Minimizing Bank Account Fraud

Keeping your finances secure is no easy task.

Even major corporations are hit hard by scam artists and thieves (such as Target).  While nothing apart from cash-only transactions can safeguard your accounts with certainty, there are still some ways to keep your bank data safe.

My suggestions below would not have protected someone from the aforementioned Target scam, but may help reduce your risk from many of the most common attacks.

Online banking

Online banking exposes people to a lot of assumed risk.  The convenience of the practice doesn't mean that we should forego sensible precautions:

     1) Don't use public or untrusted computers

Computers that aren't under your control can be infected with 'spyware' that can either keep track of all of your keystrokes and grab your usernames and passwords (i.e. keylogging). Or, a public computer might be connected to a network that allows a third-party to view all incoming and outgoing traffic (such as a man-in-the-middle attack).  This latter issue is becoming an increasing problem for unsecure WiFi networks at public places such as cafes and airports.  A malicious use of this form of eavesdropping allows the person in the middle to capture bank statements, account numbers, etc.  Even on your home computer, are your virus and malware protections current?

     2) Use Credit cards instead of debit cards (if you use a card at all)

Credit card backers often use state-of-the-art fraud departments that look for unusual purchasing patterns (out-of-country?) and call the card owner for verification.  In any case, credit cards have a maximum balance and sometimes have a maximum transaction limit - both of which protect you!  As a responsible consumer, you should be checking your statements and promptly reporting fraudulent activity (there is an 800 number on the back of your card to do this).  Promptly reporting suspect transactions reduces and sometimes eliminates the consumer's liability for the fraudulent purchases.

The problem with debit cards is that they usually don't have these protections.  It can be very difficult to credit (refund) your account and fraud affects your cash balance immediately.

     3) Use banks or online merchants that allow for continually changing passwords

Some websites allow you to have passwords that are a customized base + randomized pin = unique password (mostly).  One vendor that I am the most familiar with is VeriSign's VIP credential system.

     4) Be EXTREMELY wary of overdraft protection

Overdraft protection is often convenient in that your debit card or checking account isn't overdrawn, critical payments get through, and you avoid overdraft or "Non Sufficient Funds" fees.  However, I'd rather have my checking account declined than have automatic overdraft protection that allows my savings account to be wiped out.