Scams to get your credit card details are big business, and have stoked ID fraud fear up to fever pitch. But is there really anything to be afraid of? And what can you do to protect yourself?
There are several tips and tricks you can use to minimise the chances that fraudsters will get your details. Our Q&A below briefly explains all.
In this guide
It's when a criminal steals your identity and uses it to run up bills, applying for debts or services but leaving you to foot the bill.
It can be as simple as going through your rubbish bags, finding your old letters and bank statements and then applying for financial products using your details.
Actually, you're rarely liable for cash fraudulently spent, providing you can prove it wasn't you and that you haven't been negligent.
Why is it a problem?
It's a nightmare to sort out, and can leave you out of pocket. ID theft can also lead to unpleasant encounters with debt collectors, court actions and problems getting a mortgage. It's usually stressful as well as time-consuming.
So, while it's important to be concerned, taking the same sensible precautions as normal is what counts. Crucially, banks cover the cost of ID fraud as long as your negligence didn't let the fraudsters get the PIN. Though in this case, it's likely after they've paid out, they'd ask the Government to reimburse it.
However, since January 2013, some banks have said that if your PIN is easily guessable, eg 0000 or 1234, then they will not pay out on any fraudulent transactions made on your card. If your PIN is easily guessable - change it!
How do I protect myself?
There are a number of preventative measures:
Keep your PIN safe
PINs and passwords for debit and credit cards are the easiest way to access accounts. Always keep yours safe. Try not to use codes derived from kids' or relatives' birthdays or names, as fraudsters could get that information and work out your PIN.
Get a shredder
Everybody should have a cross-cut shredder (these usually cost around £15) for destroying important documents. This means no-one can root through your bins to find personal data, and use it in financial scams (read the more about phishing later in the guide).
This should definitely include all documents from financial institutions as a bare minimum; any others with your name and address on should be considered for shredding
Lock down your phone
As we use our smartphones more and more for our banking and shopping, please please please make sure your phone or tablet has a pin to lock it. You should also see what settings there are to limit how apps are used, such as the ability to change passwords on email accounts.
Protect yourself online
Kitting out your computer with up-to-date antivirus software is a must. Read the Free Antivirus Software guide.
When using social media such as facebook, don't display information fraudsters could use such as date of birth and mother's maiden name. You should avoid using the same and easily guessed passwords when you create accounts. Plus if information such as date of birth isn't integeral to the service, there's no harm using a false one.
If you are entering card details online, make sure the web address starts https (the s stands for secure) and has a little image of a locked padlock next to it.
Always check bank statements
Regular checking of your bank statements is always good practice. If you spot something that looks a tad dodgy, contact your bank or building society immediately. Also, if your bank or credit card statements fail to arrive, contact the company right away.
Regularly check your credit reference files
If someone is making false applications for credit in your name, it will appear on your credit reference files. You should check these at least once a year (or immediately if you suspect fraud). See the Credit Rating guide.
The prime worry is that criminals will take your identity details and use it along with other information to build a new profile, applying for new products in your name, which will go on to your records and destroy your credit history. Yet as long as we take sensible precautions ourselves, the risks are limited.
How does ID fraud work?
There are two ways that fraudsters normally operate:
Phishing Getting you to give up your details
First, they try to get your PIN or password by what is known as 'phishing'. This means they set up websites, or directly contact you by email, post or phone, claiming (and looking/sounding) like they are genuinely from your bank, and they ask you to enter/tell them your PIN.
If it works, they'll have all they need to access your money, and theft is easy.
So there's a very important golden rule. No matter whether it's a traditional letter, email or phone calls:
NEVER EVER EVER EVER give anyone your PIN or password.
Don't do it, don't think about it. Always assume it's a fake.
Sadly, the banks are culpable here. They do sometimes call and request some personal details or passcodes, and this doesn't help matters. Yet we have to protect ourselves, and not rely on the banks. Having said that, no bank should ever ask for your PIN.
Even if you think the contact is genuine, while it's a hassle, just don't give them an answer. Instead, use what you already have stored as their correct phone number, website or postal address, and contact it back. Then you can be sure you're dealing with the correct people.
You can read more and see examples in our Phishing guide.
ID fraudUsing your identity to get credit
Second, fraudsters may apply for products using your identity. To spot this, regularly check your credit reference files, which contain all data passed on by banks about how you do your banking.
If someone is stealing your identity, this is where you'll spot any products listed that you never applied for.
You should check your credit file at least once a year. Read the Credit Rating guide to find out how. With cashback sites and free trials, you can even get paid to check.
Unfortunately, many people don't take this precaution, leaving themselves hostages to fortune. Always, always check your credit file at least once a year. Otherwise fraud can continue for years without you knowing.
The same applies if you receive goods or services you haven't bought, or are notified you've been accepted for financial products or phone contracts that you didn't apply for. All these are warning signs someone's been using your identity.
If you think you've been a victim of fraud, report it to ActionFraud (tel 0300 123 2040), the UK's national fraud reporting centre. It may also be able to offer help and advice on what to do.
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Do I need ID fraud insurance?
No no no no NO!
An entire industry has built up selling us the fear of ID fraud, and then trying to sell us insurance against it. In some ways, these companies are almost, although not quite, as bad as the fraudsters themselves. Many don't mention that ID theft insurance only covers the cost of salvaging the mess, not the money lost through the fraud.
Most non-high net worth individuals don't need to pay for these expensive insurance policies. While ID fraud is a hassle, you're covered by the banks unless you're culpable.
ID fraud insurance should be differentiated from payment protection insurance, which is commonly sold with credit cards. The idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).
There have been a myriad of cases where PPI has been mis-sold, ie, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them, and some big lenders have been fined.
So it's always worth checking you aren't getting more than you bargained for when you fill in the application. Then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.
If you think you've been mis-sold identity theft insurance then you could be due compensation. A company called CPP, plus banks that mis-sold identity theft and card protection insurance have set up a redress scheme to compensate customers. Read the Reclaim CPP Card Protection guide for full info on the mis-sold product and what you need to do next.
Can I get more protection for free?
Not any more - the credit cards offering full ID assistance tend all to have annual fees. If you have the Capital One Aspire Elite* credit card (annual fee £120, 19.9% rep APR), or apply for a new one, you'll get a free subscription to its ID Fraud Alert service. Importantly this alerts you when changes are made to your credit record.
The card's hideously expensive, and you need to earn £50,000 to get it. If this isn't you, and you only want the ID Fraud benefits, it's cheaper to sign up to alert systems offered by credit reference agencies.
Full details: Capital One Aspire Elite
The Capital One Aspire Elite has a concierge service, and 5% intro cashback, as well as ongoing cashback up to 2%. You'll get the following:
Two free credit reports a year
Your credit reference file contains an array of important details about you; financial details, such as products you've applied for, addresses and electoral roll information. Checking it regularly for mistakes is important; these could impair your ability to get new credit, or may suggest ID fraud (read Your Credit Rating article).
You can get a basic statutory report for £2 by writing to one of the credit reference agencies. Plus Capital One Aspire Elite cardholders are entitled to two more-detailed reports from Equifax each year, totally free.
Email alerts when your credit file changes
Capital One Aspire Elite cardholders will get an email any time there is a key change on their Equifax credit file. This includes any applications for new credit, meaning if you get an email and haven't applied for the product, there's a chance you are being defrauded.
Assistance to put things right if you have been defrauded
If all the prevention hasn't worked and you've become a victim, Capital One provide specialist expert advice via an identity fraud helpline seven days a week. This helpline promises to provide one-on-one help with cancelling any compromised accounts, clearing your name, repairing your damaged credit status and help with filing police reports.
If you use this helpline, please report how useful it was to you. I doubt it will actually solve the problem, but one-on-one help and special documentation at a stressful time could be very welcome.
Free ID fraud assistance for Direct Line home insurance customers
Those with combined buildings and contents insurance arranged with Direct Line* Home Insurance Plus automatically receive free identity fraud assistance and help to avoid getting caught out.
Yet don't let this alone persuade you to go with Direct Line, only do it if it's the best deal anyway. Find out by using the four step Home Insurance cost-cutting guide.
Most credit card providers will monitor your account for suspicious activity and will contact you if there are transactions that do not fit in with your usual spending patterns to check that you are the one making the transactions. However, this is not a failsafe, so it is important to check your statements, and to report cards missing as soon as you realise.
Bank accounts with assistance
Packaged bank accounts usually come bundled with travel, breakdown and mobile insurance in return for a monthly fee. With some, ID theft assistance is also included though what this actually entails varies.
Often the service they offer gives little more than what a bank should do anyway if fraudulent payments have been made on your account or someone has used your identity. They're not worth getting if that's all you want them for, and often offer little more than an advice line.
Some do come with more than that though, so if you're planning to use the other benefits too, NatWest below might be a good option, but see our Packaged Account Analyser for more.
Full details: NatWest Select Silver, £10/month - includes European travel, mobile & Lovefilm
The NatWest Select Silver account offers access to Experian's* credit report service, which normally costs £14.99 a month. As part of this you'll also be able to set up credit alerts to let you know if anyone applies for credit in your name. The account is £10 a month and offers European travel insurance, mobile insurance and Love Film rentals.
Experian credit reports
Your credit reference file contains an array of important details about you; financial details, such as products you've applied for, addresses and electoral roll information. Checking it regularly for mistakes is important; these could impair your ability to get new credit, or may suggest ID fraud (read Your Credit Rating article). You can also register to recieve alerts if anyone tries to use your details.
An optional addition if you are a victim. It essentially makes lenders perform extra checks on applications though can affect your credit score. See the full explanation below.
For the £10/month fee, in addition to credit reports and monitoring, it gives European travel insurance up to age 69 (£50 premium for those 70 and over), mobile insurance, which covers iPhones, plus three rental DVDs a month with Lovefilm and five music downloads from HMV Digital. For more details, including our Packaged Account Analyser tool, see the Best Bank Accounts with Benefits guide.
Too late! I think my ID has been stolen
Need instant help? If you think you've fallen victim, Experian's* CreditExpert monitoring includes access to an ID fraud protection helpline. This costs £7.99 a month, but it offers a free 30-day trial. So if you need it, simply sign up to the service, use the ID fraud helpline and then cancel the service before the 30 days is up. See the Credit Scores guide to find out how.
If you've noticed unusual account activity and genuinely suspect someone is using your identity to apply for new products, then contact the fraud prevention service CIFAS, and ask it to put a 'protective registration' on your credit reference file. This costs £20, and alerts all lenders who see it to carry out further checks before approving credit applications.
However, don't use this lightly. Getting Protective Registration on your files will slow up any credit searches, and may mean you don't get approved for things you need, from credit cards to mobile phone contracts.