Photo (cc) by Andrew Currie
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It was no April Fools’ joke: On April 1, credit card processing company Global Payments announced it was hacked and 1.5 million credit and debit card numbers may have been “exported.” The company reported that although credit card numbers had been compromised, no customer names, addresses, or Social Security numbers were exposed. So the potential problem isn’t identity theft – it’s essentially credit card theft.
Nevertheless, this week’s ominous headlines included Security Breaches Shake Confidence in Credit-Card Safety (The Daily Beast) and Credit-card data breach raises hacker fears (The Detroit News).
While such headlines are alarming, they’re no big deal to this credit card expert. To the contrary, I’m more motivated than ever to put my trust in my credit cards. Here’s why…
The first credit card was charged in 1950, and it wasn’t long before criminals sought those magic numbers. The 1.5 million numbers that Global Payments reported “may have been stolen” is just the latest in a long list of online thefts. As Forbes reminded us this week…
Last year, hackers stole personal information from a reported 24 million accounts from Sony Online Entertainment. In 2010, 130 million accounts were stolen from a payment processing company, Heartland Payment Systems. In 2007, 46 million accounts were stolen from TJ Maxx and Marshall’s. Even MasterCard had 40 million accounts compromised in 2005.
While that doesn’t sound reassuring, remember that there are more than 1.4 billion active account numbers in the United States alone. That means the current card breach may affect around 0.1 percent of the cards out there.
2. Legal protections
As reported by the FTC, federal law limits credit card losses to $50. In practice, banks almost always credit the entire amount in the case of fraud.
On the other hand, debit cards are regulated under a different law than credit cards, the Electronic Fund Transfer Act. This law also limits consumers’ losses to $50 – but only if you report the fraud within two days. Report it within 60 days of receiving your statement and the loss limit jumps to $500. After that, the loss is limited only by the amount in your account, plus overdrafts.
3. Credit cards aren’t linked to your bank account
If your debit card is hacked, the money immediately disappears from your bank account. On the other hand, when your credit card is fraudulently used, you should discover it when you get your statement in the mail – or immediately if you check online. At that point you can report it long before any of your money is at stake.
4. Reporting fraud is easy
When Money Talks News’ Brandon Ballenger logged onto his bank account and found a fraudulent debit card transaction, he had to go into his bank to sort it out. I once had a similar issue with one of my cards, and it took a two-minute phone call to reverse the charge. Every credit card I know of comes with a toll-free number, and most allow collect calls from overseas. Like Brandon, I later had to sign a piece of paper affirming my statement – but it came in the mail with a paid return envelope.
5. Breach or no breach, always check your credit card statement
One of the responsibilities of having credit cards is checking your statements for anything that looks suspicious. After all, hackers are the tip of the iceberg: Your credit card number could still be obtained by all sorts of other means. You regularly hand it out to merchants who may – or may not – use the information as authorized. According to the FTC, fraud can happen if…
A thief goes through trash to find discarded receipts or carbons, and then uses your account numbers illegally [or] a dishonest clerk makes an extra imprint from your credit or charge card and uses it to make personal charges.
Credit cards have been with us for half a century, and their phenomenal success is due to both their convenience and security. Credit card hackers are a real threat, but they shouldn’t keep you awake at night. If you check your statement regularly, you can sleep soundly.