A few months ago, I was categorising my expenses in PocketSmith. I’m someone who regularly reviews their banking statements, so I thought I was familiar with every last line item that could possibly pop up in the process.
But I had missed one.
It was a parking charge for nearly $30, which, while higher than usual, wasn’t an immediate cause for concern. I do pay for parking as a part of my daily life, and because of that, I had missed it in my own review of my bank statement.
When PocketSmith brought the charge up for categorisation, though, it showed me in big, bold letters that the parking charge originated in London — a city I haven’t visited in over 30 years.
It set off all the alarm bells. This was a checking account, so I knew it was particularly vulnerable. I made plans to call the bank as soon as it opened in the morning.
I was incredibly lucky. Before I could dial the bank, they rang me. Apparently, they also thought it was odd that my card was used in England. Once they confirmed it was a fraudulent charge, they immediately reversed it. There was an asterisk — if their full investigation revealed that I was lying and I had actually swiped my debit card in London, they’d take the money back out. But this preemptive refund was more than a lot of banks would have given me.
They also immediately cancelled my debit card and issued me a new one.
Identity theft in all its various forms has been on the rise over the past number of years. If you haven’t had an experience like mine yet, your turn may be just around the corner.
Here are some tips on how to prevent this type of fraud — and deal with it when it does happen.
There are some steps you can take to decrease the odds that you’ll experience banking fraud. Just bear in mind that while these actions are insulating, they’re not a guarantee that you’ll never be a victim.
Shopping with a credit card rather than a debit card is a smart move in a lot of different settings, as long as you pay your balance off in full at the end of every billing cycle.
First, paying with a credit card helps you avoid in-person skimming scams when you enter your card’s PIN at an ATM or POS machine. Skimming — or stealing your card’s number and PIN — requires physical equipment, and it’s a little tricky to pull off. But it does happen.
Online, it’s even easier for scammers to nab your card information and use it themselves. However, credit cards come with a little more protection than debit cards. If you lodge a complaint with the credit card issuer, they’re more likely to offer you an immediate refund while they do their investigation.
Plus, a credit card is linked to a line of credit. It’s not linked to the account where you receive your paycheck. The damage is much greater if the scam happens to an account where you keep your assets rather than your debts.
When my spending account was breached, the banker made a suggestion I had never considered before. While they were confident they had taken all the necessary measures to ensure the hackers would no longer have access to my account, there was an additional precaution I could take.
Instead of keeping my money in the spending or checking account, I could keep it in a savings account at the same bank. Because transfers were instant, any time I needed to spend money, I could transfer it over right away. This would mean that my checking account balance at any point in time would be incredibly low, but that was a good thing if the thieves found another way in. There wouldn’t be as much for them to steal.
It also meant that while marginal, the money from my paycheck that I used for everyday spending would earn more interest as it sat in that savings account between paydays.
This strategy was especially pertinent as we knew my spending account had already been hacked once. If there wasn’t a known breach, it might have been too much labour to be worth it. If you pursue a strategy like this, you’ll want to check three things before implementing it.
First, if you have any automatic payments or transfers coming out of your account, you’ll want to reset them to come out of your savings account rather than your checking account. If you don’t make this change first, those automations could overdraw your checking account, incurring overdraft fees.
Next, ask yourself if there’s a card associated with your savings account. Most savings accounts do not come with a debit card, but if yours does, it could be just as vulnerable as the checking account.
Finally, check if your bank has any monthly withdrawal limits (or fees) on your savings account. Prior to the pandemic, there was a federal regulation that limited the withdrawals on all savings accounts to six per month. This was known as Regulation D.
Regulation D doesn’t apply to savings accounts anymore, though. However, that doesn’t mean your bank isn’t allowed to limit your withdrawals. It can also charge you fees if you go over any monthly withdrawal limits. While these fees are no longer required by the government, that doesn’t mean your bank won’t still charge them, so read the fine print.
If the American government has any of your personal financial information on file — whether that’s because you file taxes or receive any type of government benefit or pension — your personal data has been breached in a massive way recently, as Treasury data was transferred onto private, non-governmental, external hard drives without Congressional oversight.
For this reason, most financial experts are recommending that everyone freeze their credit report at this moment in time.
It’s not a politically-motivated recommendation. This is a standard recommended move when your personal information has been compromised by any data breach. A freeze prevents anyone from opening a new account in your name or making hard inquiries on your credit report. However, it does not protect the accounts you already have open.
Enacting a freeze is relatively simple. You just need to initiate the process with each of the three credit bureaus:
Because of the nature of the information in this latest breach, one particular type of fraud to look out for is tax fraud. It’s incredibly easy to pull off. All the scammer needs to do once they have your personal information is file before you. This is particularly concerning if you’re expecting a refund.
The IRS is understaffed and has been for decades. It’s not particularly effective at combating this type of crime, or at getting you the refund money once the fraud has already happened. The best way to combat this situation is to file your tax return as soon as possible. The sooner you file, the less time the scammers have to beat you to the punch.
If your identity has already been stolen, there are some steps you can take to lessen the damage. As you make your way through these steps, be sure to keep records of every phone call, email, and physical letter sent, along with the date, time and names of representatives you may interact with.
If an account has been tampered with, it’s best to close it. If it’s just your credit or debit card number that has been compromised, issuing a new card may do the trick, but closing the account entirely and opening a new one is an even more secure way to prevent potential future incidents.
A fraud alert will make it so anyone who attempts to use your Social Security number to open an account will have to go through extra steps to verify their identity. Initial fraud alerts last for one year, after which you have the option to actively renew them.
Unlike a credit freeze, when you request a fraud alert with any of the three credit bureaus, they’ll have to notify the other two. So you should only have to contact one of them.
The FTC doesn’t investigate individual cases of identity theft, but when you report your case on IdentityTheft.gov, it will help them build a database which can be used by local law enforcement. Plus, the FTC will provide you with documentation that may help you as you report to your local police station. You’ll also be connected to educational resources so you can make a plan moving forward.
The local police are the people who will actually help you with your case after you’ve encountered a financial scam. They may actually try to find the person and prosecute, or they may not. (If you’re struggling to get them to pay attention to you, you can include the FTC’s memo to law enforcement when you file.)
Whether they prosecute or not, you’ll need the documentation the police provide to fight fraudulent charges on your credit report and fill out other legal paperwork moving forward.
Once you have your paperwork in order after reporting, you can request an extended fraud alert on your credit report through the credit reporting bureaus. An extended fraud alert lasts for seven years.
Reporting paperwork doesn’t just get you access to extended fraud alerts. It also gives you a fighting chance to remove fraudulent line items on your credit report. You can use the FTC’s template letter as you submit to the credit bureaus to try to get these line items removed.
While fighting for removal isn’t the easiest process, it’s one that can be the difference between a good credit score and a bad one, which can impact things like your ability to rent a home, secure decent rates on lending products or even land employment in some situations.
Being the victim of identity fraud or theft feels violating — because it is. Someone’s gained access to your money or credit, and that can have severely negative ramifications. It’s not the easiest crime to prevent or fight, but if you take steps to mitigate the potential damage, your future self will thank you.
Brynne Conroy is an award-winning personal finance writer, creator of the popular women’s finance site, Femme Frugality, and author of The Feminist Financial Handbook, which was an Amazon #1 New Release across multiple categories including Poverty and LGBTQ Demographic Studies. Her work has been cited in academic texts, and she’s spoken at venues such as Vanderbilt University, the Financial Planning Association and the 529 Conference. Here at PocketSmith, Brynne covers personal finance within American financial systems.
