What Grace Periods Mean For Identity Theft

Financial blogger Ash Cash joins to share some notes from the other side: how identity thieves are getting wise to typical protection measures - and how you can thwart their plans.

Identity theft is one of the fastest-growing crimes in America. According to the U.S. Department of Justice, approximately 16.6 million — or, 7 percent -- of all U.S. residents age 16 or older were victims of one or more incidents of identity theft in 2012. The Justice Department in late 2013 reported that by October, nearly 12 million Americans had fallen victim to identity theft, with the total financial loss attributed to identity theft at $21 billion. Yes, billion — with a "b".

Many experts suggest you monitor your credit report regularly to keep track of your current and closed accounts, negative items and/or credit inquiries. However, this may not be enough to combat the sophisticated identity thief who knows how to circumvent many of the safeguards.

Cyber criminals are smart and patient. Many understand that after a data breach, the first thing many consumers do is opt into a 90-day initial security monitoring period, which alerts creditors that they may have been a victim of identity theft. That is why some savvy fraudsters will wait, avoiding the initial detection period before using and abusing your information. This means that you must remain vigilant long after the initial security alert is over.

You have the right to dispute information on your credit report if you think it's fraudulent or inaccurate, as well as the right to stop creditors and debt collectors from reporting fraudulent accounts. But not all accounts are treated equal. Understand your liability in the event of identity theft or other financial fraud, and for how long any available grace periods protect you.

Your liability for the unauthorized use of your credit card is limited to only $50, and if you report it before a loss has occurred then your liability is zero. If your ATM or debit card is lost or stolen, your liability for unauthorized transactions depends on how soon you report the loss to your financial institution. In some cases, you may face unlimited liability for fraud if you do not report it soon enough. Ensure that you're keeping close tabs on your cards at all times.

According to the Federal Trade Commission, you are not liable for any debt incurred on fraudulent new accounts opened in your name and without your permission.

Among the best ways to combat against identity theft is to proactively do the following:

  • Regularly check your credit report to ensure all information — including your full name and any variations, current and past addresses, Social Security number, birth date, spouse's name, and the names of current and previous employers — is accurate. Any misspellings of your name or unknown addresses could indicate that you may be a victim of identity theft. While it is suggested that you view your credit reports at least once a year, it is good practice is to review your report once every quarter, if not monthly. In addition to ensuring your personal information is accurate, to keep surprises at bay, look at closed accounts, verify negative items, and make sure there are no unauthorized credit inquiries on your report.
  • Review your bank account online every three or four days instead of waiting for your bank statements. With limited rights in the event of fraudulent bank account activity, it is imperative that you note any discrepancy and report it immediately.
  • Add credit monitoring alerts to your credit report. Alerts notify you of any changes to your credit report. This is the most effective way to identify potential fraud and stay proactive in the fight against identity theft.

Each year, cyber criminals become more and more cunning. By taking proactive precautions, you can thwart their efforts to defraud you and have peace of mind that your information is safe. The old adage of "better safe than sorry" applies in this case. Make sure you‘re doing what's necessary to protect yourself and minimize the impact of identity theft.

Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
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