PUTTING THE FREEZE ON CREDIT CARD FRAUDSubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on April 11th, 2014
In the aftermath of the largest retailer hacking incident in history, which took place at Target stores, the fear over the safety of our credit card information has surged. What are the ways to protect yourself against credit card fraud? I will discuss two different options; it is important to understand the difference between the two as they provide two different outcomes.
1) Fraud Alert
2) Credit Freeze or Security Freeze
The Target breach was massive. Hackers found a way to steal the information on credit cards used at Target’s 1,797 stores during the Thanksgiving holiday shopping season. Forty million credit card numbers, seventy million addresses, phone numbers, and other private information of Target customers were compromised. The result for Target was a year-over-year decline in profits of 46% and a loss of trust for consumers in the ability of retailers to securely handle personal information and credit card data.
If you believe your data has been compromised, you can have the three major credit reporting agencies (TransUnion, Experian, & Equifax) put a fraud alert on your credit files. This alert requires a business to verify your identity before they issue credit. Another purpose of this action is for lenders and others to scrutinize any requests under your name. Fraud alerts are free and do not affect your credit score. The problem is that they are also not 100% effective and fraud alerts can be overlooked. The stronger option is a CREDIT FREEZE. This option is a good way to alert retailers and other creditors that your identity has been compromised.
A Credit Freeze is sometimes also referred to as a Security Freeze and is initiated by notifying all of the credit agencies that you wish to take this action. The freeze stops creditors from viewing your credit score and report. Typically a lender, or any other business will not extend credit without checking the score and report, therefore, by implementing the freeze you can deter identity thieves. The fees vary by state and you will need to unfreeze your credit if you plan to apply for a loan, new job, or anything that would require them to check your credit. There is not only a cost factor but also time involved since it can take five business days for a lift of the freeze. Just as with a Fraud Alert, a Credit Freeze will not negatively affect your credit score. The Credit Freeze is a good option to minimize chances of a fraudulent credit card or loan being opened in your name. However, it does not protect you from someone using your existing credit card information.
Whether you decide to use either of these options, it is wise to regularly monitor your bank accounts and credit card activity so that you can minimize damage if you are a victim of fraud or identity theft.
For those customers that shopped at a Target store during that time period, Target is partnering with Experian® to offer customers one free year of credit monitoring services. For additional details, visit http://target.com/databreach.