While no one wants to become a victim of identity theft or credit card fraud, the latter is the lesser of two evils. Credit card fraud, a federal offense that is a type of identity theft, occurs when someone steals your credit card to make purchases. Full-blown identity theft is much more involved and can completely wreak havoc on your credit report, personal finances and life.
According to the Justice Department’s Bureau of Justice Statistics, an estimated 16.6 million people experienced at least one incident of identity theft in 2012, the most current year for data. An estimated 7.7 million people within that group reported fraudulent use of a credit card.
When someone is a victim of identity theft, his or her name and personal information, such as Social Security number, address, health insurance information or job history, is compromised. The identity thief takes this information and applies for credit by taking out loans or opening new accounts in the victim’s name. The thief might also use that information to fraudulently apply for a job or use the victim’s health insurance plan to cover prescription drugs or see a doctor.
How Consumers Become Victims
Credit card fraud occurs when someone steals your credit card or your credit card number and other information on your account. This can happen from a stolen wallet or through an unsecure Internet connection, hacking, phishing or a data breach, among others.
Identity theft occurs when someone steals pieces of your personal data and assumes your identity. This can also happen from a stolen wallet, smartphone or a home or auto burglary, as well as through an unsecure Internet connection, hacking, phishing or a data breach. It can also happen if a consumer fails to shred important documents, such as bank account statements, tax documents and new credit card offers.
How Victims Are Alerted
When it comes to credit card fraud, a credit card company is often the first to alert the victim. Credit card companies have units devoted to monitoring spending habits and purchases, and the company might notify the cardholder if purchases indicating an unusual amount, location or frequency transpire. If a cardholder is not alerted, he or she might eventually realize that a credit card is missing or a credit card bill is inaccurate.
Sometimes identity theft victims don’t discover the dilemma they are in until months or years after the fact. Checking a credit report or applying for a loan or new job might lead to the first warnings of a problem.
How Victims Recover
The sooner a victim reports credit card fraud to a credit card company, the quicker the fraudulent charges can be resolved. A cardholder should always report a missing or stolen card as soon as they realize it has been misplaced. Federal law limits liability if a credit card is stolen, but liability may depend on how quickly the loss or theft is reported.
It can take years to erase the damage from identity theft and usually requires a very time-consuming, arduous process that often involves credit bureaus, law enforcement, insurance agencies and financial institutions. In the meantime, the victim’s access to credit may diminish, opened accounts may be slammed with high interest rates, late charges and delinquencies and necessities like finding a new job or maintaining health insurance may be negatively impacted.