Credit Building

Don't be a Victim of Identity Theft | Guarding Your Credit Card Information | Taking Charge of Your Credit | Keeping Your Credit Safe | Shopping for a Credit Card

Don't be a Victim of Identity Theft

What is identity theft?

Identity theft occurs when someone uses your name, Social Security number, credit card number, or some other piece of personal information without your knowledge for their own benefit, such as making unauthorized purchases, or opening new accounts in your name. Identity theft can cause wide-ranging long-term financial problems. Don't become a victim, protect yourself using these common-sense suggestions.

How to protect yourself from identity theft

• Prevention is the first step in battling identity theft - minimize the risks.

• Be cautious about disclosing personal information and account numbers over the phone, by mail, or on the Internet - be sure that you are dealing with a reputable company, and that you understand how the information will be used.

• Carry only the ID and credit cards you need to have with you to help prevent loss or theft - file others in a safe place at home.

• When you receive a new card, sign and activate it immediately.

• Do not carry your Social Security card with you - keep it in a secure place.

• Memorize your pin numbers and passwords - don't carry them with you.

• When choosing a password for an account, avoid easy-to-obtain passwords such as your mother's maiden name, birthdates, etc.

• Never lend your credit card to anyone - you're responsible for paying the bill, and any problems with the bill can damage your credit rating.

• Shred any documents that show your credit card information, Social Security number, or driver's license number before throwing them away.

• Never write your account number on the outside of an envelope or a postcard.

• Alert your card issuer if you do not receive your statements - someone may have taken them from your mailbox.

• Destroy unwanted offers of pre-approved credit cards before throwing them away.

• Keep good records - save your receipts and compare them with your monthly bill. Promptly report any problems to the company that issued the card. If you order by mail, phone or online, keep copies or printouts with details about the transaction.

• Regularly check your credit report - changes and inaccuracies can be an early warning of identity theft.

What to do if you become a victim of identity theft

Take action immediately - timely action may be your best defense.

• Immediately contact the fraud division of the three credit reporting agencies to let them know you have been a victim of identity theft. Request they place a "fraud alert" on your file, including a statement that creditors should get your permission before opening any new accounts in your name.

• File a report with your local police department. Keep a copy in case your creditors need proof of the crime.

• Call the Identity Theft Toll-Free Hotline at 1-877-IDTHEFT (1-877-438-4338). This is the central point of contact within the federal government for reporting incidents of identity theft.

• Contact each creditor who has allowed a fraudulent account and close these accounts. Follow up in writing. If you open new accounts, be sure to place a password on the account.

• If an identity thief has accessed your bank accounts, checking account or ATM card, close the accounts immediately. When you open new accounts, insist on password-only access. If your checks have been stolen or misused, stop payment. If your ATM card has been lost, stolen or otherwise compromised, cancel the card and get another with a new PIN.

• Contact your local postal inspector if an identity thief has stolen your mail for access to new credit cards, bank and credit card statements, pre-approved credit offers and tax information or falsified change-of-address forms.

• If it appears that someone is using your SSN when applying for a job, get in touch with the Social Security Administration (SSA) to verify the accuracy of your reported earnings and that your name is reported correctly.

• If you suspect that your name or SSN is being used by an identity thief to get a driver's license, report it to your Department of Motor Vehicles. Also, if your state uses your SSN as your driver's license number, ask to substitute another number.

• Request copies of your credit reports from the three credit reporting agencies. Review reports carefully to make sure no additional fraudulent accounts have been opened in your name or unauthorized changes made to your existing accounts. After 2-3 months, order new copies of your reports to verify your corrections and changes, and to make sure no new fraudulent activity has occurred.

• Document all contacts with dates, names and phone numbers for your records.

Stay Alert

Because credit card companies limit consumer responsibility to $50 in most cases of credit fraud, and because many new cards include "zero responsibility" protection, some people think there's no reason to worry about identity theft and credit fraud, but identity theft can cause wide-ranging long-term problems. Precautionary steps should help minimize your identity theft problems, but always stay alert to instances of identity theft.

Order a copy of your credit report from the three credit bureaus every year to verify the accuracy and safety of your personal credit history.

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Guarding Your Credit Card Information

Using a good credit card can make shopping, traveling, and bill paying a dream. But it can turn into a nightmare if you don't take careful steps to secure your credit card information. The following tips will help you be on guard against hidden information thieves.

Protecting your card:

Sign the back of your new card as soon as you receive it. Your signature will offer an additional measure of protection against fraudulent use.

You should never leave your cards unattended. Card theft can happen anytime, anywhere - at work, in your car, at a restaurant or shop, or in your doctor's office.

Memorize your personal identification number (PIN). Don't write it down in your wallet or on the back of the card. Don't designate the same PIN for all your cards, and don't designate a number such as your birth date, that can be found easily in your wallet.

Shopping smarter:

Review your monthly statement carefully. Check off purchases and sales slips against your monthly statement to be sure that no fraudulent or incorrect charges have been made.

Report any errors or unknown charges immediately. Be cautious when transacting business by mail or phone. Do not give out your account number over the phone unless you initiated the call. Also, be aware that not all mail and phone solicitations are legitimate. Be cautious about offers that sound too good to be true - they probably are.

If your card is lost or stolen:

Report a lost or stolen card immediately. Stolen cards are most often used within the first few days after being lost or stolen.

Contact the credit bureaus to have a "fraud alert" placed on your file, so that any future credit applications will have to be confirmed by you over the phone. This will protect you from any additional charge accounts from being opened in your name. (Contact: Equifax, 800-685-1111, Trans Union, 800-888-4213, Experion, 888-397-3742).

Make a complete list of all your credit cards, their numbers, and the emergency contact phone numbers. Store this information in a safe place. You'll need this information to report lost or stolen cards.

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Taking Charge of Your Credit

Especially during the holiday shopping season we all have a tendency to overspend and go a little "overboard." Sometimes that means charging more than we can afford and subsequently paying for our purchases for many months after the event -- and many times over. Whether you're shopping online, by phone or at the mall, chances are you'll use a credit card for some of your purchases. The Federal Trade Commission offers these tips to keep in mind when you shop.

Keep track of your spending

Incidental and impulse purchases add up. Remember credit cards are just like loans - you have to pay what you owe. Owing more than you can repay can damage your credit rating. That can make it hard to finance a car, rent an apartment, get insurance - even get a job.  Pay your bill on time, and in full, if possible. If you don't, you'll have to pay finance charges on the unpaid balance - and it takes forever to get caught up if you just pay the minimum.

Keep an eye on your card and account number

• Never lend your credit card to anyone because you're responsible for paying the bill. Any problems with the bill can damage your credit rating.

• Don't sign a blank charge slip. Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.

• Never put your account number on the outside of an envelope or a postcard.

• Be cautious about disclosing your account number over the phone unless you know you are dealing with a reputable company.

• Carry only the cards you anticipate using to help prevent loss or theft.

• If your credit and ATM cards are lost or stolen, report it to the card issuers as quickly as possible. Many companies have toll-free numbers and 24-hour service to deal with such emergencies. Follow up with a letter, including your account number, when you noticed the card was missing, and the date you first reported the loss.

Keep good records

• Save your receipts. Compare them with your monthly bill. Promptly report problems to the company that issued the card. Usually, your statement will provide instructions for disputing a charge.

• If you order by mail, phone or online, keep copies or printouts with details about the transaction, including any warranties, or return and refund policies if you're not satisfied. You should have the company's name, address, phone number, the date of your order; a copy of the order form you sent to the company or a list of the items ordered and their stock codes, the order confirmation codes and the ad or catalog from which you ordered.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

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Keeping Your Credit Safe

Identity theft is a rising problem in our day. But an even more common problem is the theft of credit card numbers. All a thief has to do is obtain the number on your card and a little more information and he can run up a huge bill on your card. The FTC offers the following advice on keeping your credit safe.

Keep an eye on your card and account number

• Never lend your credit card to anyone because you're responsible for paying the bill. Any problems with the bill can damage your credit rating.

• Don't sign a blank charge slip.  Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.

• Never put your account number on the outside of an envelope or a postcard.

• Be cautious about disclosing your account number over the phone unless you know you are dealing with a reputable company.

• Carry only the cards you anticipate using to help prevent loss or theft.

What to do if your card is lost or stolen

If your credit and ATM cards are lost or stolen, report it to the card issuers as quickly as possible. Many companies have toll-free numbers and 24-hour service to deal with such emergencies. Follow up with a letter, including your account number, when you noticed the card was missing, and the date you first reported the loss.

Save your receipts. Compare them with your monthly bill. Promptly report problems to the company that issued the card. Usually, your statement will provide instructions for disputing a charge.

If you order by mail, phone or online, keep copies or printouts with details about the transaction, including any warranties, or return and refund policies if you're not satisfied. You should have the company's name, address, phone number, the date of your order; a copy of the order form you sent to the company or a list of the items ordered and their stock codes, the order confirmation codes and the ad or catalog from which you ordered.

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Shopping for a Credit Card

Chances are you've gotten your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer expires." Before you accept, shop around to get the best deal.

Credit Card Terms

A credit card is a form of borrowing that often involves charges. Credit terms and conditions affect your overall cost. So it's wise to compare terms and fees before you agree to open a credit or charge card account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require no application. You also may want to ask about these terms when you're shopping for a card.

Annual Percentage Rate

The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements.

The card issuer also must disclose the "periodic rate" - the rate applied to your outstanding balance to figure the finance charge for each billing period.

Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators - called indexes - change. Because the rate change is linked to the index's performance, these plans are called "variable rate" programs. Rate changes raise or lower the finance charge on your account. If you're considering a variable rate card, the issuer must also provide various information that discloses to you:

that the rate may change; and how the rate is determined - which index is used and what additional amount, the "margin," is added to determine your new rate. At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often your rate may change.

Free Period

Also called a "grace period," a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you'll have enough time to pay.

Annual Fees

Most issuers charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; "gold" or "platinum" cards often charge up to $75 and sometimes up to several hundred dollars.

Transaction Fees and Other Charges

A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit. Some charge a monthly fee whether or not you use the card.

Balance Computation Method for the Finance Charge

If you don't have a free period, or if you expect to pay for purchases over time, it's important to know what method the issuer uses to calculate your finance charge. This can make a big difference in how much of a finance charge you'll pay - even if the APR and your buying patterns remain relatively constant. See page 4 for examples of how the methods can affect your costs.

Examples of balance computation methods include the following:

Average Daily Balance

This is the most common calculation method. It credits your account from the day payment is received by the issuer. To figure the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the "average daily balance."

Adjusted Balance

This is usually the most advantageous method for card holders. Your balance is determined by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period aren't included.

This method gives you until the end of the billing cycle to pay a portion of your balance to avoid the interest charges on that amount. Some creditors exclude prior, unpaid finance charges from the previous balance.

Previous Balance

This is the amount you owed at the end of the previous billing period. Payments, credits and new purchases during the current billing period are not included. Some creditors also exclude unpaid finance charges.

Two-cycle Balances

Issuers sometimes use various methods to calculate your balance that make use of your last two month's account activity. Read your agreement carefully to find out if your issuer uses this approach and, if so, what specific two-cycle method is used.

If you don't understand how your balance is calculated, ask your card issuer. An explanation must also appear on your billing statements.

Other Costs and Features

Credit terms vary among issuers. When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR, if there is a grace period for purchases. However, if you use the cash advance feature, many cards do not permit a grace period for the amounts due - even if they have a grace period for purchases. So, it may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are definitely major considerations.

You'll probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan's services and features. For example, you may be interested in "affinity cards" - all-purpose credit cards sponsored by professional organizations, college alumni associations and some members of the travel industry. An affinity card issuer often donates a portion of the annual fees or charges to the sponsoring organization, or qualifies you for free travel or other bonuses.

Special Delinquency Rates

Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. These rates sometimes exceed 20 percent. Information about delinquency rates should be disclosed to you in credit card applications or in solicitations that do not require an application.

Receiving a Credit Card

Federal law prohibits issuers from sending you a card you didn't ask for. However, an issuer can send you a renewal or substitute card without your request. Issuers also may send you an application or a solicitation, or ask you by phone if you want a card - and, if you say yes, they may send you one.

Cardholder Protections

Federal law protects your use of credit cards

Prompt Credit for Payment

An issuer must credit your account the day payment is received. The exceptions are if the payment is not made according to the creditor's requirements, or the delay in crediting your account won't result in a charge.

To help avoid finance charges, follow the issuer's mailing instructions. Payments sent to the wrong address could delay crediting your account for up to five days. If you misplace your payment envelope, look for the payment address on your billing statement or call the issuer.

Refunds of Credit Balances

When you make a return or pay more than the total balance at present, you can keep the credit on your account or write your issuer for a refund - if it's more than a dollar. A refund must be issued within seven business days of receiving your request. If a credit stays on your account for more than six months, the issuer must make a good faith effort to send you a refund.

Errors on Your Bill

Issuers must follow rules for promptly correcting billing errors. You'll get a statement outlining these rules when you open an account and at least once a year. In fact, many issuers include a summary of these rights on your bills.

If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. The error might be a charge for the wrong amount, for something you didn't accept, or for an item that wasn't delivered as agreed. Of course, you still have to pay any part of the bill that's not in dispute, including finance and other charges.

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