Credit Fraud and Online Shopping

Online shopping has opened up a new world of opportunities and a new realm of fear. As the problem of credit fraud continues to grow, the fear of falling prey to identity theft is also growing in the minds of people. Research shows that computer users are spending less time on the Internet due to fears associated with e-commerce. However, online shopping is actually quite safe if you follow a few safety precautions.

For several years, Cheryl Addison, a 36-year-old project manager, was a loyal online shopper. She purchased clothes, gifts, groceries, and prescription drugs from online retailers without a second thought. However, with the influx of recent media reports and data breach alerts, Addison has traded online shopping for what she perceives as a safer bet – brick and mortar retailers.

“I definitely miss the benefits of online shopping,” she says. “You can’t beat the 24-hour convenience and lower prices the Internet offers. But there are so many risks, especially with smaller online shops. You’re relying on technology, but can it really protect you?”

E-Commerce Concerns

Addison’s concerns are valid, and are shared by millions of consumers around the world. According to technology research and advisory firm Gartner Inc., consumer anxiety about online security resulted in a $2 billion loss in e-commerce and banking transactions in 2006.

A Gartner study revealed that nearly half of online adults said their concerns about identity theft and data breaches affected their online behavior. The rising instances of lost consumer data files and unauthorized access to personal information are the main reasons for this concern among consumers, the report said.

According to research from TRUSTe, a privacy certification and seal program, and market information group TNS, the top six factors that limit or prevent consumers from conducting online transactions are:

• Credit fraud
• Identity theft
• Credit card theft
• Preference for brick and mortar stores
• Spyware
• Spam

Are Online Stores to Blame for Identity Theft?

According to Avivah Litan, vice president and analyst at Gartner, although nearly all purchases at brick-and-mortar stores are electronically enabled today, online retail organizations suffer the highest toll because this is where consumers perceive the problem to be. However, Litan is quick to point out that brick-and-mortar businesses can leak credit card data just as easily as electronic merchants can because they also store data on computers that connect to the Internet.

The 2007 Identity Fraud Survey Report, conducted by Javelin Strategy & Research, reveals that more fraud occurs in traditional physical channels, such as in-person transactions, rather than online.

According to James Van Dyke, Javelin’s president and founder, while many people are wary of using the Internet to do their banking or shopping, using the Internet actually prevents criminals from accessing the sensitive information they are likely to steal from the trash. He points out that only two percent of those who steal identity information do so over the Internet. It is more likely that the theft will be committed through traditional means.

As customers who shopped at the brick-and-mortar stores of discount retailers TJ Maxx and Marshalls found out, shopping offline is just as risky as shopping online. Offline shoppers who paid for their purchases via credit or debit cards recently received alerts that a hacker had stolen their personal information. The theft dated back to 2003 and involved millions of card accounts.

This story highlights a simple fact that most customers do not realize – shopping offline is shopping online. When you shop in a retail store, your card data ends up stored in a company’s computers, which are ultimately connected to the Internet.

Credit Fraud Protection – Online and Offline

Whether you doing business online or offline, you should be aware that all transactions involving personal and financial information come with some very real risks. These basic tips will help prevent identity theft and fraud:

Be proactive. Checkout our top rated identity theft protection services to help stop identity theft before it happens from TrustedID, Identity Guard, LifeLock, ProtectMyID, and ID Patrol from Equifax.

Shop only on secure Web sites. A secure Web site uses a special computer communication known as Secure Socket Layer (SSL), which encrypts data and breaks it up so that outsiders cannot read the information. To ensure your purchase is protected by secure technology, look at your Internet browser for a padlock symbol in your browser or check to see that the address bar changes from “http” to “https”.

Shop with reputable merchants. If it is your first time shopping with a company, do your homework. Third-party verification devices, such as VeriSign, TRUSTe or the Better Business Bureau, can validate a site’s reputation. In addition, a reputable merchant will always have a phone number and contact information.

Use strong passwords for your online accounts and change them frequently. Never use your phone number, birth date, or name in user names and passwords. Always make sure passwords use a combination of letters, numbers, and other characters.

The benefits of online shopping can far outweigh the risks. In fact, due to recent online security breakthroughs, some believe that online shopping can be safer than shopping over the phone or even in person.