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how to reduce your risk of credit card fraud

I’m gonna explain an easy thing you can do to reduce your risk of being a victim of credit card fraud. I first read about this trick a few years back, and started doing it myself. I can say from first-hand experience that it works.

The Two Card Approach

The basic idea is this: Get two credit cards…

  • Use one of them only for online purchases. Leave that card at home 100% of the time. It will probably never be stolen.
  • Use the other card only for in-person (non-online, aka “brick and mortar”) purchases. If it gets stolen, it’s not as big of a deal.

Here’s how it works. The vast majority of credit card fraud is from people stealing your card details at the point-of-purchase. For example, there are credit card skimmers attached to gas pumps at the service station that record the details of your card as you swipe it to pay for gas. And untrustworthy workers at the supermarket, restaurants, etc.

In fact, I just read an a few days ago about how “merchants who operate gas stations and gas pumps are facing a rash of attacks from cybercrime groups wanting to deploy point-of-sale (POS) malware on their networks.” — https://www.zdnet.com/article/visa-warns-of-pos-malware-incidents-at-gas-pumps-across-north-america/

On the other hand, online purchases are much safer. Despite the news stories you’ve read about criminals stealing data from websites, your credit card information is very safe in your web browser and at any online merchant, and every place in-between. It’s much more safe than when the card is used at an in-person (POS, of “point of sale”) merchant.

But what’s the biggest pain in the ass when you become the victim of credit card fraud? It’s that once your card is canceled by the bank, you have to go to all the vendors you do business with and update your card details with them. In my case, that’s Amazon, Apple, my mail-order pharmacy, the cable company, the power company, the phone company, and many more. So, it makes sense to give all those companies the credit card that is the least likely to be stolen, and use the card that’s most likely to be stolen only at places that don’t automatically charge my card every month, like the supermarket, gas station, etc.

Make sense? To recap:

Online-only CardNon-online Card
Stays in a drawer at homeStays in my wallet
Used for recurring payments and online storesUsed for individual purchases at brick-and-mortar stores

Problems and Risks

The two card approach isn’t perfect. There are some other risks and side-effects. For example:

  • The more cards you have, the worse your credit score will be. But if you keep the total number as small as possible, this shouldn’t be a major issue. So give up a couple department store cards and that second airline card, and instead get a second card for online use only.
  • If your credit is bad, you may not be able to get approved for a second card. Yeah, even with as aggressive as banks are about pushing cards on everyone, some people can’t get a second one, so this approach won’t work for them.
  • This approach reduces risk by reducing the likelihood of fraud and simultaneously reducing the impact of fraud. But it doesn’t reduce it to zero. You should still use all the usual precautions to prevent credit card fraud.
  • If you’re not the kind of person who pays off credit card balance each month, having two cards instead of one can help lead to falling behind on your debt.

Some Other Ideas

Since you read this far, here are a few quick suggestions for reducing your risk of being a victim while doing online purchases:

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