If you use debit or credit cards, identity thieves may be trying to get their hands on your personal information by using devices called "skimmers," which steal the information from your cards so thieves can make purchases and ATM withdrawals at your expense. But while skimming isn't 100% avoidable, there are some ways you can greatly reduce the chances you'll be affected. Here's what you need to know about skimming and what you can do about it.
What is a skimmer?
A skimmer is an electronic device that is attached to a credit card reader in order to extract the identifying information from customers' cards.
These devices can be found in many places but are most common at unattended credit card swiping terminals, such as gas pumps and ATMs. There is also significant skimming occurring in the restaurant and retail industries, as the technology has evolved and devices are more difficult to notice.
Skimmers used to be rather noticeable devices that fit over the existing card-reader, as in this photo:
However, they have now evolved to the point where they're small enough to fit inside a credit card reader or can be installed on the inside of gas pumps. There are even tiny skimmers that plug into the input terminals on the backs of cash registers.
For thieves to use ATM card information obtained from a skimmer, they also need the victim's PIN. The skimming devices can't extract the PIN from the card, so a small (often undetectable) camera is commonly installed as well, especially on ATMs and gas pumps.
The data is alarming
Skimming has become more widespread as technology has evolved and skimming devices have become harder to detect. Over the past few years, there has been an outbreak of skimming, particularly at ATMs and gas pumps.
According to ATM maker NCR, skimming at ATMs alone costs banks more than $3 billion per year, and it doesn't look like this figure will drop anytime soon. A report by credit scoring firm FICO earlier in 2015 indicates that skimming at ATMs on bank property had risen 174% in just the previous year. Even more alarming, skimming in non-bank ATMs rose by a staggering 315%.
The new chip-based credit and debit cards can help cut down on fraud where they are accepted. These cards generate a unique one-time code at the time of a transaction, which is impossible to replicate. Big merchants were required to implement chip readers this month, but gas stations have until 2017 to comply, and upgrading is rather expensive. So there has been an epidemic of skimming at gas stations -- it's been particularly bad in certain states such as Florida (a skimmer got my debit card information at a gas station in Key West last year) and Utah, but there have been numerous incidents of skimming at gas stations throughout the United States.
How to avoid becoming a victim
There are a few ways to avoid becoming a victim of skimming, or to at least minimize the damage caused if you're victimized.
- The No. 1 way to avoid skimmers is to pay with cash whenever possible, especially at the gas station, where skimming devices are most common. Many gas stations also give a discount to cash customers, creating a double benefit.
- If you don't want to carry cash, use a credit card as opposed to a debit card, as credit cards generally have better fraud protection. Most credit cards come with zero liability for fraudulent transactions, and the charge is flagged immediately. On the other hand, with debit cards the liability is limited, but you can still be on the hook for some fraudulent withdrawals or purchases -- plus it can take longer to get your money back.
- Avoid swiping any cards -- debit or credit -- in unsupervised areas, such as gas pumps or out-of-the-way ATMs. You can typically walk inside the gas station to have your card swiped at the register, which isn't 100% safe but is far better than the pump. With ATMs, try to use machines that are in open view, preferably on bank property, and with video surveillance.
- Check your accounts frequently and report any suspicious transactions as soon as possible. Debit card losses are capped by the Federal Trade Commission at $50 if they're reported within two days, but your liability jumps to $500 if you wait up to 60 days.
The bottom line
If you use credit or debit cards, skimming is a real threat to the security of your accounts. However, by avoiding the types of payment terminals most frequently targeted and keeping an eye on your checking and credit card accounts, you can greatly reduce your chances of becoming the next victim.