Counting every penny on your credit and debit card statements can help detect fraud
Most people looking at their bank statements would probably notice if their credit or debit card were used without their approval to purchase a big ticket item, and they would quickly call their bank or card issuer to report the error or fraudulent transaction. But consumers are less likely to be suspicious of very small charges, including those less than a dollar…which is why criminals like to make them.
“These transactions might be signs that someone has learned your account information and is using it to commit a crime,” said Michael Benardo, manager of the (Federal Deposit Insurance Corporation) FDIC’s Cyber Fraud and Financial Crimes Section. “That’s why it’s important to be on the lookout for fraudulent transactions, no matter how small.”
He added, “When thieves fraudulently obtain someone else’s credit or debit card information and create counterfeit card, they might test it out with a small transaction—like buying a pack of gum or a soda—to make sure the counterfeit card works before using it to make a big purchase. If this test goes unnoticed, by the true account holder, thieves will use the card to buy something expensive that they want or that they can easily sell for cash.”
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- Ask students if they know someone who had his/her credit or debit card compromised. If so, how they detected the illegal charge and how the problem was solved.
- Under what circumstances should you close the compromised account?
- Why is it important to regularly scrutinize your monthly credit and debit card statements?
- What can be consumers do to protect themselves from such frauds? What is the best way to catch this type of fraud?
Scammers are taking advantage of millions of consumers who haven’t yet received a chip card. For example, scammers are e-mailing people, posing as their card issuer. The scammers claim that in order to issue a new chip card, they need to update your account by confirming some personal information or clicking on a link to continue the process. Information received can be used to commit identify theft. If they click on the link, they may unknowingly install malware on your device.
How can you tell if the e-mail is from a scammer?
- There is no reason your card issuer needs to contact you by e-mail or by phone to confirm personal information before sending you a new chip card number.
- Still not sure if the e-mail is a scam? Contact your card issuers at phone numbers on your cards.
- Don’t trust links in e-mails. Only provide personal information through a company’s website if you typed in the web address yourself and you see that the site is secure, like a URL that begins https (the “s” stands for secure).
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- Ask students to visit other identify theft websites, such as, consumer.gov/idtheft, to learn what to do if your identity is stolen.
- Ask students to compile a list of what actions can they take to ensure that their credit/debit cards and other financial information are secure.
- How do you discover that someone has stolen your identity?
- What steps can you take to thwart identity thieves?
Banks and card issuers have been sending out new credit and debit chip cards, usually as existing cards expire or need replacement. If you haven’t gotten your new cards, don’t worry. The rollout will continue at least through 2016. If you want to know when yours new chip cards will arrive, contact your card issuers at the phone numbers on your cards.
Your new cards look like your old cards with one exception. New cards have a small square metallic chip on the front. The chip holds your payment data—some of which is currently held on the magnetic stripe on your old cards—and provides a unique code for each purchase. The metallic chip is designed to reduce fraud, including counterfeiting.
Here’s how it works: To buy something in a store, instead of swiping your card, you’ll put it into a reader for few seconds. Then you might have to sign or enter a PIN. With each transaction, the chip generates a unique code needed for approval. The code is good only for that transaction. Because the security is always changing, it’s more difficult for someone to steal and use.
There will be no change in how you use your card online or by phone. That means chip cards won’t prevent crooks from using stolen card numbers to buy online or by phone. So it’s a good idea to still guard your card information closely, and check statements for suspicious activity. If there is a problem, your consumer protections remain the same.
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- Ask students if they have received a new chip credit or debit card. Show how the new card differs from the old card.
- Do you believe that new cards will help reduce fraud? Why or why not?
- How might scammers try to take advantage of the millions of consumers who have not yet received a chip card?
- How can you protect yourself from the scammers?
Credit reports, produced by credit bureaus, detail your financial history, and are used to develop credit scores. Under federal law, you can get at least one free report from each of the nationwide credit bureaus every 12 months. If you find an error, contact the credit bureau directly and correct the record.
If you cannot qualify for a regular credit card, consider a no-fee or low-fee secured credit card. This is a credit card for which you would keep money (as collateral) in a deposit account at the financial institution issuing the card. For example, if you want a card with $1,000 limit, you might deposit that amount into a savings account at the bank offering you the card. The lender would report how you manage the card to one or more of the credit bureaus, and often it will provide you the opportunity to obtain an unsecured credit card after a certain period of on-time payments. Secured cards may have fees attached to them and may have a higher interest rate, so be sure to do your homework before signing up.
To order your free annual report from the three major credit bureaus—Equifax, Experian, and TransUnion visit www.AnnualCreditReport.com or call toll free 1-877-322-8228.
You have the right to see and correct reports from “specialty” credit bureaus that, for example, track a person’s history of handling a checking account.
For more information, go to:
Building a better credit report
Specialty consumer reports
- Ask students to visit several websites that may provide current information about credit files.
- Bring to class examples of credit related problems of individuals or families. Suggest ways in which these problems may be solved.
- Ask students to talk to a person who has discovered an error on his or her credit report. What was their experience to get it corrected?
- What steps can you take to improve your credit score?
- Which federal laws protect your rights if your credit application is denied?
Bank reward programs tied to credit or debit cards or other products can provide you with appealing offers for things such as points to be used for travel and shopping or cash added to your account. But finding great deals is only half of the equation. Before jumping into any rewards program, consider these tips for maximizing the potential benefits and minimizing mistakes:
- Comparison shop different rewards programs, including their fees and other costs, before deciding to apply for one.
- Choose a rewards program that fits your lifestyle. The best way to maximize benefits and avoid spending problems is to choose a program that rewards you for purchases or deposits you would make even without the gifts.
- Remember what it takes to earn rewards. Many credit cards provide rewards when you use them to make purchases, but it’s important to know exactly how much you can earn.
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- Why is it important for consumers to understand that to make the most of any rewards program, they need to make sure that they do not overlook other, more important account features in addition to the rewards?
- Ask students to comment on the statement: “While rewards can be beneficial, don’t spend just to earn rewards.”
- Where should you look for credit cards and other bank products that provide rewards tailored to your particular needs?
- What are some of the perks that credit cards allow for their customers?
- Does overall spending and debt accumulation increase among consumers who use a rewards credit card?
Many companies that solicit new credit card accounts and insurance policies use prescreening to identify potential customers for the products they offer. Prescreened offers–sometimes called “preapproved” offers–are based on information in your credit report that indicates you meet criteria set by the company. Usually, you receive prescreened solicitations via mail, but you may also get them in a phone call or in an email.
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You may want to use the information in this article to discuss
- Why some people prefer not to receive prescreened offers in the mail, especially if they are not in the market for a new credit card or insurance policy?
- What might be some advantages of receiving prescreened offers?
- Ask how many students have received prescreened offers and what did they do with them.
- Can prescreening hurt your credit report or credit score?
- How can you reduce the number of unsolicited credit and insurance offers you receive?
Medical credit cards are offered by financial institutions to pay for services not covered by health insurance, such as, dental and cosmetic procedures, or for veterinary care. Medical credit cards received increased attention after the New York attorney General and the Bureau of Consumer Financial Protection brought enforcement actions against Care Credit LLC, an affiliate of GE Capital Retail Bank. It is alleged that Care Credit failed to provide disclosures and gave inaccurate information to 4.4 million cardholders.
Medical credit cards from large banks offer a revolving line of credit with an established credit limit with some form of promotional financing (special terms and conditions, which are valid for a specified period of time). The most commonly used financing option is deferred interest, with no interest charged for promotional period, but interest charged retroactively if the balance is not paid in full before the end of the promotional period, usually 6 to 24 months. Among large banks the Government Accountability Office reviewed in May 2014, the most commonly used cards had an annual percentage rate of 26.99 percent or more. These banks also offered revolving line of credit with fixed monthly payments, with an APR of zero to 17.99 percent.
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- Ask students what are other alternatives in financing medical expenses that are not covered by health insurance.
- Have students survey friends or relatives to determine the use of medical cards.
- Why would someone get medical credit cards when mainstream credit cards, such as Visa, and MasterCard, offer relatively lower-rate credit cards?
- What might be advantages or disadvantages of using medical credit cards?
When your credit card issuer suspects fraudulent activity on your credit card, it triggers a red flag to deny the charge. Generally, it is a great protection. But if you are making the purchase and not a thief, it can be frustrating. Some purchase patterns that could cause your purchase to be denied include:
- A purchase for a small dollar amount, followed by a large purchase. Credit card thieves sometimes make a small dollar “test purchase” followed by big ticket items, so this raises a red flag.
- Multiple purchases back-to-back in a short span of time.
- Making purchases in a new city, in a different part of town, or in stores where you do not normally shop.
Though inconvenient, these protections are to keep you from being a victim of fraud. Take these steps to prevent or deal with a credit card purchase being denied by mistake:
- Inform your credit card company if you will be using your card out of town (especially internationally).
- Update your billing address if you move, so that the company recognizes the new pattern of purchases as a new normal.
- Make sure the company has your cell phone number so that it can contact you faster to verify or authorize a purchase.
- Contact your credit company immediately if your purchase is denied.
For more information go to http://www.usa.gov/topics/consumer/consumer-action-handbook.pdf
- Ask students if their credit card was ever denied in error.
- If the transaction was denied, how did they resolve the problem.
- What are a few reasons that your credit card purchase might be denied?
- What can you do to avoid such an embarrassment at the check-out counter?
Did you know that retailers are permitted to charge or surcharge up to 3 percent on your credit card purchases? However, if a retailer imposes a surcharge, it must be clearly disclosed in the store and on your receipt.
These checkout fees may also give you a discount if you pay with cash. Retailers in CA, CO, CT, FL, KS, MA, ME, NY, OK, and TX are not permitted to charge credit card surcharges.
Retailers are also allowed to set a $10 minimum purchase amount for credit card purchases. However, they can’t charge fees or set minimum purchase amounts on debit card purchases.
For more information on credit card surcharges, go to http://www.knowyourcard.org.
- Ask students if they have personally experienced credit card surcharges on their purchases.
- Have students make a short presentation with a summary of what actions might be taken to avoid credit card surcharges.
1. Should retailers charge extra 3 percent surcharge when they display a sign “Your VISA and MasterCard are accepted here”?
2. What can you do to avoid credit card surcharges?
The Federal Deposit Insurance Corporation’s Response Center reports that billing disputes and error resolution problems and processes are the most common types of complaints it received in 2012 and 2013 related to credit cards. And, according to the Consumer Financial Protection Bureau, many consumers are confused and frustrated by the process of challenging inaccuracies on their monthly statements.
Checking your statements periodically also can help you monitor your spending. You may want to sign up for alerts on your mobile phone or through your email that inform you when your credit card has hit a specific balance amount or you are close to your credit limit. Other alerts can remind you about an upcoming bill.
If you notice a billing error, such as an unauthorized charge on your statement, contact the card issuer as soon as possible.
For additional information and guidance, see consumer information from the Federal Trade Commission at http://www.consumer.ftc.gov/articles/0219-fair-credit-billing.
1. What might be some reasons for consumers to be confused and frustrated by the process of challenging inaccuracies on their monthly statements?
2. What are advantages of checking your monthly credit card statements?
You may want to use the information in this blog post and the FTC website to
- Have students make a short presentation with a summary of actions that might be taken to report billing errors to the credit card issuer and other federal consumer protection agencies.
- Draft a sample letter to dispute a billing error.
- Review the Fair Credit Billing Act to learn about protecting their rights if a billing error occurs.