My daughter thought she was doing the right thing, the safe thing … And that’s how hackers drained her bank account.
The hacks, viruses, and scams are coming at us fast in 2017. Barely two months ago we were dealing with WannaCry. Last week the Petya ransomware virus attacked the US, Europe, and the Middle East. But credit and debit card fraud has really hit home for me lately. When someone in your family gets hacked, it really strips away the illusion that, “Those kinds of things won’t happen to me.”
So what happened? And how can you protect yourself from the latest credit and debit card hack? Here are three important lessons I learned from my daughter’s unfortunate situation:
1. Debit cards are not always “safer” than credit cards.
Like many parents, I try to discourage my children from relying too heavily on credit cards. Yes, having good credit is important, and there’s nothing wrong with credit cards when they’re used responsibly. But a debit card hack can be way worse than a credit card hack because it’s tied to actual money, not credit.
The two cards are also covered by two very different liability laws. If your credit card is hacked, federal law limits your liability to $50, and many credit card companies include zero liability fraud protection in their member agreements. Your liability for a hacked debit card, however, escalates the longer the fraud goes unreported. If you suffer a card hack and you don’t report it within 60 days, your liability could be unlimited.
Check with your bank and credit card companies and find out what your potential liabilities are in the event of a card hack. And if you have bills and protection plans set to auto, remember that …
2. Automation is not always your friend.
My daughter had enabled overdraft protection on her debit card, so that if her debits exceeded what was in her checking account, any additional charges would be covered by her savings account. That seems like a sensible and responsible thing to do, and many folks probably have their debit cards set up the same way.
But after my daughter’s card hack drained her checking account, the overdraft protection kicked in, and the hackers drained the associated savings account too.
Automating bills and monthly bank transactions can be a big time-saver, but be careful about putting all your finances on autopilot. Check your bank and credit card statements every month, even if they’re set to autopay, or you might be auto-paying for something you didn’t buy. If you’re a debit card user, think twice about overdraft protection. A better strategy might be to keep a regular, but low, available balance in the associated bank account. In addition to limiting potential damage in the event of a card hack, you might also become more mindful about unnecessary purchases, and a better long-term saver.
One piece of automation you should consider are automatic fraud notifications from your bank or credit card company. Sometimes these “suspicious activity” alerts can be superfluous, but would you rather get a couple unwanted texts and emails, or suffer a card hack?
3. You can’t predict the next hack.
Just when my daughter thought she was finally at the bottom of her debit card hack, she started receiving packages from UPS and FedEx that she hadn’t ordered. She was all set to return the items as misdelivered, but first she dug a little deeper and discovered this was a whole new layer to the card hack: the scammers were buying things with her card, shipping purchases to her billing address to throw off the merchants, and counting on her to “return” the items she hadn’t bought.
Except the return labels were fakes! If my daughter had called the shipper and asked for a return pickup, the items would have been sent to whatever address the hacker had put on the fake return labels.
Confused? I sure was! But these are the lengths to which crooks will go to steal your personal and financial information. And you can bet that the next big breach will be even crazier and harder to deal with than the current one.
So the next time you’re reading headlines about a new internet virus or bank card hack, don’t just swipe to the next story. Staying up to date on the latest cyber threats and scams is your best defense against the next wave of attacks, and your best chance of limiting any potential damage to your financial security.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 24 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.