How To Protect Yourself From Financial Fraud

All of us, no matter what our income or financial status, are subject to being a victim of financial fraud and other scams.  Both the number of these scams and their sophistication means that we should all be vigilant and protective of our personal information.  According to the credit card bureau Experian, 1 in 20 Americans are the victim of identity theft or related financial fraud every year, with a cost of approximately $17 billion. But the good news is that we can all take some steps to protect ourselves from these frauds and scams.

The most common type of fraud is the unauthorized use of credit or debit cards, where your card or account number is used to make unauthorized purchases.  This is followed by account takeovers, where someone attempts to take over your investment account, bank account, or credit card account, preventing you from accessing it and taking money or making unauthorized purchases from it.  The opening of new accounts or loans is yet another type of fraud.  This is where a new account or loan in your name is opened, and when spent or drained of funds, the resulting default gets charged to you.  Types of accounts opened often include credit cards, bank loans, car loans or leases, or utility or phone accounts.  Finally, governmental, tax, or employment fraud is used to generate identification in your name, apply for tax refunds in your name, or receive other government benefits in your name.  This type of fraud exploded during the Covid pandemic, when many people found that their identity had been used to apply for unemployment benefits or other covid related benefits.

The most important thing that you can do is to put a ‘lock’ or ‘freeze’ on your credit.  This will prevent unauthorized individuals from opening an account in your name, or using your credit or information to open an account in their name. While it is a bit time consuming to do, this is one of the best things that you can do to protect yourself from fraud, so the small investment in time is really worth it.  You can fill out a freeze online with the three major credit bureaus, by phone, or by mail.  The easiest way is online, where you can go to the websites of all three bureaus, answer a number of questions to verify your identity, and where you will be given passwords and pins.  KEEP THOSE PASSWORDS AND PINS in a safe place, for if you ever need to temporarily unfreeze your accounts (for example, to apply for a loan, open a new credit card or bank account, or the like) having ready access to those passwords and pins will make the unfreezing process a lot swifter.  You can also call each of the credit bureaus and do a phone version of the online forms.  Finally, you can do the request by mail, but this is by far the most cumbersome method, as the amount of documents that need to be mailed in, and the time to review them, makes this a last resort choice for most people.  You can usually request a free copy of your credit report at the same time, which is another great way to monitor open accounts and check for discrepancies.

The next best thing that you can do to protect yourself is to carefully monitor your account activity.  Most credit and debit cards have an option where you can be texted or emailed any time your account is used to make a purchase.  Be sure to enable this feature for all of your credit and bank/financial accounts.  By noticing any unauthorized transactions early, you can prevent further fraud, as well quickly notify your financial institution for reimbursement.

You should also pick unique, complex passwords, and regularly change passwords for important services, such as email, bank and financial accounts, and credit card accounts.  And be sure to choose different passwords for your email accounts and financial accounts!  If your email password is hacked and it’s the same password that you use for your bank or financial accounts, you’re putting yourself at needless risk.  Many people find it best to use a Password Manager.  This is a program that will generate and maintain unique, complex passwords for most of your online accounts.  While some charge a small annual or monthly fee, there are a number of free program that you can use as well.  PCMag has listed some of the better ones here

Also, always authorize two-factor authentication (sometimes known as multi-factor authentication) when available.  Most all email services, financial companies, and bank offer this (in fact, many require use of two-factor authentication).  This is where you are only permitted access after entering your correct username and password, as well as entering a unique, ever changing password or pin that is sent to a phone or email account.  This way, even if someone does gain access to your username and password, without access to the device or account to which that second password or pin is sent, they would not be able to access that account information.

Lastly, always be mindful of where and how you are accessing your personal information.  Utilize secure online connections every time you check private accounts, and use a Virtual Private Network (VPN) when you can.  Never check your private accounts or financial accounts from an unsecure network connection – hotels, airports, and other ‘open’ networks are not the time and place to be accessing such sensitive information.  Wait until you are back at your home or office or elsewhere where you can be assured of a secure connection.

And one more thing – don’t forget paper documents!  Credit card offers, mailed statements, mailed bills that include account numbers, tax returns, and the like should always be disposed of properly.  If you have not done so already, purchase a cheap paper shredder and use it to securely shred all such paper documents.

By following the above advice, you can dramatically increase the chances that your private, personal financial information will remain secure from criminal activity.  And while some of the above steps do require a bit of a learning curve or time commitment to set up, it is time well invested – for your peace of mind and for the safety and security of you and your family!



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