3 Ways Your Credit Card Protects You from Identity Theft
It's hard to keep your personal information private anymore. Even if you do everything right, there's always the possibility that hackers steal your information in a data breach. There were 3,205 data breaches in 2023, according to the Identity Theft Resource Center.
When you think about tools to protect yourself from identity theft, a credit card probably isn't the first thing that comes to mind. But credit cards have a few key features that could help in this situation.
1. Free Credit Monitoring
A credit monitoring service keeps track of the activity on your credit file. It also alerts you about any changes or suspicious activity. For example, credit monitoring would typically notify you about any of the following:
- New credit applications
- New credit cards and loans opened
- Balance increases and decreases on your credit accounts
- Credit score increases and decreases
You could then check whether you were responsible for that activity or if it's fraudulent. For example, you get an email alert that a new credit card was opened in your name. If you didn't open a card recently, you'd know that someone else stole your identity, and you could report it to the bank that issued the fraudulent card.
Free credit monitoring has become a popular credit card perk. Most of the big card issuers offer it for their cardholders.
If you already have a credit card you like, see if you can sign up for credit monitoring through it.
2. Fraud Alerts for Suspicious Transactions
There are many ways your credit card number could fall into the wrong hands. It could be leaked during a data breach, or you could use your card at a payment terminal where a criminal installed a card skimmer/shimmer. Once your card information is compromised, thieves can use it for fraudulent transactions.
Fortunately, banks have systems in place to detect and prevent fraud. They monitor your account for suspicious transactions, such as larger purchases than normal or purchases in new locations.
If your bank detects a suspicious transaction, it will notify you by text message or email. It will ask you to confirm if the transaction is legitimate, and it may also block the transaction until it hears from you. If it's fraud, your bank will lock your card and send you a replacement with a new card number.
For situations where it isn't fraud, you just need to let your card issuer know. You may need to do this if you're spending more than usual or traveling. By the way, if you travel often, make sure to check out travel credit cards that can help you save money on your trips.
3. $0 Fraud Liability
Despite your bank's best efforts, you notice a fraudulent transaction on your credit card statement. Don't worry — you're not on the hook for that.
Legally, you're not responsible for digital transactions made using your card number. You're only responsible for up to $50 in fraudulent transactions if your physical card is lost or stolen. But many card issuers take it a step further and have zero-liability protection.
When your credit card has zero-liability protection, you're never responsible for fraudulent charges. Report the fraud to your card issuer, and it will be taken off your bill. You'll also receive a replacement card in the mail with a new card number.
With free credit monitoring, fraud alerts, and $0 fraud liability, credit cards can help prevent identity theft — and reimburse you for unauthorized transactions. Best of all, these aren't rare features. It's easy to find all three, as lots of credit cards offer them.
Looking for your perfect credit card? Check out our credit card options.
This article was written by Lyle Daly from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
