How to Protect Yourself from Identity Theft and Financial Fraud

The first time my identity was compromised, it was over 25 years ago and was perpetrated by a former employee. It was so long ago, the industry didn’t even have a term for it yet. Now, I find evidence of fraud once a year or so, but it’s not personal. Most fraud is perpetrated by computers used by professional criminal rings, not individuals. Take a moment to learn how to protect yourself from identity theft and financial fraud.

How to Protect Yourself from Identity Theft and Financial Fraud

How to Protect Yourself from Identity Theft and Financial Fraud

You might not be able to prevent identity theft entirely, but the quicker you find financial fraud and respond to it, the better off you’ll be. The absolute BEST tip is to open ALL of your snail mail and to at least look at your financial accounts monthly or more frequently. Clients find evidence of fraud when they start getting the marketing mail that comes after big purchases that they didn’t make.

This is such an important topic, I share my personal experiences and tips at least every other week with clients.

Prevent Identity Theft by Opening Your Mail

-Read all email from your banks and credit cards, which is how I’ve found warranty offers to protect a snow blower that was fraudulently purchased on my card.-Check your credit report at least annually. I showed you how to check your credit report up to three times a year for free in this post.
-Shred mail and documents with financial or medical account numbers. (Don’t bother shredding everything with your address on it. That info is publicly available and not a risk to you.
-Turn off snail mail financial statements that you aren’t opening.

Prevent Financial Fraud with Credit Cards

-Close down credit accounts when you are no longer using them.
-Proactively put a credit hold on at all three credit bureaus. This prevents new accounts from being opened without your personal involvement.
-Proactively stop new unsolicited credit offers from all three credit bureaus.
-Shred credit offers that come in the mail. Those can be used by thieves if they end up in the trash.
-Limit yourself to two personal credit cards, a main one, and one for backup. Three at most!
-Review your account balances and look at individual charges monthly. Did I say this already? That’s because it’s important!
-Research and challenge even small charges that you don’t remember making or from merchants you don’t recognize. Fraudsters call them “tester” charges. They’ll charge something for $5 or $10 one month to make sure the card is good, then they’ll go on a shopping spree the next month.

Prevent Identity Theft by Staying Organized

-Consolidate accounts when possible. Don’t have more banks or brokerage accounts than you really need.
-Change your passwords more often than you want to and make them longer than you think is necessary.
-Don’t conduct business using passwords that you also use for your bank over public wi-fi.
-Don’t carry all of your cards and social security card in your wallet.
-Make a copy of the contents of your wallet and store it at home. You’ll need that if your wallet is stolen.

Prevent Financial Fraud on Debit Cards

-Don’t keep large amounts of money in an account tied to a debit card. When that debit card gets compromised, that money is gone immediately, and it can be weeks until you get it back.
-Don’t keep debit cards you never use. Even inactive debit cards can end up being used by criminals. (Ask me how I know.) Call the bank to cancel the cards.

What to Do When You Suspect Identity Theft Happened to You

-Don’t freak out if/when your credit card gets compromised. You don’t have to pay the charges once you’ve reported the fraud.
-Report suspicious activity IMMEDIATELY and in writing. Your bank will have established procedures to report it.
-Report fraud and identity theft to your local police department, no matter where you think the criminal was or where the fraudulent charges occurred.

I’m skipping over the completely obvious advice like not giving financial or account info to random callers. My readers are all smart enough to know this is a bad idea.

Don’t Do This to Prevent Identity Theft

The one thing I don’t recommend is paying for fraud monitoring. I’ve never found a need for it. If you take reasonable care with your accounts, and you open your mail and look at your bank balances, you’ll find problems when they occur. Many of my clients end up with multiple fraud monitoring services which cost a pretty penny, and they don’t look at the alerts when they happen. It gives you a false sense of security, doesn’t really help you learn how to manage your own money and security, and creates a lot of extra noise and paperwork.

There are a few other ideas in this article from CNC on the latest ways to identify and stop fraud. The thing that’s changed in the decades since this first happened to me is that you now report international crime to your local police department. When my former employee opened an account in my name, it made sense to call in the local police. But when my card was used for a spending spree in Las Vegas last year, I honestly forgot to notify my local police department. But by reporting the crime, you can help officials connect the dots and prosecute criminals when possible.

You can’t completely prevent fraud today unless you take yourself off the grid, but you can manage it fairly painlessly when it happens.