STOCK MARKET WATCH -- Friday, 22 May 2015

[Demeter]

18. 5 Ways To Protect Yourself Against Debit Card Fraud

http://www.forbes.com/sites/nickclements/2015/05/21/5-ways-to-protect-yourself-against-debit-card-fraud/

This week, FICO reported that debit card fraud has hit a 20 year high. Fraud at ATMs located in bank branches increased 174% from January 1 to April 9, compared with the same period last year. And ATM machines located away from bank premises experienced an incredible 317% increase.

ATMs in America remain vulnerable. When a consumer takes out cash, they need their ATM card and a pin code. The ATM card does not have chip-and-pin protection. Instead, all of the information is stored on the magnetic stripe, which is a very old technology. And most fraudsters are still using an old technique called skimming. With this technique, fraudsters attach a device on the ATM that can be very difficult to detect. When you input your ATM card, the attached device will skim the data from the magnetic stripe. Typically, a camera will also be added to the ATM machine, so that the fraudster can record your pin code. With this information, a new debit card can be created using the information skimmed from the magnetic stripe. Combined with the pin code, the manufactured card can be used to withdraw cash from ATMs. It is much easier to attach skimming devices at ATMs located in convenience stores than at bank locations, which is why ATMs away from bank branches are most vulnerable.

However, there has been an increasing risk even at bank branches. I have spoken with a number of fraud managers at large banks, and they have told me that while the ATM machines inside of a branch lobby are well protected, one vulnerability has been increasingly exploited. When you visit an ATM out of office hours, you often have to put your card into a reader to unlock the door. This device has become vulnerable to specially designed skimming devices. And while fraudsters likely will not have your pin code, they can use the credit card functionality of the ATM card to make other purchases. I used to run large fraud departments at banks earlier in my career. As a result, I have always been very paranoid about protecting myself. And I view the checking account as the most important account to protect, because it is your cash. Here are the five things I do to reduce my risk of fraud.

1. Only Use A Bank ATM And Cover Your Pin Code

ATM machines away from the bright lights and cameras of a bank branch are at a much higher risk for fraud. Whenever I need to get cash, I use a bank branch ATM. And I only do it during regular business hours, so that I avoid having to use the devices that open doors after business hours. When you input your pin code, make sure you use your hand to cover the number pad. That way, any camera would not be able to obtain your code.

2. Set Up Daily Alerts With Your Bank

Most banks give you the opportunity to set up alerts. I opt for text message alerts, because it gets my attention. I have set up the alerts so that any transaction greater than $0.01 using my ATM card results in a text message being sent to my phone. I will know right away if I have been compromised.

3. Keep As Little Cash As Possible In Your Checking Account

The more opportunities there are to access an account, the greater the chance for a fraudster to steal money. Checking accounts have more ways than any other type of account. You can remove funds by using your ATM card. You can use that same card like a credit card, making a purchase with a signature. Checks can be written. Automatic debits can be taken out of your account, if someone knows your routing number and account number, which is written on your checks. People can hack your online banking account and order a bill-pay. Every one of those transactions has a process that a fraudster is studying, and trying to break. I keep very little money in my checking account. Every month, I sweep money from my checking account to an online savings account that has no ATM card associated with it. Not only do I earn a much higher interest rate, but also I reduce the chance of theft. I have a setting on my savings account that any withdrawal will result in a notification.

4. Sign Up For 2-Factor Authentication

Many banks give you the opportunity to sign up for 2-factor authentication. That means that a username and password is not sufficient for signing into your account. Instead, you need to have a text message sent to your phone, or an email sent to your account. You are usually given a number of options for setting up this higher level of security. I turn on the higher level of security wherever it is offered. But at a minimum I would set it up for adding a new payee for online bill-paying. I have seen too many people have their online banking credentials hacked. The fraudster could then login to your bank account and send money to a new payee.

5. Consider A Credit Card For Your Everyday Purchases

Credit cards can be dangerous. For too many people, a credit card serves as a source of temptation to spend more money and get into debt. But, if you have the self-discipline to manage your credit card responsibly, it can be a wonderful tool. I put all of my monthly purchases on a credit card. That way I can keep very little money in my checking account. When I am paid each month, I pay for my home, my utilities and my single credit card bill. I then transfer the rest to a savings account, leaving a small buffer. Even better, I know that if fraud does happen, my own cash is not at risk. Instead, I dispute a credit limit rather than having to wait to get my cash re-deposited after an investigation. Although banks are generally good about putting cash back into someone’s checking account during a dispute, it does not always work perfectly.

Fraud Will Likely Happen To You

At some point, you will likely be the victim of fraud. Your first goal should be to minimize the risk of it happening. Your second goal should be to know about it as soon as it happens. And then you need to call the bank right away and report it. I have experienced fraud a number of times. But I found out about it right away, disputed it and never lost any of my own money.