Skimming 101: How to spot it, avoid it, deal with it

"Skimming" is a method by which thieves steal your credit card information, and all it requires is a little illicit technology and a lot of criminal intent by those who handle your credit card.

Skimming occurs most frequently at retail outlets that process credit card payments -- particularly bars, restaurants and gas stations.

How to spot skimming
Here's how it works: A corrupt employee "skims" a customer's credit card with a small, handheld electronic device that scans and stores the card data from the magnetic strip. The employee usually sells the information through a contact or on the Internet, at which point counterfeit cards are made. The criminals go on a shopping spree with a copy of the credit or debit card, and cardholders are unaware of the fraud until a statement arrives with purchases they did not make.

John Brewer, assistant district attorney in the major fraud division of Harris County (Texas) District Attorney's Office, regularly prosecutes identity thieves. "Many consumers think that shopping online is a high-risk endeavor compared to going to a brick and mortar store, but I believe the opposite," Brewer says. "The vast majority of cases we investigate have to do with employees at a physical store stealing your information."

How to avoid skimming
Brewer has encountered many skimming victims and has tips for consumers on how to stay out of trouble.

• Make sure your card stays in sight, and never let anyone leave of your presence with the card if you can help it. "Skimming occurs most at restaurants since the waiter has to walk away with your card," Brewer says. "If you are in a retail store and they say they have to go to another counter to run the card, follow them." If you are concerned about letting go of your card at restaurants, use cash instead.
• Your credit card is like cash. "You need to be aware that your credit card is very valuable," Brewer says. "Treat it like a diamond or cash. Would you just give someone cash and let them walk away with it?"
• Monitor credit card receipts and check them carefully against your statements. If you are married, sit down with your spouse to account for all charges, Brewer says. Some thieves take out small amounts in hopes cardholders won't notice.
• Shred unwanted financial solicitations and put your mail on hold when you leave town. This will not help with skimming, but it can help with other forms of identity theft.

To further protect yourself from potential unauthorized charges or identity fraud, you can request that credit bureaus monitor your accounts for unusual spending patterns and require them to notify you before new credit can be granted in your name. These services come at a price; normally under $100 per year depending on the credit agency. But that might be a worthy investment, especially if you eat in restaurants on a regular basis.

How to deal with skimming

• Call the police. "When your identity or credit card is stolen, it's just like having a car stolen," Brewer says. Make a police report and hang on to the police report number.
• Contact your bank or credit card issuer immediately and tell them your card was stolen. If you don't make a report quickly, you may be liable for some or all of the unauthorized charges.
• If you report swiftly, federal law caps your liability at $50. Most credit cards voluntarily go further, and won't charge you at all -- again, if you report quickly. "If you end up being a victim, it's probably not going to cost you any money," Brewer says. "If you notify your bank quickly, they'll return the money. Don't get hung up about the fact that someone might drain your bank account. The most you will probably spend on it is wasted time and lots of aggravation, since it can be a long process to get everything worked out."
• Contact the three major credit bureaus -- TransUnion, Equifax and Experian -- to request a security freeze, which prevents new credit authorizations without your consent. Brewer suggests visiting the Web site www.annualcreditreport.com. "It's an institution created in response to a large number of identity theft victims and the cost incurred to them," Brewer says. Through the site, which was mandated by federal law in response to consumer outcry, you are entitled to receive one free credit report each year from each of the three major credit bureaus.

Brewer suggests viewing the reports on a computer you can print from since you only get to check them once a year. "Look at the inquiries section of your report, and see which companies have looked at your credit," Brewer says.