Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

By Ellen Roseman, personal finance columnist, Toronto Star
(Listen to the original audio)

You’re sitting at home when the phone rings. It’s a fraud investigator who tells you that your credit card has been compromised. A new card will arrive in the mail shortly.

How do they know? Banks have sophisticated software that picks up unusual patterns of credit card activity. A large purchase far from your home might be flagged as suspicious, for example, or multiple transactions in stores you never patronize.

Credit card fraud is a problem that keeps interest rates high for consumers and fees high for merchants. Eventually, we’ll have credit cards with embedded computer chips to make them more secure. But replacing all the credit card terminals across the country will take years.

Meanwhile, credit card data can be stolen by hackers who find a way into merchants’ computer systems. Remember TJX, the parent of Winners and Home Sense? This company kept too much data and didn’t secure it properly. Millions of credit cards were compromised and replaced in the past year.

Thieves can also obtain your full credit card number, and expiry date, from sales receipts. While your copy may have some numbers disguised, the merchant’s copy does not. Mandatory truncation could limit fraud, but Visa and MasterCard issuers let merchants keep sensitive customer information in case of refunds or exchanges.

Fraudsters order merchandise by mail or online, knowing the card can’t be inspected at the point of sale. Some merchants insist you supply a three-digit verification code, printed on the card but not in the magnetic stripe. Cloned cards often lack this code.

Debit card fraud is also a problem. The Interac Association is running ads about a test of chip technology for debit cards, which begins this month in Ontario. But not until 2015, eight years from now, will magnetic stripe transactions be phased out at the point of sale.

When thieves steal your credit card, you rarely lose money. The cost is covered by banks. But debit card fraud can hurt you. Banks may hold you liable for losses if they suspect you haven’t protected your personal identification number.

So, keep your PIN secure and watch out for people lurking behind you at bank machines or stores. They’re known as shoulder surfers.

-- Ellen Roseman

(Click on the comment link below to share your view)