Credit Card Debt–It’s Bad Enough When It’s Your Own

Credit card debt that’s problematical can be one of the most depressing and distressing issues that you’re likely to face in your financial life. But being told that you have credit card debt when you haven’t had the pleasure of spending the money must be even worse.

Yet that’s the situation being faced by an increasing number of credit card holders, according to a new survey, published yesterday, from Javelin Strategy and Research, a San Fransisco-based company that describes itself as, “the leading independent provider of quantitative and qualitative research focused exclusively on financial services topics.”

It gives a whole new meaning to the term, “balance transfer credit card.”

Identity Fraud Soaring

The report shows that 11.1 million Americans were the victims of identity fraud last year. That’s a full three million more than in 2007. Back then, 3.6 percent of the U.S. population was affected, a figure that shot up to 4.8 percent in 2009. Javelin defines identity fraud as: “the unauthorized use of another person’s personal information to achieve illicit financial gain.”

The company believes that much of the increase may be a result of the economic downturn, and points to similar rises during previous periods of widespread financial hardship. But, even if it’s true that recessionary times tempt the once honest into criminality, and force existing fraudsters to up their game, that doesn’t provide much consolation to victims.

Credit Card Users Especially Vulnerable

Yesterday’s Los Angeles Times expanded on the research findings:

Last year, the number of new credit card accounts that were opened fraudulently shot up 39%… And at least 13% of all identity crimes from 2009 were committed by someone whom the target had known.

That 39 percent increase in the number of fraudulent credit card applications is shocking, especially compared with the same figure for debit cards, which actually dropped two percent last year. In 2009, debit cards accounted for 33 percent of all card fraud.

The Most Vulnerable of All

Two groups turned out to be especially vulnerable to identity fraud. Small business owners were one-and-a-half times more likely to be victims than adults as a whole, possibly because they execute more transactions than most.

And 18-24 year olds were the least likely to spot such frauds quickly. In fact they took twice as long to do so, because they check their accounts less frequently, and are less inclined to subscribe to services that monitor credit reports.

Some Good News

The good news is that credit card use by others in your name is unlikely to harm your financial health either very much, or for long. The Javelin report says:

…during 2009 there was a drop in fraud costs per victim and a decrease in time to resolution, thanks to increased consumer awareness, assistance provided by financial institutions, consumer support organizations, and law enforcement.

In fact, the median consumer cost for victims of all identity fraud dropped by 25 percent between 2008 and 2009: from $498 to $373. And the mean resolution time for incidents fell from 30 hours to 21 hours over the same period.

And, of course, credit card companies generally cap customer liability at a nominal sum or even zero. So you can relax a bit–but not too much.

Published 02/11/10 (Modified 04/23/12)