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Credit cards

Identity Theft: Three ways to fight it

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A few years ago, SDXB and I learned separately that each of our credit reports said we had lived at an address neither of us had ever heard of, in Tempe, Arizona. Although neither of us was harmed financially, it indicated a type of identity theft known as “application fraud” or “true name fraud.”

It took about a year to get the fake address off my credit records. Once it was expunged, I pretty much forgot about it…until a couple of weeks ago. That was when Costco announced it didn’t have my current address and my membership renewal was overdue. When I went to customer service to pay up, the CSR happened to show me her computer monitor, and what should I discover but that my home address was listed as SDXB’s former address and my business address is now at that same fake address in Tempe!

The appearance of an unfamiliar address on your credit report is one of many possible signs of identity theft. Other warning signs are missing bills, unexplained charges to your accounts, the existence of accounts you didn’t open, denial of credit for no apparent reason, and dunning calls from bill collectors for items you didn’t purchase.

Undoing a mess some crook has made is very difficult. It can take years to persuade creditors and credit reporting agencies that you’ve been a victim of identity theft, and the crime can haunt you for a long time. Thieves have so many ways to steal your private information, many of which you have no control over, that you really can’t prevent it. But you can take a few steps to reduce your risk. I think of them in terms of three strategies:

1. Monitor

You’re entitled to free annual credit reports from each of the three major credit reporting bureaus, Equifax, Experian, and Transunion. Rather than having to go through the hassle of contacting each of these agencies separately, it’s now possible to order credit reports through a single source, annualcreditreport.com. Instead of ordering all three reports at once, take advantage of the federal law by revisiting annualcreditreport.com once every four months, so that you can spread out reports from the three agencies over the course of a year. This will allow you to monitor your credit reports steadily. Watch for any unexplained activity or accounts you don’t recognize.

Also, before you pay a credit card bill, remember to review the statement carefully. Check financial accounts and billing statements each month, looking for charges you didn’t make.

2. Prevent

Limit the number of credit cards you carry around. Keep no more than one or two cards in your wallet.

Pay in cash at restaurants and other establishments where you can’t watch what an employee does with your card after you present it for payment. This eliminates the use of a skimmer, a handheld device thieves use to swipe cards for later download into their own computers.

Don’t use debit cards. If you must, memorize your PIN; don’t carry a note with your PIN in your wallet or purse. Avoid using your birthdate, numbers of your address, sequential numbers, or four digits of your Social Security number as PINs. Never use a debit card for online shopping.

Photocopy your credit and debit cards, front and back, and keep the photocopies in a safe place. This makes it easy to contact issuers if cards are stolen.

Don’t allow anyone to write your credit card number on a check.

Always take credit card receipts with you. Carry them in your wallet or purse, and shred them before discarding.

Carry outgoing snail mail to a USPS post box or postal station. Don’t leave it in your mailbox to be picked up by the postal carrier. To protect financial information sent to you through the mails, install a locking mailbox.

Avoid giving out your Social Security number. Don’t carry a Social Security card or Medicare card on your person. You (or your parents) can photocopy a Medicare card, trim it down to wallet size, and cut out the last four digits of the SSN that appears on it. Take the original the first time you see a doctor; otherwise, store it in a safe place at home.

Opt out of marketing lists for the three credit bureaus, limiting the number of free credit offers sent to you in the mail. When you do get such offers, always shred them or scissor them into tiny pieces before throwing them in the trash. Also register your telephone number with the National Do Not Call List, to further reduce offers from hustlers.

And of course, never respond to phishing e-mails. Remember, a legitimate bank or creditor will not ask you for your account number or Social Security number.

3. Fight back

At the first sign of identity fraud, notifiy all three credit bureaus and place a fraud alert on your account. This is good for 90 days. This step entitles you to a free credit report; get one from each agency and review all three reports carefully.

Report the theft or fraudulent activity to the police in writing, using an identity theft report.

Once you have filed an identity theft report with law enforcement agencies, use that and your evidence of identity theft to extend the credit bureaus’ fraud alert for seven years.

Report the crime to the Federal Trade Commission, using the police report number you got when you filed a police report.

Learn what your rights as an identity theft victim are.

If an identity thief has opened new accounts in your name, contact these creditors immediately. Federal law allows you to block businesses from reporting fraudulent activity to credit reporting agencies; the sample dispute letter available here will come in handy for that purpose.

If the thief has used existing accounts that belong to you, report the fraudulent activity to the creditors. Arrange to close the accounts and have new accounts with new account numbers issused to you.

So…what am I going to do about the Costco situation?

Well, we have a fair idea where this came from: only one person could connect SDXB and me in quite that way (the phony entry showed my legal first name, which I don’t use socially; few people who knew the two of us as a couple know my real name). At the time the spurious address popped up in our credit reports, this person was engaged in an extramarital affair. We figured she and the boyfriend had forged driver’s licenses in our names so they could rent themselves a love nest.

More recently, the same someone, who has been in deep financial trouble for quite some time, likely ran out of cash about the time her Costco membership lapsed. So she dug out the fake ID, presented herself as me, and said she’d lost her card. If she went in and asked for a new card in my name, she might have been asked for an address. SDXB’s old street address was at the same number as my new street address; the only difference is that one house is on Erewhon Road and the other is on Erewhon Place. So if she gave his old address as “hers”/mine, it would be credible.

I guess what I will do is cancel my Costco membership. Then we’ll have M’hijito buy a new membership in his name, with me on his account as a secondary card holder. This will be a hassle, because they’ll have to issue a new Costco American Express card with a new account number.

But since she hasn’t done anything (so far) that’s cost me any money or damaged my credit rating, maybe I’ll just let it ride and keep a close eye on the credit reports. Who cares if she gets into Costco for free?

Sears Credit Card: A new fast one from MasterCard

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What should come in the mail today but a notice that, o lucky me, I soon will be receiving a shiny new gold-plated MasterCard to replace my ancient Sears credit card, which I thought I’d canceled years ago.

Huh. “Your new card gives you MORE!” 

Oh boyoboyoboy! 

“Earn Rewards Points!…
…with FREE membership in Sears Choice Rewards when you call 1-800-669-8488 and enroll by 10/31/09″

“Plus Earn Up To 1,500 Bonus Points!!!!!”

Be still, my heart. I can hardly contain my excitement.

At first I thought this thing is a straight-out replacement for the Sears card, which materialized some time back when I bought some appliances on one of those 12-month no-interest deals. If you have the cash to pay upfront, these offers can be played to your benefit: you just set the money aside a high-interest online bank account or into your credit union’s highest-paying account or 9-month CD. Then in the 11th month, you pay off the debt in full. Allows you to earn a few dollars on the float. Makes you feel smug.

However, a study of the fine print reveals that you don’t lose your regular Sears charge account unless you call an 800 number and have the MasterCard activated. If you do nothing, well then…nothing happens. The Sears card does not go away, and the MasterCard does not function. But if you don’t want them to send you an unsolicited credit card, the better to expose you to identity theft, then you have to waste some time navigating their punch-a-button maze to call and tell them to knock it off.

Well, I thought I’d closed that Sears account. Dug up the old, dusty file folder and found…nay. The last time they sent me a shiny new blue Sears charge card, I just dropped it in the folder and forgot it. The sticker with the phone number to activate it is still stuck to the front of the card.

I carry two cards in my wallet because some establishments refuse to pay American Express’s exorbitant merchant’s fees. That notwithstanding, I use AMEX because a) Costco won’t take any other card at its gas pumps and b) it gives me a $250 to $500 kickback once a year. Since I don’t carry cash, I need a back-up card if I’m to do business with retailers and service providers who won’t accept AMEX. That feels like one card too many for me: given my choice, I’d use only one card. So I absolutely positively do not need a MasterCard with a Sears logo on it.

This fine offer came in a first-class envelope labeled “credit-card replacement information—open immediately.” What it really is is issuance of an unsolicited credit card. I did not ask for this card, whose interest rate can go as high as 29.99%, and I don’t want it. Nor do I appreciate having to waste my time in their punch-a-button maze to get rid of the thing.

Didn’t they make that illegal?

If you’re a Sears customer, watch for this coming your way. And if you already have a perfectly fine general-purpose credit card, ask yourself why you need another one. If the answer is “I don’t,” note that you have to call them to “opt out” of this unsolicited gift.

Credit card companies to penalize “freeloaders”: What’s your plan?

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As we know, credit card companies call people who pay their bills on time and in full “freeloaders,” and management highly resents such deadbeats because they’re not cash cows like people who sink over their heads in usurious debt. Credit-card issuers make something on us bums, of course, because each charged transaction nicks the merchant a percentage of the sale price. But it’s nothing like the criminal interest rates and extra gouges they get from people who run a tab on their cards.

Well, if you’re one of those losers who pays your bills on time, watch out! The legislation pending in Congress to limit credit-card penalties and curb wacko punitive fees is about to backfire on you. In response to having to quit ripping off feckless consumers who can’t or won’t clear their credit-card debt, the nation’s banks are about to curtail cashback and other rewards, eliminate grace periods, and sock every card user with an annual fee. As American Bankers Association CEO Edward L. Yingling told the New York Times, “It will be a different business. Those that manage their credit well will in some degree subsidize those that have credit problems.”

Don’t think so, Ed. Charge me a fee to carry your plastic around in my purse, and you can have the piece of plastic back. I, for one, do not and will not pay an annual fee (or any other kind of fee) for the privilege of going into debt at a usurious rate. While it’s a great convenience to have an American Express and a Visa card in hand, it sure doesn’t come under the heading of “necessity.”

So, what will we do if suddenly all our credit card issuers inform us that cash kickbacks and airline miles are things of the past, that we now have to pony up $25 or so to use any credit card, and that the grace period for paying one’s bill has died?

The AMEX cashback scheme is the sole reason I use my Costco American Express card for every purchase I make. The reason I got the AMEX card in the first place is that Costco quit accepting any other credit card at its gas pumps, which dispense the cheapest gas in town. Costco won’t accept cash for gasoline, and I don’t care to use a debit card. If AMEX reneged on its cashback plan, I probably would continue to use the card exactly as I do now, because it’s a great convenience and because the “float” between charge date and payoff date makes it easy to manage my budget. 

However, if they demanded an annual fee, I’d cancel the card in an instant. Ditto the Visa card.

There are some good reasons to have a credit card, most of them related to booking travel arrangements and to the extra back-up in case of a dispute with a merchant. I’d be sorry to see the cards go, but go they would if I were made to pay to carry them around.

In lieu of cards…what? There are several fine alternatives:

• Use a debit card instead. Costco’s gas pumps accept debit cards, and so do most other merchants. Disadvantages: it’s a fair way to bounce a transaction, and there’s little or no protection if someone steals the thing and hacks into your account.

• Pay recurring bills with EFTs from your checking account, not by charging them on your credit card. Disadvantage: some vendors won’t accept EFTs. But they may change their attitude when their best customers dump credit cards.

• Use cash. Some people find they spend less when they carry cash instead of a charge card. I personally have the opposite experience: cash flows through my fingers like water, and at the end of the day I have no clue where it went. But I suppose you could keep every receipt and enter it in Quicken or Excel; if that helps you keep a grip on credit-card spending, it presumably would do the same for cash.

• Use checks. This creates a paper trail, just as charge card statements do. Disadvantage, of course, is that checks are an expensive nuisance. 

My strategy: First, to find out if policies to shaft us “deadbeats” apply to the Visa cards available through the credit union. If not, get one of those; if so, get a debit card and start using lots more cash.

Times reporter Andrew Martin reminisces that in the good old days only the best consumers could get credit cards—and indeed, I do recall the time when flashing a credit card advertised your status. Now everyone will know that only the worst money managers have to use credit cards—pulling out a credit card at the grocery check-out will signal fellow shoppers that you can’t afford to pay your bills in cash.

What do you plan to do if your credit card issuer yanks your benefits and proposes to charge you an annual fee?

Snail-mail vs. electronic payment

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Are there bills that you refuse to pay electronically, or am I the only maverick running loose across the range?

These days, I pay all monthly bills by EFTs, except the phone bill. I never trusted Qwest, which in the past was prone to sending incorrect statements full of phantom charges. But because they had been OK for several years and because I no longer make many long-distance calls, I opted to let them engross money from my checking account. That was a mistake—it added even more aggravation to the late, great Qwest saga. So, when I switched to Cox, which after all is just another giant squid of a telecom corporation, I decided to keep its tentacles out of my bank accounts.

Cox’s statement hasn’t arrived this month. It’s usually here by now: last month I wrote a check on the 6th, meaning the bill would have been sitting around the house for several days by then. The bill actually isn’t due for another couple of weeks, but they claim you need to get the payment to them ten days before the announced due date, to ensure it posts on time. So I had to call them on the phone, navigate the infuriating punch-a-button system (is there any question why so many Americans have high blood pressure?), then find out what’s owing and what their mailing address is.

Snail-mail is so passé that the employees don’t even know what the company’s address is. It took the human I finally reached two tries to find what she thinks is the correct accounts receivable P.O. box.

There are some corporations, IMHO, that can’t be trusted. The phone company is one of those: I want to see the bill before there’s even any possibility of money being released. Ditto that for credit cards. I never pay credit-card bills electronically: I do not want Visa or American Express to have any access of any sort to my bank accounts, other than through a check. I want to be able to see and confirm each charge in each billing cycle before sending money.

A credit-union rep once remarked that it’s not a good idea to pay insurance companies electronically, either. I do: long-term care and life insurance premiums are EFTed to the relevant companies. But I don’t pay the annual homeowner’s and auto insurance that way. Too squirrelly: you never know when they’re going to run amok with the premiums, so I want to minimize potential hassle if I decide to switch insurers.

What bills, if any, do you pay the old-fashioned way?

AMEX kickback comes through, and surprises

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Nice timing for the annual AMEX credit-card kickback. This year it’s $210, which will almost make up for this month’s furlough gouges. One of our clients owes us $1,100, which hasn’t been forthcoming, but if and when that ever shows up, my half of the net plus the American Express rebate should carry me through the first three periods of reduced pay.

So far, I haven’t gotten any static from American Express, despite reports of questionable practices from those quarters. I did use the card at a Walmart before I’d heard of AMEX’s data mining schemes, but so far they have not cut my credit line. Possibly that’s because it’s a Costco card. It’s unlikely that AMEX would risk alienating a major client by slashing its customers’ credit.

Hm. I’ve spent an incredible amount of money with this thing over the past year: $18,717. Of that, $1,187 went to gasoline, $448 to eating out (really??), and $14.75 to “traveling” (huh? I haven’t “traveled” in years). “Everywhere Else” racked up a total of $15,742.

Oh, this gets better: a Quicken category report suggests I spent $578 eating out! The $14.75 was for lunch in Prescott, when I drove an out-of-state friend up there, not exactly “traveling,” IMHO. Lordie! Who would think I’ve spent that much in restaurants? I try to stay out of them, and generally restrict eating out to twice a month, max—and for lunch, never for dinner.

Eating lunch out is pretty much out of the question during the week, because the on-campus chow lines sell nothing but junk food, which I don’t eat. There are only a couple of decent places to eat within walking distance of the campus, and one of them is very expensive. So, I usually go hungry over the lunch hour, since we have no refrigerator and no place except the public toilet to rinse out dirty dishes.

Surprising. I’ll have to get a grip on that!

Credit cards, debit cards, cash cards

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Good grief! Rousted out of the sack at 6:30 ayem by the bulk trash pickup, flashing their lights into the bedroom. I thought it was the Fire Department! Grr…I’d planned to sleep in for a while today, after working myself stupid yesterday on a horrifically mind-numbing project.

{Ugh!} Speaking of bulk trash, what do we have here but an e-mail from the sidekick reporting that our brilliant author’s 87 gerjillion ditzy boxed pullouts disappeared from the file I sent her!? How many more hours am I going to have to spend on this garbage?

Where was I? Yesterday, comes in the snail-mail a notice from Sears saying its credit-card issuer, Citibank, has made “some changes.” I’ll bet, think I. Actually, I expected the “change” would be to cancel the account, which I opened only to get the benefit of a 12-month no-interest scam on some appliances and have never used since.

No. They’re writing mostly to say they’re upping the already usurious interest rate another couple of points.

Interest on this card, in the wacko free-for-all age of the unregulated market, can go as high as (hang onto your hat) 29.9 percent! For heaven’s sake. And this is on a card for Sears, a joint commonly patronized by folks who never spend their time swimming in money. Is that or is that not the most rapacious thing you ever heard?

Over at Consumerism Commentary, Flexo has a discussion going about the merits of debit cards vs. credit cards. I’ve never used a debit card, partly because I have enough numbers to memorize, thank you, without yet another PIN, but mostly because I think they’re dangerous. If someone steals it, he can not only empty your checking account, he can drain it to the bottom of your check-cashing credit line. In my case, that’s $3,000 plus whatever cash is in the account at the time.

I realize they’ve changed the law since these things first came out, so that you do have some protection from rip-off artists. But the fact remains that you may not realize what’s happening until the account is already bouncing EFTs. So even if the bank reimburses you for the stolen money, you still are faced with the enormous hassle trying to explain to all your creditors that you’re not, no indeed not, a deadbeat. Your credit could be damaged, and who has time to run through every punch-a-button maze for every faceless corporation with which we all have the pleasure of doing business? That’s a nightmare scenario that I’ve preferred to avoid.

A credit card—providing you pay it off on time—has many advantages. First, most credit card issuers back you up to some degree in a dispute with a merchant. Second, many credit card issuers provide insurance for products that are lost, damaged, or stolen shortly after the purchase. Third, many credit cards give you kickbacks in the form of cash or “rewards.” And finally, you make only one transaction a month in your checking account, rather than a score of them. This allows you to keep your money in a money market account, which earns a sou or so more in interest than a checking account does.

There is, as many PF bloggers note, the risk that you’ll spend more money when you’re waving a card around than when you’re forking over cold, hard cash. Personally, I have the opposite experience. Cash disappears out of my purse like water flowing through a pipe. Put $100 in my hand in the morning, and by evening it will be gone and, more to the point, I’ll have no idea where it went!A credit card statement gives me a paper trail, so at least I know where I diddled away the money.

And as a practical matter, I don’t diddle it away with a credit card. I budget a specific amount each month that can be charged to the credit card. The credit union automatically transfers that amount out of my paycheck into a money market checking account, from which I pay credit-card bills. Using an Excel spreadsheet, I enter each transaction as a debit against the budgeted amount, so that at any given time I know exactly how much remains to spend. I also know when I’ve spent it all, and so I know when to stop charging stuff.

This works effectively to keep me from spending more than I have.

Recently, however, American Express, which issues the card I use most, changed the closing date on a billing cycle. I dodged an overcharge only because I was ill and so didn’t make it out to buy groceries on the extra day that appeared in that cycle.

Needless to say, I was less than pleased. Because I was running pretty tight on the budget, had I bought the groceries I needed that day, I would have had to raid savings to pay last month’s bill.

It occurred to me that I could get around this problem by purchasing cash cards at Costco and Safeway (which collect most of my money) in the amount that I normally spend at those emporiums each month. This would set my budget in stone: run out of cash on a card, quit buying. It would moot any cute little changes designed to trip up credit-card users. But if I charged them on my AMEX card, I’d still get a bit of a kickback (not as much, because the Costco gasoline purchases get a very nice kickback, but something). It would also mean that if I had not used the entire balance on such a card, that much more would be available to spend the following month.

Let us ruminate…

If indeed I have not spent a month’s alloted budget at Safeway, so that I have, say, $150 left over at the end of a budget cycle, then the only place I can spend that money is at Safeway. Wouldn’t I rather have that money in the money market account, where it’s earning a little interest and where I can spend anywhere? While it’s true that the next paycheck puts another $150 spendable dollars in there, if the leftover cash remains in my account, the account contains 300 interest-bearing dollars rather than only 150 of the same.

And if a debit card is risky, how much riskier is a cash card? Anyone can use it, and as far as I can see, there’s no protection at all if you lose it or if it’s stolen. With a debit card you have a hassle. With a cash card, the money is already spent (effectively), and it’s as stealable as cash itself. Bad.

Costco’s cash card can be used to buy gasoline as well as food and household products. Costco will not take cash or checks at its gas pumps, which consistently underprice all other gas stations: you have to use an AMEX or a Costco card. If AMEX continues to close its billing cycle on unpredictable days, a cash card in the amount of $50 or so would allow me to buy gas near the end of a cycle without worrying about whether I would overrun my budget. While gas prices are low, it would even leave enough to buy a day’s worth of groceries. The theft of an entire month’s food budget would of course be a disaster, but fifty bucks wouldn’t break the bank.

It would be convenient to have a cash card to buy food and gas if, as happened a few months ago, the AMEX card mysteriously quits working. On the other hand…cash would serve the same purpose and need not be carried around in a wallet, where it’s infinitely vulnerable to diddling way, theft, or loss. It probably would be better to stash a hundred bucks in a file folder and use it as a small emergency fund.

Overall, then, pretty clearly a cash card has no advantage over a debit card and no advantage over cash. For those of us who need to see actual dollars in order to keep a grip on them, a cash card poses the same budget-busting risk as a credit card. In stop-loss terms.the debit card has only a slight advantage over cash should you lose it or have it stolen from you.

IMHO, the credit card has got it all over either a debit card or cash, assuming you can exercise a modicum of self-discipline. It’s safer, it lets you see where you’ve spent your money, and it gives you a kickback.

So… In the past I’ve made the day before and the day of the AMEX billing cycle end date “no-buy” days, to be sure all payments clear on the statement I’ve budgeted for. Now I’ll also refrain from spending on the day after the billing cycle is supposed to end. That should obviate any repercussions from this new “gotcha.”