the Identity Theft Resource Center, a non-profit organization sponsored by entities like Experian and the U.S. Department of Justice. You might also choose to file a police report with law enforcement agencies.

• If you’re experiencing fraudulent charges on a debit or credit card, call the card issuer’s fraud department right away to dispute the charges and/or cancel the card. Most issuers will not hold you accountable for fraudulent charges.

• Place a credit freeze (also known as a security freeze) on your credit reports from each of the three credit bureaus (e.g. TransUnion, Experian, and Equifax). A credit freeze makes it more difficult for thieves to open a new account in your name by restricting access to your credit report. While a freeze makes it hard for a criminal to open an unauthorized account, it also means you’ll have to take a few extra steps the next time you open a new account that requires a credit check — like a new credit card or mortgage.

• If you don’t want to pursue a credit freeze, consider a fraud alert. Fraud alerts mean lenders can still check your credit but will need to take extra identity-verification steps first. You’ll be notified anytime there is an attempt to check your credit.

• Keep in mind, a freeze or fraud alert won’t prevent a thief from running up balances on your existing lines of credit — so monitor your accounts diligently. You can also enact a credit freeze or fraud alert even if you aren’t a current victim but want to be extra careful about potential fraud.

Catch identity theft before it happens

Being proactive about the security of your personal information is the best way to protect yourself against becoming a victim of identity theft. But even if an identity thief does gain access to your information, you can catch it before more damage is done.