Why you should never have a debit card

Debit cards have become a very popular way to pay for everything from fast food to rental cars. The Federal Reserve reports that debit card transactions have been growing more than 20 percent annually and have surpassed credit card transactions. The appeal is understandable. Debit cards are quick and easy to use. But using a debit card can cost you hundreds and even thousands of dollars. We’ll show you why you should never carry a debit card.

More Risky than Carrying Cash

In it’s 2007 Debit Issuer Study, PULSE EFT Association reported that U.S. financial institutions lost an estimated $662 million to debit card fraud in 2005. There is no end in sight.You’d be safer carrying cash. Although you don’t have much recourse if it’s lost or stolen, but at least your loss is limited to the amount of the missing currency.Carry a debit card, and you put the entire balance in your bank account at risk. If you link your checking account to your savings account to avoid overdrafts, you put the balance in both accounts at risk.

More Dangerous than a Credit Card

If a thief gets your credit card, the federal Truth in Lending Act limits your liability for any fraudulent credit card charges to $50. You may not have to pay even that amount, as many financial institutions don’t impose any charge on their defrauded customers. And while the theft is being investigated, you can refuse to pay any part of the unauthorized charges.Debit cards fall under a completely different law, the Electronic Fund Transfer Act. To limit your liability to $50, you have to notify your bank within two business days of discovering that you’re debit card has been lost or stolen. Wait longer than that, but give your bank notice of the fraudulent transactions within 60 days of when your statement is mailed, and your maximum liability jumps to $500. Miss that deadline and you could lose all the money in your account. Because the debit card accesses fund directly out of your account, you can be left without your grocery money while the fraud claim is being investigated.

The $350 Taco

One trip to Taco Bell was enough to send Joseph Rizk’s checking account into freefall.Rizk made the mistake of paying for fast food with his debit card. He figures he spent only about $5 more than he had in his account. Unfortunately, by the time he realized there was a problem, the bank had hit him about $350 in overdraft fees. At $25 to $35 per occurrence, it’s easy to rack up hundreds of dollars in needless NSF fees.“I overdrew, and they pretty much pummeled me with charges,” said Rizk.The Center for Responsible Lending, a consumer group, estimates that overdraft charges cost people about $17.5 billion each year. The center’s research reveals that about 45 percent of those overdrafts are the result of using a debit card or taking out cash from the ATM.Banks used to refuse any debit card transaction that would overdraw a depositor’s account. But not any more. Banks could warn depositors when their accounts are close to being overdrawn. But they don’t.Instead most financial institutions automatically enroll their depositors in a program that loans them the amount of the overdraft—but at a steep price. The Center for Responsible Lending estimates that Banks that offer these lending programs can expect a sharp increase in overdraft revenues, as much as 200 to 400 percent.Calculated as an interest rate, rather than a fee, the cost of these loans is astronomical. The average amount of a point-of-sale purchase that overdraws an account is $14.75. The average fee is more than double that amount. According to the agency, most consumers only use these loans for a few days. So on an overdraft loan, the annual percentage rate can be as high as 20,000 percent.In defense of this practice, bankers like to point out that it’s the responsibility of the account holders to monitor their account balances and avoid overdrafts. Of course, that requires the account holder to know how much money is in their account.

How Can You Know Your Account Balance?

R. C. Welborn, learned the hard way about the risks of using debit cards. To make sure he didn’t overdraw his account, he checked his online bank statement. Since it showed $80 in his checking account, he fell free to make several small purchases a few days before his paycheck was deposited. Using his debit card, he bought two gasoline fill-ups, snacks and cigarettes, totaling about $65.Although the balance in his account was more than enough to cover the price of what he bought, when he checked his account about ten days later, he found he had incurred $120 in overdraft fees. “I couldn’t figure out what was going on, I knew I had money in the bank,” Welborn remembered.Like most people, Welborn didn’t know that merchants can place a pre-authorization hold on a customer’s account. In situations where the exact amount of the transaction isn’t settled when the approval is given, it makes sense a merchant would want reserve a little more to cover their transaction. If you give your debit card to a waiter, hotel clerk, car rental company, or gas station, the merchant is likely to get an approval of a higher amount—to cover any tip on their service, higher purchase amount, or room service. Car rental companies that accept debit cards routinely place holds in the amount of $300 to $500. Now Welborn understands that the pre-authorization hold the gas station put on his account resulted in overdrafts on at least six other small transactions. He estimates that he paid over $2,000 in overdraft fees because he used a debit card. “The quickest way to bankrupt yourself is not knowing what’s going on with your debit card, but if you don’t get a warning when you’re doing it, how to you know?” Welborn asked. “I won’t touch a debit card anymore. I do everything with cash.”Pre-authorization holds placed by merchants are just one of the factors that make it difficult, if not impossible for a depositor to know his or her available account balance. It’s becoming more difficult to tell when a transaction hits an account. Some debit cards allow for both signature-based debit card transactions, that, like a check, take a few days to clear, and PIN-based transactions, which hit the depositor’s account instantly. Take into account paper checks that merchants and service providers frequently convert into electronic drafts, and, without real-time account information, it’s impossible to know what’s in any checking account.Nessa Feddis, senior federal counsel for the American Bankers Association in Washington explains that even the banks don’t have up-to-the-minute information. “We don’t have real-time transactions. There will always be outstanding transactions that the consumer has authorized but have not hit the bank.” Comparing debit card transactions to a plastic checks, some financial institutions instruct depositors to keep track of their purchases, just like in the old days when checks and drafts were the only way to draw funds from a checking account.But in the old days, a depositor could wait for their bank statement to reconcile their balance. Now, by the time the statement arrives, the damage may already be done.“The debit card is really where it’s a serious problem,” argues Ed Mierzwinski, the consumer program director of the U.S. Public Interest Research Group in Washington. “It’s harder to keep track of your balance because of the tricks banks use.”In addition, there are no regulations or statutes that limit the amount of a pre-authorization hold, or the length of time that it can be imposed on an account. When Penny Chaisson’s bought $20 worth of gas, the station put a hold of $75 on her account, more than 3 times the amount of her purchase. She contacted both the gas station and her bank, but each pointed a finger at the other. Even after escalating her complaint to management, it was 72 hours before the hold was released.These holds stay in place until the bank or the requesting merchant gets around to releasing the amount held in excess of the purchase amount. Generally this takes a few days, but it could be longer.

How You Can Protect Yourself

Promptly reconciling your account to the monthly statement or monitoring your account balance on-line won’t always prevent loses associated with the use of a debit card.There is only one solution—Don’t carry a debit card. When opening a checking account, it is standard practice for a bank to send the depositor a combination debit/ATM card. However you can pick and choose the services you want to accept. If you want to avoid the risks of having a debit card, but would like the convenience of ATM access, you bank will issue you a card for just that purpose, without the debit card function.You can always pay for your purchases with cash or a credit card, since both are safer than using a debit card.  

Dirty Bank Secrets

In recent years, banks have adopted some practices that impose high fees and other penalties on some of their most vulnerable customers. We’ll take a look at two of the most dangerous pitfalls, and show you how to avoid them.

THE UNIVERSAL DEFAULT CLAUSE

Banks have been promoting low “teaser” rates on new cards and balance transfers, but there’s often a catch. Those preferable interest rates can jump into the high 20s and even in the low 30s if a borrower is late with a single payment.
Banks that include a Universal Default Clause in their credit card agreements can raise interest rates if their customers are late paying any debt. This means that if you don’t pay a utility bill on time, or forget to send a check to a book club, the interest rate on all of your credit cards can make a sharp jump upwards.

Changing the Rules in the Middle of the Game

It’s one thing to use a consumer’s payment history to underwrite a new loan. But credit card companies are applying these new, much higher interest rates to existing loan balances.

There is no other form of lending where this happens. If a bank tried to double the interest rate on an existing car loan, the courts would smack it down. Even with adjustable rate mortgages, there are established limits on when and by how much the interest rate can change.

Only with credit card debt are the banks allowed to increase rates on the slightest bad credit news. Worse yet, the amount of the increased interest rate they charge the consumer, as well as the event that triggers the increase, are at the bank’s discretion.

Even Without a Late Payment, Banks Can Raise their Rates
Mary Ann was shocked then she opened a credit card statement to discover her APR on the loan jumped from 8.99% to 18.49%. The bank informed her that, after reviewing her credit records, they determined her high debt-to-income ratio made her a higher risk borrower.

“I consider myself to be very capable with my finances, but I’ve had a few years where I ran up more debt than usual, including a home equity loan,” said Mary Ann. “I made all of my payments on time, but evidently my new debt affected what used to be a stellar credit record. It’s frustrating.”

Then another credit card statement arrived, raising the interest rate from 8.99% to 27.4%. Mary Ann was appalled, “In all the years that I held this card, I never made a late payment.”

Preying on the Inexperienced

When Seth Woodworth was a student at Central Washington University, he ran up over $3,000 in credit card debt. “I was pretty terrified of listening to my voice mail because of all the messages about the money I owed,” said Woodworth.

Students are an easy mark for unscrupulous credit card providers, because they often don’t have any experience using a card.
Woodworth didn’t read the credit card agreement, and had never heard of a Universal Default Clause. “I had no idea that my interest rate would rise the way that it did because I missed one payment,” said Woodworth. He also didn’t know that there is no regulation limiting the amount a bank can charge for a late fee on a credit card payment, until he was charged $39.

In their defense, issuers of credit cards say they emphasize consumer education. And, of course, they give every customer a disclosure of the terms and conditions of the credit card agreement. These agreements are often 30 pages long, and contain sophisticated legal terms.

Citibank promised to stop imposing a Universal Default Clause on its credit card customers, and has done so. But as of the middle of 2007, a survey by the advocacy group Consumer Action, reported that 8 out of 10 banks still employ a Universal Default Clause to raise interest rates based on customers’ credit reports.

As for Woodworth, he had to quit school and work for 2 years to pay off his credit card debt before he could finally resume his college education. He said, “If I could do it over again, I never would have gotten a credit card.”

BOUNCE PROTECTION

Many people are not aware that if they try to make an ATM withdrawal for more money than they have in their account, the ATM will allow them to do so, but the bank will impose an overdraft fee that can be as high as $35.

Bounce Protection, or “Courtesy Overdraft Protection” as some banks call it, is a program that many banks and other financial institutions routinely impose on their checking accounts. It used to be that a customer had to request overdraft protection on their account. Now it is quietly slipped into the terms and conditions agreement.

Getting Rich on Overdraft Fees

According to the National Consumer Law Center, Bounce Protection was designed and promoted to banks by several banking consulting companies, who sold it as a complete package, including software, consumer marketing materials, and operational assistance. The consultants promised that banks would increase their overdraft fee income by 100% to 300% or more—and they kept that promise.

One consultant calculated that a customer who makes only one overdraft transaction per month generates the same income to the bank as a depositor with a $12,000 average account balance. Since there are many more depositors who are likely to use Bounce Protection then there are affluent depositors, it benefits the bank to encourage customers to overdraw their accounts.
Maximizing Multiple Overdraft Fees

Where the banks are really making money is on multiple overdraft fees. Once an account has gone into a negative balance, any check, ATM or debit card transaction that hits the account generates another $20 to $35 NSF fee.

What’s worse, is the banks structure their accounting so that the largest transaction hit the account first, so if it puts the depositor over their account balance, each of the smaller transactions will trigger a new $35 fee. It would be easier to apply the transactions to the account in the order in which they occurred—but that wouldn’t generate the as many fees.

More Expensive than Payday Loans

In essence, banks are competing with payday loans. At least with a payday loan, borrowers know up front how much they are borrowing, and how much they are paying for the advance of funds against their paycheck. With Bounce Protection, a depositor often doesn’t know their account is overdrawn until the damage has been done, and it’s too late.

Since most overdraft loans are repaid within a couple of days, they may pay as high as 20,000% APR on their overdraft advances.

Unlimited Fees

There are no limits to prevent consumers from getting mired down in multiple overdraft fees, creating perpetual debt. And banks have a disturbing history of accessing the social security deposits of low-income and fixed-income depositors to cover their multiple Bounce Protection fees. These are not hypothetical situations, but real depositors that banks have literally put out on the streets without money for rent and food.

HOW YOU CAN PROTECT YOURSELF

Read the fine print
Be one of the few who actually reads the boilerplate contracts the bank gives you, containing the terms and conditions that control their credit cards. Since this is a legally binding contract, it’s worth the time to read the agreement and ask questions about any provisions you don’t understand—before you open an account.

And the fine print doesn’t end when you open the account. Most banks reserve the right to change the terms and conditions agreement at any time. You’ve probably received notices of changes of the terms of your credit card or bank account in the mail, with more legal disclosures. The only way to know what new terms the bank is imposing, is to read these as well.

Shop Around
Not all banks include a universal default clause or bounce protection provision in their consumer agreements. Look for a bank that will provide you the financial services you need, without putting your finances or credit rating at risk.

Check your Monthly Statements
With any credit card, it’s important to read your monthly statements, and to compare them with previous months. Interest rates have a way of creeping up over time. Even on fixed rate cards, interest rates can balloon on as little at 15 days notice from the bank.

If the bank does raise your rate, consider calling to ask for a lower interest rate. You’d be surprised how often they will do what is necessary to keep your business.

Conclusion
At some point, Congress may pass a law prohibiting these types of abusive fees and exorbitant interest rates. But in the meantime, the rampant greed of the banks that use Universal Default provisions and Bounce Protection fees to generate income goes unchecked. Thus, it is up to consumers to protect themselves.

Credit REPAIR-FACTS & FALLACIES

There is lot of information available about credit repair, but so much of it is conflicting, it’s easy to get confused. The credit bureaus themselves would like consumers to believe that there is nothing they can do to improve their credit ratings. There are unscrupulous credit repair companies that guarantee miraculous, instant jumps in credit scores… and then there are legitimate credit repair agencies that provide services that give consumers realistic and reasonable results.
To help clear up some of the confusion, here are five facts and fallacies about credit restoration:

1. Only Time Can Change The Information on Your Credit Report.

FALSE.

The purpose of the Fair Credit Reporting Act is to give consumers the right to challenge the accuracy and fairness of information on their credit reports. Congress recognized that credit bureaus have a vital role in accessing the creditworthiness of consumers. The act was designed to ensure that consumer reporting agencies exercise their responsibilities with fairness, impartiality and a respect for the consumer’s privacy.

The result is a federal law that gives consumers the right to challenge the information in their credit reports.
The FTC has warned consumers to avoid using credit repair services. Why? Because in the past so many Americans have been deceived by them. Due to the number of people desperate for credit repair, inflated offers of overnight credit restoration target a large and eager audience. Most of these companies promise impossible results and fail to deliver after they have the customer’s money. In an effort to protect the public from being preyed on by such companies, the FTC has issued the sweeping statement that “Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost.” However, this isn’t entirely true.

2. Accurate Information Cannot be Removed from your Credit Report.

FALSE.

The Fair Credit Reporting Act provides in part that a “consumer reporting agency is not required to remove accurate derogatory information from a consumer’s file, unless the information is outdated under section 605 [§ 1681c] or cannot be verified.” Section 609(c)(2)(E).

Did you notice the wording, “not required to remove”? There is nothing that prohibits credit agencies from removing accurate information. In fact, the Fair Credit Reporting Act lays out EXACTLY the situations in which credit bureaus are REQUIRED to remove an accurate item from a consumers report.

Why does anyone say otherwise? The banks want to know every derogatory event in a potential borrower’s credit history and the credit bureaus are in the business of selling negative information.

Congress recognized that consumers are bombarded with offers of easy credit and that good citizens should not be punished for every mistake they’ve ever made. Since the purpose of the law was to give consumers the right to challenge information in their credit reports, Congress left room for reporting agencies to remove even accurate information under certain circumstances.

3. Credit Reporting is Subjective.

TRUE.

There is no one number or report that defines your credit history.
There are three nationwide consumer reporting companies, Experian, Equifax and TransUnion. Each of these companies has its own sources of credit information as well as its own method for calculating a consumer’s FICO score.
FICO is short for the Fair Isaac Company. FICO scores range from 365 to 840. The higher the score, the better credit a consumer has. Anyone with a score of 720 or lower might benefit from credit repair services.

The way that FICO scores are calculated is shrouded in mystery. However, it is generally accepted that FICO scores are calculated on a scorecard on which several factors are given varying degrees of importance. These factors include: delinquencies, the number of new accounts, length of the credit history, the amount of unused credit available, and inquires requesting the credit report.

Since each of the three credit bureaus uses its own formula to arrive at a FICO score, they usually have different FICO scores for the same person. While some banks rely on only one FICO score, others look at all 3 and average them together.4. Credit Repair can be Instant and Guaranteed.

FALSE.

There are no instant fixes when it comes to credit repair. Even if you were to pay off all of your current debts, it would take at least a month for that action to be reflected on your credit reports.
So what is a reasonable period of time for a consumer to expect to see an improvement in his or her credit rating? Of course, it depends on the situation. And the consumer has to keep their credit in good standing going forward. Getting a new late payment reported will send credit repair efforts back to square one. A consumer’s goal is to convince the credit bureaus that the bad history is old information, and the new information accurately represents their current financial picture. Since credit bureaus tend to weigh most heavily the events of the last 12 or 18 months, depending on a consumers specific history, it is reasonable to expect that it may take 3 to 12 months to significantly impact a consumer score.

There is also an unpredictable aspect to credit repair. Of course, the skill of the person repairing the credit is one variable. But part of credit restoration depends on what each of the individual creditors and credit bureaus do. For this reason, the same type of request regarding the same kind of derogatory credit information can have very different results from one creditor to the next.

5. Lenders are the Only Ones Who Look at your Credit Report.

FALSE.

Running a credit check has become a common practice among a lot of businesses that deal with the public, not just lenders.
More and more, insurance companies are pulling their applicants credit reports before making a decision to issue or not issue coverage. The insurance industry justifies the practice by pointing to its finding that the likelihood a customer will file a fraudulent claim rises if that customer had a bad credit history. Of course, even if a consumer convinces an insurance company to issue a policy in spite of his or her bad credit rating, that customer is very likely to pay a higher premium that someone with a good credit.

Employers frequently check on their prospective employees histories. It’s very disturbing to think that a couple of derogatory reports on your credit report could keep you from landing a job, but it’s true. It’s not much comfort that any employer who rejects a job candidate because of his or her credit history has to notify that candidate in writing and provide him or her with a copy of their credit report.

There is now a law that requires insurance companies and employers to get written consent of the consumer before running their credit history. But this isn’t much protection. A potential employer can claim that a job candidate hasn’t completed their application until they sign the consent to have their credit report checked.

A bad credit report can negatively affect many aspects of your financial life. With something this important, it makes sense to get professional help with your credit repair. The result of any credit restoration effort depends in large part on how well a consumer complies with the repair program as well as the skill of the credit repair professional hired.

6. Anything a legitimate Credit Restoration Company can do for you legally, you can do for yourself at little or no cost.

FALSE.

Since Credit Restoration Companies work with numerous clients, the reputable ones have much more experience in dealing with creditors, the credit bureaus and collection agencies. As an analogy, credit dispute strategies can be much more complex than simply changing the oil in your car. Automobile mechanics can check the more technical aspects of your vehicle, such as your brake pads, rear differential fluid, etc. Another comparison would be representing yourself in court. It’s not impossible, but one small mistake could cost you. What if I were to say to you…

“Anything a legitimate attorney can do for you legally, you can do yourself at little or no cost.”
The same goes for a mechanic. In the end it comes down to the “cost to benefit ratio.” How much can I do myself based on my current skills and experience, and would I benefit by hiring someone to handle the more technical aspects of my credit report. The answer is almost always a resounding “yes.” A skilled credit restoration expert lives, breathes, and eats their work. They always have light bulbs going off in their head as to additional angles that can be used to get you the results you need, and as quickly as possible.

For example, some collection agencies can be very uncooperative. You just can’t “shake them”. They might ignore your dispute letter, and the credit bureaus might verify the account as accurate. What next? A skilled credit restoration expert will be able to bring you the persistence you need in getting negative items removed, as well as helping you add positive primary unsecured accounts to your credit report to immediately boost your credit score. This is why all consumers should consider hiring a professional.

The Truth About Credit Repair

Have you ever wondered what companies send you when they claim you can erase your bad credit overnight? How about those ads that say you can get any major credit card 100% Guaranteed regardless of your credit?

Ads abound almost everywhere (online and off) selling books, systems and secrets to help you fix your credit in a hurry. Many of these programs have claims that read like the covers of supermarket tabloids “In 3hrs my credit score jumped from 580 to 676!”… “Erase bad credit and smash your debts with just 2 Magic Letters!”. “Create a completely new credit file in 24hrs!” Are these types of claims ALWAYS too good to be true? The answer is “Yes and… no”.

While many people would love for you to believe that the only thing that can fix bad credit is time; in reality… nothing could be further from the truth. The fact is, time is only one factor that will fix a credit report (but it’s a far cry from being the only factor). How can I back this up? Easy. Under a consumer protection law known as the Fair Credit Reporting Act (a.k.a. the FCRA) the only negative information that can remain on your credit report is not what is accurate… but what can be proved as such. What’s this mean to you?

It means any negative item on your credit report can only remain there if it is accurate and CAN BE PROVED AS ACCURATE under the guidelines of the FCRA. This undisputable fact presents consumers with both good news and bad news. The good news is that through the FCRA your credit score can most likely be improved dramatically in a very short period of time with only a modest amount of effort on your part.

The bad news is that while the actual “work” will take very little of your time, it is vital that you have good information on “how” to go about it. This is the bad news; 9 out of 10 courses on restoring your credit will do nothing more than lead you into a snake pit. This is because they provide you with out-dated “Boiler Plate” dispute letters, which are rarely effective. These are nothing more than form letters and… quite frankly (more bad news) the Credit Bureaus and Creditors will laugh at you if you try to use them.

While I agree with the Federal Trade Commission (FTC) that “Anything a Credit Repair Clinic can do for you legally, you can do for yourself at little or not cost”… the key element you need for success is the latest inside techniques and procedures to get the results you want. These involve strategies known as “Proof of Contract”, “Constructive Notice”, “Challenge of Procedure” or “Restrictive Endorsement” and many others.

All these terms may “sound” impressive but they are really quite simple. In the end, it is nothing more than a method of communication, which exercises your consumer protection rights, gets the results you want and raises your credit score. Even more impressive, once you learn how simple it can be by doing it for yourself, you will find there is a fortune to be made doing it for others! Either way, it all starts by requesting a free copy of your credit report by calling the Annual Credit Report Service at 1-877-322-8228.

How to protect yourself from Identity Theft

How to Make Yourself Virtually Identity Theft PROOF in 60 Minutes or Less

Copyright 2007 Jay Peters

The FBI has called it “The fastest growing crime in America.” Close to 10 million Americans every year are victimized by it and the costs are estimated at 50 billion dollars annually. Many criminals get off easy while the victims spend years working to restore their damaged credit reports and reputations. Worse yet, there seems to be no end in sight.

“The popularity of the crime is simply growing faster than the solutions to stop it,” many experts conclude. The task of recovery is so time consuming and tedious, multiple states have resorted to creating “Identity Theft Passports” for victims in an attempt to ease the pain for them as they endure the lengthy and frustrating clean up process.

By the end of this article I will share with you the secrets of making yourself virtually identity theft proof in 60 minutes or less (for free). I use the term “secrets” because less than 1% of the country is aware of these techniques (let alone practicing them).

If Americans took these preventative steps up to 99% of all identity theft would be eliminated. However, “why” this beneficial approach is not being made common knowledge in the mainstream media is something I will not disclose in this article (more on that another time). For the moment I believe the biggest crime one can commit is to not share this information with their friends and family (by the end of this article you will understand why).

Unlike other authors covering this subject I will not insult your intelligence by sharing common sense tips like “Don’t carry your SSN Card or ATM PIN# in your wallet or purse” or “Keep all data sensitive documents like credit card and bank statements locked up in your home or office”. This is elementary advice at best. The key to protecting yourself from identity theft is to look at what the masses are doing and then do the opposite (to say the least).

Almost 70% of Americans are now shredding all their mail and documents and many are even subscribing to credit monitoring services or buying identity theft insurance in an attempt to protect them from becoming victims. While this is better than doing nothing it’s a far cry from TRUE security.

Study The Past To Predict The Future

Contrary to popular belief statistics show the majority of identity theft does NOT result from the Internet as most consumers have been led to believe. In fact, less than 10% of identity theft cases (where data compromise can be determined) originated online. In almost 50% of cases consumers are the ones who detect the breach. In nearly 40% of cases the criminal was someone who was in close contact with the victim (friend, relative, neighbor, coworker, in-home, employee, waiter/waitress or financial institution employee). In then end, nearly one third of identity theft cases come from a stolen wallet/purse, checkbook or credit card.

More interesting, the age of the primary victim has lowered. If you are between the ages of 25 to 34 you are now the largest target for the crime (65+ has become the smallest). The bad news is that while identity theft nationwide is on the decline (8.9 million victims last year down from 9.3 million in 2005) the dollar amount per victim is going up ($6,383 last year, up from $5,885 in 2005) and so are the number of hours victims spend cleaning up the mess (40+ hours last year, up from 28 hours in 2005).

We’ve all heard the saying “An ounce of prevention is worth a pound of cure”. Yet, no one is practicing it in the pandemic of identity theft. Credit monitoring is nice but only 11% of consumers ever catch identity theft through this means. Identity Theft Insurance (according to many experts) is even more of a hoax. A product marketed by playing on the fears of American consumers which does nothing more than assist them in cleaning up the mess only AFTER their identity has been stolen.

A Different Approach

The following is a completely different approach to preventing and protecting yourself from identity theft. It is based on the reality that we live in a world now where there is zero privacy of personal data. Meaning that your name, address, phone number, social security number, date of birth (even your mothers maiden name) can be obtained by ANYONE for a fee.

If you’re one who feels this is paranoid thinking let me tell you about Amy Boyer. In 1999 Miss Boyer had an old high school classmate (Liam Youens) come back into her life many years later. Mr. Youens obtained Amy’s SSN and other personal information after paying Docusearch Inc. $150. After Youens shot Miss Boyer to death he then turned the gun on himself. Today the company tells visitors to its website that “not all searches are available to the public” and some are reserved for the investigative and legal industry. How’s that for homeland security?

With this “different” approach we break down identity theft into two distinct categories. 1.) Basic Identity Theft, and 2.) Credit Hijacking. By definition “Basic Identity Theft” is when the perpetrator steals your identity and then uses it to obtain NEW credit accounts for their personal gain. “Credit Hijacking” falls under a criminal stealing your identity in order to access and use your EXISTING credit accounts. Each type of fraud is different and therefore so is your plan of defense.

BASIC ID THEFT DEFENSE: The best proactive defense against basic identity theft is through the placing of an “Initial Fraud Alert” on all three of your credit reports. This “Initial Fraud Alert” accomplishes three important factors:

1. Your name and personal information can no longer be sold by the credit bureaus to ANY third parties for any marketing purpose (i.e. credit card offers, loan solicitations or credit pre screenings).
2. No one can be approved for credit with your personal information until the creditor personally calls you at the telephone number you list on your consumer credit report. And,
3. Requesting this initial fraud alert entitles you to a free copy of all three of your credit reports (one copy from each of the three major credit reporting agencies). Please be advised that this is an “Initial Fraud Alert” which lasts only 90 days. To extend the fraud alert and obtain the above mentioned benefits for 7 years you will need to write to each credit bureau at the address provided within your initial fraud alert confirmation letter (Note: It is likely credit bureaus will make the extended alert harder to obtain as a great deal of their revenue comes from the third party rental and sale your information).

CREDIT HIJACKING DEFENSE: Most online merchants now utilize a security feature known as “Address Verification Service” or “AVS”. AVS is a security feature for online merchants allowing them to only authorize credit card transactions for merchandise to be shipped to the same address, which appears on the consumers’ credit card billing statement. If the address does not match that of the credit card billing statement the transaction will automatically be declined. In other words, if someone gets your credit card number, expirations date and CVV code (the three digit code on the back of the card) the only way a transaction can be authorized online is if the merchandise if shipped to the SAME address that your credit card billing statement is currently sent to.

This is what makes credit hijacking so dangerous. When a criminal hijacks your credit they call up the banks (posing as you) and change your address on your credit cards with your personal information (i.e. last for of SSN and mothers maiden name) as if you were moving. They then proceed to order thousands of dollars in merchandise (online or over the phone) to be shipped to the “new” address. Because they changed “your address” on your credit cards they will bypass the AVS security from online merchants and the charges will be approved.

The only real defense against credit hijacking is to establish a personal security code with all your bank accounts and credit cards. This is a form of security, which goes beyond your SSN, Zip Code, Date of Birth or Mothers Maiden Name to give you a whole new tier of personal security. This is a unique number or group of letters and numbers, which you create and give to every credit card provider you, have.

For example. The number could be as simple as “JACOB2801″ which is a combination of your best friend as child and the numerical address of the home you lived in growing up. By establishing this auxiliary pass code with all your credit card providers no one will be granted access to your accounts without it providing it to them. Since you are the only one who knows it and it is non public it is truly secure. I have yet to find a credit card company, which will not allow you to create a pass code and added layer of security.

Summary

So now with the initial fraud alert established on your credit reports (and later extended) as well as the personal security code set up with all your bank and credit card accounts, you are virtually identity theft proof in under 60 minutes for free. Sure, someone can always “steal” your identity but the real joke will be on him or her. If they try to open a new credit account anywhere in the country the creditor is going to have to call YOU at the phone number listed on your report in before it can be approved and it’s GAME OVER.

If they try to hijack your credit by changing the address on your credit accounts they will be asked for not only the last four digits of your SSN and mother maiden name, but also your personal security code which they will NOT know and again it’s, GAME OVER.

Please understand that this article deals only with the topic of “financial” identity theft, which is by far the most prevalent today. However, you should be aware you also have the following “5 MAJOR” identities in computers across the nation which are your:

1. Driving Records/History (DMV Databases).
2. Medical Records/History (Medical Information Bureau Database).
3. Social Security Records/History (SSA Database).
4. Insurance Claims/History (C.L.U.E. Database).
5. Criminal, Legal and Public Record databases from birth records and real estate deeds to corporations, trusts and court cases.

Yes, we are in the information age but all information is stored in databases. I think we are now living in the database age.

10 Extra “Financial” Identity Protection Tips

1. Keep a list of all credit card and bank account numbers with bank phone numbers so in case of loss or theft they can be notified immediately.
2. Use only one credit card for personal expenses and one card for business expenses and monitor accounts online weekly.
3. Always send or receive mail only through secure and locked mail boxes.
4. Never give out any sensitive information (SSN, Acct #, Pin #, Password Etc) via an email solicitation. Always type in and visit the website directly.
5. Limit the information on your checks to your first initial, last name and address (nothing more).
6. On all credit cards instead of signing your name write “Check ID!”
7. Never use a debit card or Visa/Master Check card, as recovering fraudulently accessed funds from these accounts can be extremely difficult.
8. Store all credit cards, bank statements and passports etc in a secure and locked place.
9. Never give out your Social Security Number, Drivers License Number or Date Of Birth unless they have just cause and really need it.
10. For details about establishing and initial fraud alert on your credit reports visit: www.experian.com, www.equifax.com, www.transunion.com

This FREE Report was made possible by:

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(801) 712-1607

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