A Simple Way to Limit Your Risk of Credit Card Fraud

I was in the checkout aisle of Home Depot (NYSE:HD) last week when an interesting thing happened. I handed the cashier my credit card, but she wouldn’t take it.

It wasn’t that the card was no good; she simply wouldn’t handle the card herself. She made it absolutely clear that she was there to ring up the goods only. And I needed to maintain sole possession of the plastic.
After that slap on the wrist, we got to talking. She told me how management had prohibited Home Depot employees from handling customer cards in the wake of the security breaches that had surfaced last month.
While that breach wasn’t the biggest to hit a retailer in the last year, it was still significant. Home Depot’s breach first hit in April, but wasn’t detected and disclosed to the public until September. At that time, the company confirmed that an estimated 56 million credit cards and debit cards were at risk after malware hackers stole customer information. A credit monitoring service estimates that associated fraud losses could reach $3 billion.
But what struck me most about my experience at the Home Depot was how I didn’t even bat an eye. I simply swiped my card and left with an afternoon’s worth of projects. Done deal, and on to the next errand.
This is how accustomed we have become to security breaches. The size of the one at Home Depot was far larger, and longer, than the one that caused Target’s (NYSE:TGT) stock to plummet when its systems were breached in December 2013.

How to Limit Your Risk of Credit Card Fraud

The problem hasn’t just been at these retailers. Sixteen million Americans were the victims of identity theft last year.
Big corporations are willing to shell out big bucks to protect against those types of financial losses – and avoid the kind of embarrassment that has plagued Target and Home Depot in recent months.
JPMorgan Chase alone estimates that it will spend $250 million annually on cyber security by the end of the year, employing 1,000 people to protect customers’ assets.
The good news is that customers aren’t typically responsible for unauthorized transactions. And perhaps that’s why I felt one step removed from the inconvenient realities that accompany a stolen card number. The buck stops with the financial institutions that provide the financing for the cards, not with the consumer. In some cases, the merchants will reimburse these lenders, but not always.
That said, it’s still a huge headache for the consumer who may have to wait for reimbursement for unauthorized charges and get new cards to use.
There isn’t much we can do as consumers to stop these data breaches. But we can do a few things to protect ourselves. And doing these things is one of the reasons I wasn’t too concerned when the Home Depot clerk said she wouldn’t handle my card.
First, if using a debit card, swipe it as “credit.” Don’t use your PIN code unless at an ATM machine. Doing this can help keep your PIN number out of the hands of hackers, and therefore help avoid unauthorized cash withdrawals.
And second, use a credit card instead of a debit card when possible. According to LifeLock (NYSE:LOCK), credit cards carry more protection and less risk because the funds are not withdrawn directly from the consumers’ bank account. This limits the risk of overdrawn accounts, bounced checks and other inconveniences that add insult to injury.
Also, most credit card issuers will typically give a consumer 90 days to report unauthorized transactions. That’s far more time than the two days that is customary for debit card issuers before the liability limit jumps from $50 to $500.
It’s not a foolproof strategy, but thus far it’s kept me out of the reach of hackers. And it lets me continue to focus on completing my laundry list of projects.

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