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5 ways to avoid identity theft in 2011

January 18, 2011

By Barbara Marquand | Money Rates Columnist

About 5 percent of U.S. residents ages 16 or older were victims of identity theft during a recent two-year period, according to a study released in December 2010 by the Bureau of Justice Statistics.

That's an astounding 11.7 million people. Financial losses from identity theft during the same period totaled more than $17 billion.

The most common type of identity theft was unauthorized use or attempted use of a credit card account--a crime that affected 6.2 million victims. Another 1.7 million people reported crooks used their personal information to open fraudulent credit card or other accounts.

About 40 percent of victims said they thought they knew how their information was stolen. Among them, 30 percent believed their information was stolen during a purchase or other transaction; another 20 percent said their wallet or checkbook was stolen, and 14 percent thought the information was stolen from personnel or other files at the office.

About 42 percent of victims spent a day or less resolving financial and credit problems stemming from the crime, but 27 percent estimated they spent more than a month clearing up the mess. About 3 percent continued to have problems related to the theft more than six months after discovering it.

Experts don't expect identity theft to diminish. In fact, the Identity Theft Resource Center projects the problem will escalate in 2011. Here are five prevention steps you can take:

1. Protect your credit card from low-tech thieves.

Direct-mail credit card offers, which slowed to a trickle during the recession, have returned with gusto. Collect mail from your mailbox as soon as possible, so crooks don't steal pre-approved offers and fill them out in your name. Shred unwanted offers and other papers with account numbers or other private information before throwing them away.

2. Don't lend your credit card to anybody.

Lending your credit card is a good way to spoil a friendship. Make the transaction yourself if you need to help out a friend.

3. Watch out for phishing and smishing.

Ignore unsolicited e-mails and texts claiming to be messages from your credit card companies demanding you to respond with your account information. If you're concerned, call the company directly, using the customer service number on the back of your credit card.

4. Use virtual credit cards online.

Be careful how you use your credit card online. Shop only from trusted retailers with secure sites. Ask if your credit card issuer provides virtual credit card numbers--one-time numbers linked to your account for shopping online. Virtual numbers are worthless to hackers because they're good only for one use.

5. Track your credit card activity.

Keep an eye on your credit card activity by checking your account online every week, instead of waiting for the statement at the end of the month. Keeping close track will help you catch unauthorized activity quickly. In addition, sign up for free transaction alerts, which send text messages or e-mails anytime there is unusual activity on your account.

Federal law limits your liability to no more than $50 per credit card account for unauthorized purchases, and many credit card companies limit your liability to zero. Still, you'll want to limit the scope of the crime by reporting any suspicious activity to your credit card company immediately.

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