The Cost of Credit Card Fraud

Washington, DCAccording to the US Department of Homeland Security, the cost of credit and charge card fraud may be as high as $500 million a year. And it's not just the credit card companies that are left holding the bag - cardholders often face economic losses, lengthy legal battles and struggles to re-establish clean credit records.

Also, credit card companies' losses may be reflected in higher interest rates across the board for all cardholders.

Stolen Receipts a Major Issue
The US Department of Homeland Security warns consumers: "Theft is the most obvious form of credit and charge card fraud [but] a more subtle form of fraud is misappropriation - the use of your card number without your permission."

Credit card misappropriation can happen in several ways. One of the most common forms of credit card misappropriation is when thieves "dumpster dive" through stores' credit card receipts or a dishonest sales clerk sells credit card receipts to criminals. Thieves then use the credit card numbers to make purchases - with your money.

Protective Legislation Exists, but are Merchants Complying?
In 2003, the US Congress passed a federal statute that has helped make it harder for thieves to get access to people's credit card numbers. Statute 15 UCA 1861, part of the Fair Credit Reporting Act (FACTA), prohibits merchants from printing on any receipt more than five digits of the credit or debit card. It also prohibits printing the expiration date.

The statute affected many merchants as of January 1, 2005 and it affected everyone as of December 4, 2006. While most merchants have complied with this legislation, some have not.

The Link to Identity Theft
Thieves can also use stole credit card numbers from receipts to gain personal information about cardholders and engage in identity theft, establishing new credit card accounts and maxing them out. Cardholders are then left to clean up the mess with the credit card companies and to clear their good names.

If you've experienced identity theft, you are not alone. There are at least half a million new cases of identity theft each year, about one per minute, estimates Beth Givens, director of the Privacy Rights Clearinghouse in San Diego.

Sarah's Nightmare
Sarah from Buffalo New York was a victim of credit card theft in 2005. "Someone stole my receipts from a store, and charged $2,800 in one day. Then, about 3 weeks later someone opened a new credit card in my name - with a credit line of $20,000. Luckily, the company called me to check it out. This happened over and over for about 4 months!"

"It was terrifying... I still worry about it," Sarah said, noting that she is in the process of buying her first home. "Two years later, I still have to explain myself to creditors."

Protect Yourself
Take the following steps to help protect yourself against credit and charge card fraud:

• When you make a purchase, avoid signing a blank receipt. Draw a line through blank spaces above the total when you sign card receipts.



• Void or destroy all carbons and incorrect receipts.



• Check to ensure that the store has not printed more than five digits of the credit card, or its expiration date, on the receipt. If they have, they may be in violation of the law.



• Save your card receipts and compare them each month with your billing statements.