50% of cardholders will cut usage after facing fraud attempt.
It’s no secret that dealing with credit card fraud and getting fraudulent charges removed from an account can be a bit of a hassle. But according to a new survey from Sparks Research and the fraud prevention firm Tender Armor, that hassle might be so great that cardholders become wary of using their card at all following a fraud attempt.
More than half of the over 1,000 survey respondents (565) reported that they cut back on online shopping, scaled back on card usage in general or closed their accounts altogether. Additionally, 78% of respondents wanted more protection for credit data when shopping online.
Still what would that protection look like? Secure, encrypted websites are designed to keep information secure, and unlike EMV chips that prevent “card present fraud” where the merchant actually can see your card, there are limited opportunities to improve protection on “card not present fraud” short of adopting the European credit protection system of EMV chips with PIN numbers.
That’s a big difference between the U.S. fraud protection credit of EMV chips versus the EMV chips they currently use in Europe and elsewhere internationally. American credit cards with EMV chips are still signature-based. In other words, they check the chip in your card, but you still have to sign. By contrast, most international credit providers, particularly in the EU, have switched to EMV chips with PIN number authentication – similar to American debit cards.
But within the U.S. credit issuers have little interest in adopting the PIN system in addition to adding EMV chips. So the chances of credit cards themselves providing additional fraud protection for online shoppers are slim.
Reducing risk when shopping online
For many U.S. consumers, cutting out online shopping entirely would be a monumental pain. These days more and more merchants are making it as convenient – if not more convenient – to shop online and have products shipped directly to your home rather than forcing you to head out to an actual storefront.
Just consider how much of your holiday shopping last year was likely done online. A whopping 93.1% of consumers shopped online for at least one gift in 2015 and the decrease in Black Friday chaos is largely attributed to more people shopping at home and even at work.
So if you groan at the idea of going back to fighting crowds and dealing with pushy salespeople when you’re shopping in stores, worry not. There are a few ways you can reduce the fraud risk of online shopping outside of basic online identity theft prevention.
- Use PayPal. Assuming you set unique logins and passwords that aren’t easy to guess and don’t give them out on social media, PayPal is relatively low-risk when it comes to someone fraudulently accessing and using your account. Also, even if the account were accessed the fraudster would only have access to the money in your account. The downside is that PayPal isn’t as widely accepted as you might think, so many online stores simply don’t give you the option to use it.
- Use a prepaid credit card. This offers a similar type of protection to PayPal since the only money a fraudster would potentially have access to is the money you have loaded on the prepaid card. You don’t build credit with prepaid cards – they’re kind of like debit cards that aren’t attached to your main bank account. So you get the convenience of credit with the finite cash access of debit or PayPal. Many major credit issuers have a prepaid card, so you also get wider access than you would with Option 1.
- Have a low-limit credit card you only use for online shopping. If you’re one of those people who use credit strategically so you have different cards for different purposes then this could be right up your alley. You keep a card with a low-limit (we explain how to do that below) that you only use for online purchases. If the card is accessed and used fraudulently, the damage will be minimized by the low credit limit. Additionally, since you only have one card you use online, it’s easier to comb through transactions closely to make sure all of the charges are yours.
How do I get a low-limit credit card?
Never heard of a low-limit credit card? That’s because unlike rewards credit cards or low APR credit cards, credit card issuers don’t go out and “sell” low-limit cards. But as CreditCards.com explains you can usually get a card with whatever high limit you qualify for based on your credit score and then call the credit issuer to ask them to lower the limit. In some cases you can actually request a lower limit for a specific reason you explain on the application.
Another way to get a low-limit card is to open a secured credit card account. This is an account that’s usually used by people with no credit or bad credit because you have to make a deposit to open the credit line, so it’s easier to qualify. With most secured credit cards the limit is equal to your deposit amount, so if you deposit $500 then you only have a credit limit of $500.
And don’t worry, you won’t lose all or part of your deposit just because your account is used fraudulently. The deposit is there in case you default on the account and the creditor has to charge it off. If your account is used fraudulently, you can dispute the charges just like you would with a regular unsecured credit card.