Dangers of Using Plastic in an Electronic World

Chris Hannan (Mar, 2015)

Almost every day in the news we hear that yet another huge batch of private information is stolen from identity thieves. I have personally had my business credit card information stolen so many times that the credit card provider does not even bother telling me and instead just sends me another credit card.

It’s always the same old story.  I purchase something online and a year later the vendor isn’t watching some electronic back door and a hacker steals the entire database of credit information and attempts to make a large transaction. The good thing is that the credit card company usually catches the transaction and stops it before the transaction goes through.

In this case, there is nothing I can do about it because I do not control the vendor’s servers or network.  Worse yet, the vendor probably does not even own the network and instead outsources it to some cloud based company somewhere outside of the US.

Now let’s change the situation a little and say that I used a bank debit card to make the transaction, instead of my charge card. In this case; unlike a charge card, the money does not sit on a statement for 30 or so days until it is paid. The money instead is taken directly from my account and I am out of luck for the moment. The good news is that I can still dispute the transaction and most likely get my money back, but unfortunately that can take weeks or even months.

Identity thieves want money in the quick and easiest way so in the example above the identity thief would be jumping for joy if I used my debit card. Let’s say I had $5,000.00 in that account and the thief was able to process the transaction for $4,000.00. He gets the money and I have $1,000.00 in my account that I don’t realize I have until after the mortgage check I sent a week ago bounces. I then call the bank and they start the investigation while I wait and watch the rest of the checks I wrote bounce. I’m stressed for several weeks and have to pay penalties to the vendors whose checks bounced, plus I am short $4,000.00. In addition, the vendors I wrote the bounced checks to generally do not care for any excuse as to why the checks bounced.  This is not at all an ideal situation.

How can we avoid such frustrations from potentially occurring?   First off, we have to realize that nobody can stop identity theft from happening completely. It will happen and it is going to continue to happen because you do not have control over the databases and equipment used to process your transactions.  The upside is that with a few best practices you can potentially mitigate some unfortunate incidents.

Do not use your bank debit card for transactions.  Yes, some banks (like mine) do have a pending period and yes, you can dispute it; however, these pending periods are usually 24 hours and if you’re not watching, the transaction will go through. I use my charge card for every purchase I make and I make sure that the card company has a card monitoring service to catch questionable transactions. My charge card is a business card and comes with free card monitoring. Most personal cards do not offer this service or there is an additional fee, but that may be a wise investment in today’s world. Purchases with a charge card can be disputed when you get the bill and the money stays in your pocket to avoid any loss in cash.

Make sure your Checking account and Savings account are not linked to the same bank debit card. I found this out recently when I inadvertently pressed the savings account button during an ATM withdrawal. I always followed some good banking advice in keeping limited funds in my checking account just in case my  account was ever compromised the thief would only be able to steal a limited amount of money. The bulk of the money would be safe in my savings account where only I or my wife can touch it. Anyhow, this best practice was tossed out the door when I found that my bank debit card was tied to both accounts (checking and savings). If some thief was able to get a hold of this card information then he would be able to drain both accounts completely.

I called the bank and was told that they set it up that way by default when the account is created and in order to tie the card number to one account both my wife and I (as it’s a joint account) would have to go to the branch to make the change.

Americans basically live with “plastic” transactions these days and carry little cash. We make purchases online because of the convenience rather than driving out to a store. The truth is that everything you buy is electronic and recorded in huge databases for marketing purposes and reporting. Identity thieves are just like us and do not have to go anywhere to steal charge card information. They can sit at their computer and rip off millions of numbers, sell them in minutes and make fraudulent purchases before you can finish your cup of coffee. We must all realize that the vendors we are buying from, whether online or in a store, are tied to the same electronic devices that identity thieves target every day and we have no control over them. I am certainly not saying that my ideas referenced in this article are any way to prevent your money or credit being stolen, but simple mitigation of a potential issue can go a long way in today’s electronic world.

Chris Hannan is an Information Technology expert with over 20 years’ experience in the electronic industry. His background includes Network Engineering, Design, Auditing, Forensic Analysis, Communications and Security. His certifications include Microsoft, CISCO, HP and IBM to name a few. Chris has worked with Dermody, Burke and Brown since the late 1990’s, joined the firm as the Director of Information Technology in 2004 and started Optimal Technologies, LLC. in 2007. He continues to be an integral part of our firm to this day.

The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent tax law changes, if any.

Return To The Focus Front Page

I would like my DB&B tax advisor to
contact me regarding this topic.