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Credit Card Fraud vs. Check Fraud by crunchy


									                  Credit Card Fraud vs. Check Fraud
                         Is It Safe To Use My Credit Card?
                               Fraud Tip of the Month
                                By Detective Paul Henninger
                                       January 2008

This is the second of a two-part series on Checks vs. Credit Cards. The question was: “Is it
safer to use a check or credit card?” My answer…”It depends on how they are being used
and how you are protecting the account numbers.” Today, I will discuss potential hazards and
advantages associated with the use of credit cards.

Credit card fraud is a major problem. Last year, according to the Federal Trade Commission,
25% of all reported Identity Theft involved credit card fraud.

The good news is that credit card companies are regulated. Consumer protection laws protect
a cardholder from most of the liability of fraudulent transactions.

To be protected under these consumer laws, the credit card companies have added their own
conditions. I am not going to cover all the conditions, as they vary between companies. You
will have to read your lengthy credit card agreement for all of them. I will point out two very
important conditions that are connected to many cards and commonly overlooked.

   1. The card must be signed by the cardholder. If it is not signed, and the credit card
      company can show this, they can hold you responsible for all of the fraudulent charges.

          a. Do not write only “See ID” on the signature line. If you want to use this fraud
             prevention trick, use both your signature and “See ID.”

                 i. I use this technique on my cards, signature and “See ID.” Unfortunately, I
                    have found that only about 10 percent of the cashiers who look at (or
                    pretend to read) the back of my cards actually ask to see my ID. When
                    they do, I thank them for asking. When they don’t, I ask them if the read
                    the back of my card and would like to see an ID. You, too, can help train
                    these lazy cashiers.

   2. You must dispute the fraudulent charge in a timely manner after being notified of the
      charges (i.e. receiving your statement).

          a. Make sure you carefully read all of the charges on your monthly statement.
          b. Consider having online access to all of your credit card accounts and reviewing
             them weekly. The service is free. Online access is very safe and an excellent
             tool to detect and avoid credit card fraud. The quicker you find the fraud, the less
             liability you have for the transactions.

Is There an Advantage to Using My Credit Card Instead of a Check?
Yes, if you protect your card and credit card numbers, monitor your transactions online or
when you receive your statement, and immediately notify the credit card company of missing

cards or fraudulent activity. Be familiar with the Credit Card Consumer laws. If you follow
these simple rules, your maximum liability due to fraud is $50.

If at all possible, I do not use checks. Checks are too vulnerable to theft and can be easily
counterfeited. If my checking account is compromised due to a check, the money is removed
from my account before I know there is a problem. It could take days, and sometimes weeks,
to get my money back if the fraud was not my fault.

If it is my credit card that is compromised, I do not have to immediately pay for the fraudulent
transactions and can contest the charges. Money does not leave my bank account.

But beware--ATM cards have protections similar to credit cards, but there are more rules to
follow to be protected under the consumer protection laws. In addition, the money has already
left your bank account before you know there is a problem. Finally, you need to protect your
Personal Identification Number (PIN) so the card cannot be used at an ATM to remove all the
money from your account.

How Can I Safely Use My Credit Card?

First, ensure you have updated firewall and virus protection on your computer. Always use
your browser to go to a website where you want to make a purchase. Do not use hyperlinks in
e-mails or unfamiliar websites. Research the company and website, if you have not used it in
the past. Do not use a website to make a purchase, or transfer sensitive information, that is
not secure. The beginning of the web address should be “https”, indicating the site is secure.
( “https” is a URI scheme used to indicate a secure HTTP connection)

Many persons use their ATM/Debit cards to make purchase on the Internet. It is safe if you
follow the listed precautions. I do not use my ATM card online. I do not like the fact that if the
number is compromised, money leaves my account before I discover the fraud. My money will
be returned, but I will have to wait for days, or even weeks.

I suggest you dedicate one credit card for making online purchases. If you frequently use the
Internet, use a credit card that is used only for Internet purchases. Again, monitor your
purchases weekly online, or closely review your monthly statement.

Online Auctions

Online auctions are relatively safe, if you know what you are doing. But with many fraudsters
online, there are risks. Educate yourself about online fraud before you play. How do you
protect yourself? Simply stated, research the vendor and pay by credit card or “PayPal.”

         If you pay by credit card and are defrauded, you are protected under the Credit Card
         Consumer Laws. Money has not been taken out of your bank account and you can
         contest the charges.

         For additional protections, and an advocate if something goes wrong, consider using an
         online payment service, such as “PayPal.” PayPal is the largest provider and the
         services are free to the consumer. Vendors using PayPal pay for the service. PayPal
         regulates its authorized vendors and will even guarantee products purchased on
         “eBAY.” You pay PayPal directly with your credit card or electronically through your
         bank account. I suggest that you attach a credit card to your PayPal account to get two
         types of protection against fraud. Since PayPal pays the vendor directly, your credit
         card number or bank account number is never seen by the vendor. If the vendor is a
         crook or identity thief, he cannot attack or misuse your accounts. Many businesses,
         cities, utilities and online businesses now accept “PayPal” online payments.

               Note: The Salem Police Department does not endorse “PayPal” or any online
               payment service. PayPal was used as an example of an established payment
               service. There are still risks of liability, even if you use a payment service.


It is safe to use either a credit card or debit card. Watch employees closely, control your card
and shred all receipts. The key to your account is your credit card number, expiration date,
and the three digit security number on the back of the card. Protect them always. Verify your
purchases online or when you receive your monthly statement.


The use of your credit card on the telephone is safe, if you know to whom you are talking. If
you initiated the call and are positive who you are talking with, make the purchase. Never,
Never and Never give out your credit card information if you receive an unexpected call. If you
make a purchase on the telephone, check your credit card account online at the end of the
next business day to ensure the proper amount was charged and there are not any additional
unexpected charges.


Protect your cards. Only carry the cards you normally use. Keep a separate list of the cards
you carry. Keep a list of the cards you store at home. Immediately notify your credit card
company if your card is misplaced, lost or stolen. Do not lend out your card--you may be
responsible for any related fraudulent charges.

Summary of Cardholder Liability Under Federal Law
Credit Cards

   •     Your maximum liability under federal law for the unauthorized use of your credit card is

            o If you report your card missing before a fraudster uses it, your maximum liability
              is zero.

   •     Once you report your card as lost or stolen, you are no longer liable for any subsequent
         fraudulent charges.

            o So it is very important to immediately report the loss of your credit card. Most
              credit card companies have a 24-hour number to report losses. If you think your
              credit card is missing, go ahead and report it as lost or stolen.

    •   If your credit card is not physically missing, but an identity thief is using your credit card
        number to make fraudulent purchases, you are not liable for any fraudulent charges.

ATM or Debit Cards

    •   If you report an ATM or debit card missing before it is used, you cannot be held
        responsible for any unauthorized transactions or transfers.

    •   If unauthorized use occurs before you report it, your liability under federal law depends
        on how quickly you report the loss.

            o If you report the loss within two business days after you realize your card is
              missing, you will not be responsible for more than $50 of unauthorized use.

            o However, if you do not report the loss within two business days after discovery of
              the loss, you could lose up to $500 because of an unauthorized transfer.

            o You risk unlimited loss if you fail to report an unauthorized transfer within 60 days
              after your bank statement containing the unauthorized use is mailed to you. That
              means you could lose all the money in your bank account, as well as the unused
              portion of your line of credit established for overdrafts.

Pre-Paid Credit Cards

Pre-Paid Credit Cards are like cash. If they are lost or stolen, you will not get back your money
or your tears.

For additional information about Fraud, visit the Salem Police Department’s Fraud Tips at\departments\police. Click on the link “Fraud Tip” on the left column. This will be Detective
Paul Henninger’s last tip, as he prepares for retirement. The fraud tip program will be continued by his


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