Are online shopping habits increasing the chance of credit card fraud?

Probably. Fraud reached record highs last year, and online shoppers took the biggest hit. According to a report released earlier this month by Javelin Strategy & Research, in 2016 fraud increased a staggering 40% for identity card-not-present (CNP) transactions. With Americans now making 51% of purchases online, that increase in online identity theft is especially concerning.

The key to combatting identity theft is consumer education. With a better understanding of why it's on the rise, what can be done to avoid it, and how to mitigate the repercussions of ID theft if it's already happened, people can successfully protect themselves from this rising threat. (And continue with online shopping, which has become nothing less than an American way of life.)

EMV chip cards have played a role. Chip cards are actually more secure than magnetic stripe cards, at least during in-person transactions. Chip cards have eliminated the ability for criminals to counterfeit cards and use them in person at brick and mortar retailers, because the chips and new card readers work together to create a unique token that verifies each transaction.

When that source of revenue dried up, fraudsters had to find other means of making money. Because online transactions only require basic card information and don’t require chip authentication, e-commerce became the path of least resistance for card fraud.

Credit card companies generally don't hold customers liable for fraudulent purchases, but the responsibility to notice and promptly report suspicious activity still falls on the customer. Giving consumers the information that makes them aware of the fraud threat is key.

Consumers should be advised to:

Set alerts. Set up text or email with instant notifications of every transaction.

Check statements. Review all monthly billing statements and confirm purchases are legit.

Choose secure passwords, and update, update, update. It's best practice to use long, complicated, and unique passwords for all online accounts, and to change those out regularly.

Look for http “s.” The “s” stands for secure and should appear on all web pages that require disclosing financial information.

Beware of public Wi-Fi. Cyber thieves can easily grab wireless data at Wi-Fi hotspots, because the majority of these places don’t encrypt the information users send over the internet.

Watch for fake websites. Scammers will set up fake domain names that are just a letter or two off from popular sites, and then steal data from unsuspecting shoppers there.

Stick to established e-commerce sites. Small and obscure online merchants offer significantly less security and are more vulnerable to having any stored financial information stolen by hackers.

Consumers should also be advised to contact the bank or issuer as soon as possible to report the disputed charge or charges and request a new card with a new account number, blocking further charges on the card and rendering it inactive.

Ben Woolsey

Ben Woolsey

Ben Woolsey is president and general manager of CreditCardForum.