If you need justification for checking your credit card statement, this would be a good one. How about an online scam running for four years, debiting accounts, 1.35 million of them, by as little as $0.25 at a time. The debits were put into the accounts of bogus merchants set up by the scammers aided by unsuspecting mules throughout the U.S.

According to the FTC, the source of the stolen cards is unknown but I would be willing to bet that at least a good part of them came from the ongoing credit and debit card data breaches perpetrated by Albert Gonzalez and his bunch. After all, he got 170 million card accounts.

Out of the 1.35 Million consumers bilked out of these small sums, only 78,724 thefts were reported. This pretty much convinces me that a lot of you folks aren’t checking your credit card statements like you should be. Every statement. Every month. Every time.

You read about it almost every day. You see it on Television. You even get warnings on your statements. But apparently you aren’t doing it.

Don’t think for a minute that it can’t happen to you. It can. If it hasn’t happened to you yet, it will. I promise. Those 170 million card numbers that the Gonzalez gang got is two-thirds of the population of the United States. Those card numbers did not go to jail with Gonzalez. They are still out there in the hands of the fraudsters. And there are a lot more bad guys out there still hard at work to steal your money.

Source:
Computerworld article

Democratic Sen. Sheldon Whitehouse of Rhode Island recently proposed an amendment to the financial regulation bill that’s being worked on in the Senate. That amendment would have capped the interest rate that credit card issuing banks could charge consumers. It would have limited the interest rate to the cap set by individual States.

Currently, credit card interest rates are limited by the State in which the issuer is headquartered. Delaware, North Dakota, and perhaps a few others, have either a high limit or no limits at all and major credit card issuers have set up corporate headquarters in those States.

Late yesterday, that amendment was rejected by the Senate. Once again, government has folded to the wishes of the big money banks over the needs of their hard working constituents. We can assume that someone’s pocket is a bit greener this morning. I applaud Sen. Whitehouse for the effort.

Earlier this month, Cambridge University demonstrated successful attacks on Chip and PIN technology. Nobody is surprised. After reading numerous reports from reputable sources, here’s what we’ve been able to determine.

First, it’s important to note that Chip and PIN has been ubiquitous in the UK for several years and is currently being deployed in Canada. There hasn’t been widespread use in the US yet but the technology is being pushed.

Apparently, nobody ever thought it was secure. I certainly didn’t because I don’t believe any credit card technology is secure; just that some is a little more secure than others. It’s been reported that HSBC in London, one of the world’s largest banks, issued this statement about the Cambridge announcement.

“Although they have raised a clear security concern with regards to chip-and-PIN, which we are taking very seriously, the problem highlighted is relevant to all card issuers and not just HSBC.”

Note that nowhere in that statement did they deny that the hack was a reality.

According to at least one report, the equipment needed to accomplish the hack was too big and bulky to go unnoticed. But there are others that claim to have seen and video recorded the attack and it went totally unnoticed. I haven’t found any posted video yet so I can’t say one way or the other. But I would ask you how much suspicion a person with a back pack or laptop bag would attract. My guess is, not very much. Cashiers don’t even look at signatures these days. Whether the hacking technology is palm sized or truck sized, the fact remains that it can be done.

As usual, what we’re seeing is that the banks have no incentive to make this, or any, technology secure because they can pass the liability off to others. In this case, it looks like it will be the cardholder. The reason for this, apparently is quite simple. The hack collects enough information from a transaction to make subsequent fraudulent transactions look like the PIN was entered. That puts the burden squarely on the cardholder.

Even more interesting is a report contained in a story from SecureIDNews. This story said that, “The Smart Card Alliance has reviewed the hack along with other industry organizations and concluded that widespread implementation of this attack is unlikely.” The mysterious part is that, according to Smart Card Alliance Spokeswoman Deb Montner, the Smart Card Alliance–to her knowledge–has reached no such conclusions and has issued no such statement.

I won’t go into how the hack is carried out. I’m not a security expert so most of it is over my head. If you’re interested, there are some details in a recent Store Front Backtalk article.

We probably won’t see any wide-spread hacks from this any time soon, but I believe that once they start, they’ll grow rapidly. Cardholders will pay the price.

I’m sure you’ve seen the sales pitch from your credit card issuer. It’s called credit card insurance or debt cancellation insurance and it sounds like it makes sense. If you lose your job or become disabled and can’t work, the debt on that card will go away. In the current state of the economy and available jobs, it’s tempting. Some of the offerings don’t even sound terribly expensive at $0.75 to $2 per $100.

Take a good look at those numbers.

Suppose the balance owed on your account is $5,000 and you’re paying the cheap $0.75 per $100. You’re going to pay $37.50 per month for that insurance. At the $2.00 per $100 rate your fee would be $100 per month. At least it seems that way but there’s more. Unless you pay that $37.50 to $100 per month insurance fee on top of your normal monthly payment, the fees will be added to your outstanding balance and you’ll be charged interest on it. If you’re paying only minimum payments, there’s a good chance that your outstanding balance will increase instead of getting paid off.

We’re not done yet.

In spite of what the sales pitches lead you to believe, your debt does not get cancelled. If you are out of work, the insurance will only cover your minimum payments. Make no mistake about it; you will still be responsible for the amount of the outstanding balance.

Getting them to pay might not be so easy.

Like any insurance, you are going to have to prove the circumstances that trigger your claim. You can bet it won’t be a matter of a phone call or a note. You’re going to have to prove that you’re out of work and you’re probably going to have to do it every month. By the time you get finished proving this month’s claim you’ll have to start all over for next month.

Is it worth it?

Only you can decide if you want to throw your hard-earned dollars at this kind of insurance but consider this. In 2003, the Center for Economic Justice estimated that consumers paid $2.5 billion for these ‘products’ but card firms only paid out $125 million in benefits. If you already have disability insurance, there’s a good chance that your credit card payments may already be covered. Before you sign on the dotted line for any credit card related policies, crunch the numbers carefully. You already know that card issuers will stop at nothing to get your money. Credit card debt cancellation insurance is just another cash crop for them.

Consider taking the fees you’d pay for the insurance and putting into a savings account where it will accumulate some interest for you and be available to make those credit card payments if you fall on hard times.

The Government thought they were doing us a favor passing the new Credit card legislation. But the banks are haveing no trouble getting around it. To the tune of a 79.9% interest rate. First Premier Bank is doing just that. They have to because in February when the new law goes into effect, they can’t charge $256 in fees on a new $250 credit line.

Don’t believe me. Read the full story here.