Credit Card Guide

Credit card fraud protection - which card is best?

Updated: Friday 02 December, 2011

By Martin Fagan

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No one wants to fall victim to credit card fraud, but do some credit cards offer better protection than others?

The convenience of using credit cards is undeniable: cards are replacing cash for a huge range of things, from paying utility bills to ordering shoes online.

However, the rise in popularity of using cards and shopping online has led to an increase in credit card fraud. In 2010, total card fraud losses were £365million, according to the UK Cards Association. But this was down 17% from £480.3 million in 2009.

Becoming a victim of fraud is not only financially damaging, it can also be very distressing and frustrating to rectify. It is no reason to miss out on the convenience of using credit cards, but you do need to make sure your card offers adequate protection and that you do everything you can to reduce the risk of fraud.

In this guide we will look at the different fraud protection services that credit card providers offer, as well as looking into additional protection policies available.

• Fraud losses and “reasonable care”
• Chip and pin
• Online protection
• Account monitoring
• Additional protection policies
• Things to remember

Fraud losses and “reasonable care”

For all credit cards, as long as you have taken reasonable care to protect yourself and have notified the company as soon as you realised something was wrong, you will generally not be held liable for losses as a result of fraud.

If a card is used fraudulently before it is reported lost or stolen, the victim could have to pay the first £50 that is lost, but not all providers will necessarily apply this.

The question of what amounts to “reasonable care”, however, is a contentious issue. Keeping your details secret, not writing down or sharing your PIN with anyone and not letting your card out of your sight are generally good ways to take “reasonable care” to protect yourself from fraud. However, recent changes in the Banking Code mean that when shopping online, you may need to do more if you are to be seen to have taken “reasonable care”.

Banks advise customers to use up-to-date antivirus and spyware software and a personal firewall on their personal computers, and many banks now offer free antivirus packages to customers.

It is so far unclear whether - or to what extent - credit card providers will refuse to cover fraud losses for customers who have not adequately protected their PC. However, if you are planning to use your credit card to shop online, it’s wise to use up-to-date antivirus and spyware software as well as a personal firewall to protect yourself and to ensure you will be covered in the event of fraud.

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Chip and PIN

Chip and PIN is an industry-wide initiative designed to combat fraud, and whichever credit card you choose, you will be required to use chip and PIN.

Before chip and PIN was introduced, you simply needed to sign a receipt to make a purchase and signatures could be forged fairly easily. Now, every time you make a purchase you will be asked to enter your four-digit personal identification number (PIN), which makes the process much more secure and should reduce the risk of fraud.

You should avoid writing down your PIN and should not share it with anyone.

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Online protection

All credit cards that are powered by MasterCard or Visa now offer additional protection from fraud online. This is in the form of an extra verification level for online shopping and is completely free to register for.

Once you have registered for one of the two systems – MasterCard SecureCode or Verified by Visa – the individual password you choose will have to be entered in addition to the normal card details in order to complete any online transaction at participating online stores.

This system adds an extra level of security and costs nothing to set up. So to prevent your card being used for unauthorised transactions, it is definitely worth registering. You can do this by visiting your card provider’s website or through the Visa registration page or MasterCard registration page.

For making online purchases, the UK Cards Association and Financial Fraud Action UK have further advice on their dedicated website, BeCardSmart (www.becardsmart.org.uk). As well as registering your card with Verified by Visa or MasterCard SecureCode - and protecting your PC with software as outlined above - it recommends you do the following when shopping online:

• Look for the padlock – a padlock symbol displayed in your browser window means your information will be handled securely.
• Always log out after shopping online and remember to save the purchase confirmation email.

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Account monitoring

Most credit card providers say they will monitor your account and will contact you if they notice any unusual use or unexplained activity that could potentially be fraudulent. NatWest (www.natwest.com) and RBS (www.rbs.co.uk) even offer this as a “text alert” service.

While this is good practice and is designed to beat fraud, it means you should notify your credit card company if you are planning a trip abroad.

Otherwise, if the company sees overseas purchases being made and believes you are in the UK, it may assume the items are being bought by someone else and could put a freeze on your card. Not what you want when you’re enjoying your holidays!

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Additional protection

While most credit card companies offer fairly similar protection from fraud, individual companies will have slightly different policies and will offer additional extras.

Most extras will incur an additional cost, but one that is completely free and really stands out is the extra identity protection from Capital One (www.capitalone.co.uk) in association with Equifax (www.equifax.co.uk).

As part of the “identity alert” service, customers can opt to be alerted if someone applies for credit using their details or if any key changes are made to their Equifax credit report. Also included are two free credit reports from Equifax each year and “no news is good news” monthly messages, when their credit file hasn’t changed. The service is free for Capital One customers but customers must register to activate it. If you have a Capital One card, it may be worth considering.

The extra policies you can buy from your card issuer as add-on protection essentially separate into two categories – “card protection” and “identity protection”. Here’s a brief look at each:

• Card protection – This type of policy typically promises to make life easier if your cards are lost or stolen, offering to notify all your card providers and order replacements for you. All your debit and credit cards are covered (store cards and membership cards too in many cases) and you will be covered up to a certain limit for fraudulent use, although you are unlikely to be liable for credit card losses anyway. Some policies may also include any of the following; cover for key and lock replacement, cover for replacing a lost purse, cover for lost or stolen cash, replacement costs for a driving licence and emergency cash advances. You can get a service like this from most of the card issuers and it will cost from £25 to £50 a year, depending on the number of features and benefits you want the policy to contain.
• Identity protection – This type of policy offers additional protection against identity theft and assistance should you become a victim. Services will generally include alerts of changes to your credit report as well as unlimited access to your credit report, advice and guidance from identity theft experts and insurance cover to provide money towards the costs of clearing your name if you do suffer identity fraud. Some policies may also cover the cost of replacing lost or stolen passports and driving licences, or offer emergency cash advances. Again, most card issuers will offer this for a fee, often higher than card protection, and an annual policy will cost in the region of £75. Before you sign on the line for any type of protection policy, it is essential to weigh up the costs and the potential benefits. Remember, if you decide you would benefit from certain cover, it can often be cheaper to purchase it separately and not from your card provider. So be prepared to compare policies available from third-party providers.

You might already be covered for certain losses under your home contents insurance – so check this policy carefully first before you buy more cover.

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Things to remember

The fraud protection offered by credit card companies is pretty similar across the board. As long as you take “reasonable care”, you should never be liable for fraud losses above £50.

Capital One’s extra identity service could prove very useful if you are concerned about identity theft, and there are extra policies, as outlined above, that you can purchase to put you mind further at ease.

However, think carefully before shelling out for an extra policy and read the small print carefully, so you know exactly how much cover you will get for your cash - and how relevant it is for your personal circumstances.

Here are some extra things you can do - that won’t cost you a penny - to reduce risk of fraud (in addition to protecting yourself online):

• Shield your PIN when using an ATM and ensure there is nothing suspicious attached to the card slot
• Never share personal details, such as passwords or PINs, with others
• Check all your statements and bills carefully and alert your provider if anything appears unusual
• If you are disposing of financial statements, old credit cards or anything that contains your personal details, ensure it is shredded first
• If you are moving house, ensure you inform your bank, credit card provider and all utilities suppliers. Leave a forwarding address at the property you are leaving or consider having your mail redirected by the Post Office
• Check your credit rating regularly
• If you do experience fraud, contact your credit card provider immediately.

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