The Uncomfortable Truth About Credit Cards

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The man allegedly behind the greatest cybercrime in history has been arrested, but for the more than 130 million men and women whose accounts may have been compromised, this story is just beginning.

Your credit card, in the line of fire -- sort of
Three men have been accused of hacking into the customer databases of 7-Eleven, Heartland Payment Systems (NYSE: HPY  ) , and Delhaize Group's (NYSE: DEG  ) Hannaford Bros. supermarket subsidiary, according to The Wall Street Journal.

The accused include Albert Gonzalez of Miami, a former informant for the Secret Service, who is suspected of orchestrating the operations. Authorities also suspect he's behind a data breach that cost TJ Maxx parent TJX Companies (NYSE: TJX  ) $200 million, the Journal reports.

Interestingly, the grand jury indictment against Gonzalez and his two accused Russian compadres alleges that they directly targeted exactly zero consumers. That's right; zero. Instead, their spree -- dubbed "operation get rich or die tryin" by the men, according to court documents -- allegedly targeted Fortune 500 firms.

And that should scare the beejeezus out of you.

Why? Millions of cardholders like you and me couldn't have done anything more to protect our electronic records or credit accounts. None of us were in control, and we still aren't.

So in the wake of this bust and its obvious implications --- that (a) none of us are safe, and (b) that banks such as Citigroup (NYSE: C  ) and JPMorgan Chase (NYSE: JPM  ) and shopping destinations such as (Nasdaq: AMZN  ) and Blue Nile (Nasdaq: NILE  ) will remain targets -- let's talk about what we can do.

Here are three ways to deter an identity thief.

1. Use a free credit reporting service
Credit reports, while dense, are by far the best way to see who is asking about you and what accounts the major credit bureaus think you have. All citizens have the right to a free report once annually.

More diligent consumers can also use credit-monitoring services. These services are designed to kick off alerts when new information about you is captured by the bureaus, and can help with the rapid response in the event that a corporate breach leads an identity thief to your digital door.

2. Track your transactions digitally, and consistently
Whether or not you choose, Quicken, or some other system to track your financial accounts, do track them. I'd advise daily if you can, weekly if you must, but at least once a month. Each gap in your record-keeping is a hole that an enterprising thief can exploit, charging away on your cards as you bask in the horrible bliss of not knowing anything about how much you have.

3. Have your creditors' key information in an emergency numbers file
There's good reason to keep a comprehensive record of your card account data while on vacation. Suppose your wallet is stolen; fail to replace your cards in a timely fashion, and you might also fail to get home. But is it ever bad practice to have an emergency file packed with key information socked away somewhere safe? Wallets can get stolen at home, too.

The Foolish bottom line
There's little we can do to stop hackers from accessing the information vendors have about us. Just ask the 130 million or so who've had their credit data put at risk.

Fortunately, the battle isn't won or lost at the corporate level, and data can only get an ID thief so far. To really succeed, they need lazy consumers who don't monitor their accounts. They need ignorance.

Don't give it to them.

Get your clicks with related Foolishness: is a Stock Advisor selection. Heartland Payment Systems is a Motley Fool Hidden Gems pick. Blue Nile is a Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy had an excellent weekend, thank you. Yours?

Read/Post Comments (3) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 24, 2009, at 5:02 PM, pickerupper wrote:

    It seems to me that all three of these suggestions don't really deter identity theft. They just help find out that it may have happened already. This might help nip things in the bud but the damage has already been done. Having bogus charges appear on your credit card isn't too bad - for the card holder - since the card holder isn't responsible for those charges beyond, I think, $50. You do have to know it's happening, though, and the suggestions are useful for that.

    More serious is the opening of accounts in your name which you may not even be aware of. This can be largely prevented by putting a "freeze" on your credit files. The rules for this are different in different states. I'm lucky because Indiana requires the credit bureaus to provide the service for free. Since my credit file is frozen, even if someone gets my information they won't be able to open any accounts because my credit report can't be accessed. It can be problematic to do this if you require your credit report to be accessed frequently, but this is not the case for me. The freeze can be lifted online at all three credit bureaus.

  • Report this Comment On August 24, 2009, at 8:58 PM, stockmenot wrote:

    Thank you Pickerupper for your information. I am going to look into doin that right now!

  • Report this Comment On August 24, 2009, at 9:22 PM, TMFMileHigh wrote:

    Hello pickerupper,

    I agree with stockmenot. Good comments and very helpful supplementary advice -- thanks very much.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

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