With everything easily available from wines and perfumes to electronics and toys, online shopping is an increasingly attractive alternative to braving the local mall during the holidays. However, it can also pose a risk to your identity, according to the Insurance Information Institute (I.I.I.).
As online shopping becomes increasingly popular, more and more people are going to the Internet to take care of their holiday purchases. Seventy-two percent of U.S. online consumers say they will shop online for holiday gifts this season, according to exclusive research conducted for Internet Retailer. And this year’s Cyber Monday (the Monday after Black Friday, a focus point for online holiday retail sales promotions) was a case in point, proving to be the busiest online-shopping day in U.S. history, with sales reaching $1.03 billion, up 16 percent from a year ago, according to comScore Inc.
But the Internet is not the only place where there is a risk of identity theft. Statistics from the 2009 Identity Fraud Survey by Javelin Research, noted that 43 percent of identity theft cases are in fact the result of a lost or stolen wallet, checkbook, credit card or other physical document.
“The hustle and bustle of the holidays creates the perfect environment for thieves bent on stealing your credit cards or other financial information,” said Loretta Worters, vice president, I.I.I. “Online, people are rushing to place an order and may not be aware that they are ordering from a non-secure site. In the malls, shoppers are tired, stores are crowded and it’s easy to become less guarded about personal information such as credit cards, personal checks, driver’s licenses and social security numbers.”
Most home and renter policies provide coverage for theft of money or credit cards; however, the amount of coverage is limited (usually $200 in cash and $50 on credit cards). It should be noted that once you have reported the loss or theft of your credit card to the issuing company, you are responsible for only $50 of unauthorized use.
Some companies now include coverage for identity theft as part of their homeowners insurance policy. Check your policy to find out. Others sell it as either a stand-alone policy or as an endorsement to a homeowners or renters insurance policy which can run about $25-$50 annually. Identity theft insurance provides reimbursement to crime victims for the cost of restoring their identity and repairing credit reports. It generally covers expenses such as phone bills, lost wages, notary and certified mailing costs, and sometimes attorney fees (with the prior consent of the insurer). Some companies also offer restoration or resolution services that will guide you through the process of recovering your identity.
Identity thieves take personal information and use it to impersonate a victim, stealing from bank accounts, establishing phony insurance policies, opening unauthorized credit cards or obtaining unauthorized bank loans. In some more elaborate schemes, criminals use the stolen personal information to get a job, rent a home or take out a mortgage in the victim’s name.
Use of stolen credit card numbers is among the most common forms of identity theft, but some schemes use electronic means, including online scams like ‘phishing’, in which thieves use email inquiries purporting to be from financial or other online organizations, to obtain sensitive account information. Others might use more old-fashioned methods, such as ‘dumpster diving’—rooting around in people’s garbage to collect financial information.
Many credit card companies are now using radio-frequency identification (RFID) chips in their credit cards instead of magnetic stripes. The advantage is quicker, more efficient transactions, especially those carried out at traditionally cash only retail outlets, such as fast-food restaurants or convenience stores. However radio frequency identification may make it possible, in some cases, for identity thieves to use a simple electronic device to capture the information. The scariest part is that it can happen right in your presence, without you even knowing it.
Victims of identity theft are often left with lower credit scores and spend months or even years getting credit records corrected. They frequently have difficulty getting credit, obtaining loans and even finding employment. Victims of identity theft fraud often travel a long and frustrating road to recovery; depending on the severity of the identity theft fraud damage, the recovery process can take anywhere from a few weeks to several years.
“With so much increased spending this time of year, consumers should carefully monitor their credit card bills and bank balances to make sure that they actually made all of the purchases,” said Worters. In fact, the Federal Trade Commission (FTC) reports that 52 percent of all identity theft victims discovered that their identity was stolen by monitoring their accounts.