MONEY identity theft

Hackers and Identity Thieves Are Everywhere. Here’s Your Best Defense

Wallet exposing social security card
8.3 million: How many private records have been exposed to thieves so far this year. Olivia Locher; Prop styling by Linda Keil

Millions of private financial records have already been exposed this year. Follow this simple plan to stay safe.

Social Security numbers. Medical data. Credit card information. At least 8.3 million private records have been put at risk in 250 separate data breaches revealed this year, says the nonprofit Identity Theft Resource Center. One upshot of the leaks (up 23% over 2013 through late April): greater awareness of the threat of identity theft. Follow this three-tiered plan to defend yourself.

1. Take Advantage of Free Tools

Visit annualcreditreport.com every four months to get a credit report from a different one of the three major reporting agencies, advises Ed ­Mierzwinski at advocacy organization U.S. PIRG. And sign up for any no-cost service your bank or credit card issuer has for notifying you of activity in your account.

2. Warn All Lenders

Afraid your data has already slipped out? Put a free 90-day fraud alert on all your credit reports by contacting Experian, Trans­Union, or Equifax, says Paul Stephens of the nonprofit Privacy Rights Clearinghouse. That tells companies to use extra caution before issuing credit in your name. For confirmed identity-theft victims, alerts last seven years.

3. Lock Down Your Credit

For top security, freeze your ­credit, advises ID-theft consultant Robert Siciliano. Opening new lines of credit will require your password. Visit each of the big three bureaus online to launch it. Costs—up to $30 to place a freeze and $12 to lift it—vary by state.

MONEY Savings

Millennials Are Saving, But Men Are Saving More. Here’s Why.

Among young adults, a savings gender gap is starting early. Are you ahead or behind?

You’ve probably heard that Millennials are doing better than previous generations in saving for retirement—those who landed jobs, anyway. But here’s something you may not have heard so much about: young men are saving significantly more than young women.

That’s the finding from a new Wells Fargo survey on Millennial savings habits, which found that overall 55% of young adults are saving for retirement. But that number disguises a wide gender gap. More than 60% of men are stashing money away, compared with just 50% of women.

“We were surprised to see the gap in this generation, when they have such similar profiles,” said Karen Wimbish, director of retail retirement at Wells Fargo. She points to the relatively few number of women in high-paying positions as a key reason for the disparity. For college-educated Millennial men, the median household income is $77,000, according to the survey; for women, it’s $63,000. (Those figures are similar to 2012 data from the Bureau of Labor Statistics, which found that women ages 20 to 24 earn just 89% the median earnings of their male counterparts.)

Given that difference in pay, it’s not that surprising that 26% of young men manage to save more than 10% of their incomes, compared with just 9% of women. The majority of women surveyed (53%) put away only 1% to 5% of their pay.

For both men and women, debt loads are making it more difficult to save. Some 40% of Millennials say they feel overwhelmed by debt. Nearly half say more than 50% of their pay is going toward debt repayment, and 56% “live from paycheck to paycheck,” the survey reported. The largest payments were owed to credit cards (16% of debt), followed by mortgages (15%), student loans (12%), auto loans (9%), and medical bills (5%).

Still, paying off debt, especially high-interest credit-card balances, can be a smart move, even if it delays saving, says Dan Weeks, a financial planner at Sound Stewardship in Overland Park, Kansas. But for many Millennials, those payments are likely to slow their ability to buy a house and start a family.

One bright spot: Millennials are becoming less risk averse—nearly one-third are invested in the stock market. Among college-educated young men, median financial assets, including stocks and bonds, were $58,500; for women, $31,400. And more than two-thirds of Millennial expect their life after retirement to be better than that of their parents. They could be right about that.

MONEY Kids and Money

Four Reasons You Shouldn’t Be Saving for College Just Yet

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KidStock—Blend Images/Getty Images

You should make these moves before you start funneling away money for tuition, says financial planner Kevin McKinley.

As graduation ceremony season nears its peak, I’m seeing a steady drumbeat of stories warning of ever-rising tuition costs and education debt loads. It’s no wonder many parents of smaller children are panicked into thinking they have to drop everything and start saving all their money for their kids’ college expenses RIGHT NOW. Hang on just a second there, moms and dads. Although I’m certainly in favor of getting parents to save, there are four things I’d suggest you should do—and one you shouldn’t—before making “saving for college” the top priority. (Already completed all of these steps? Check out the MONEY 101 section on college for help getting started on your college savings journey.) DO save for retirement Since it’s possible to borrow money to pay for college but not to fund retirement, working parents have to put their own needs first. You should start by putting money in any pre-tax retirement savings plans at work (such as a 401k or 403b), at least up to any available matching contributions from employers. If no employer-sponsored plan is available, those with earned income should fully fund an IRA. You may be able to make a deposit for a stay-at-home spouse, as well. You can save up to $5,500 in 2014, or $6,500 if you’re 55 or older. The tax savings on the contributions to a pre-tax retirement plan will likely exceed what the deposits to a college savings account are likely to earn, especially in the first year. Then if you end up with a well-funded retirement, you can tap their overstuffed accounts once you hit 59 1/2—and have passed the penalty zone—to pay for college expenses as needed or pay off student debt incurred by your children. DO open a Roth IRA For eligible depositors, Roth IRAs can serve as a hybrid college/retirement savings account. These accounts—which allow for tax-free withdrawals—are typically thought of as a retirement savings vehicle. But if parents want or need the money before retirement for college (or other) costs, they can withdraw the Roth IRA contributions at any time for any reason with no taxes or penalties whatsoever. As an added bonus, money held in parents’ retirement accounts is less likely to be counted in a school’s need-based financial aid calculation than funds in the child’s name. DO pay off credit cards Double-digit interest rates charged on outstanding balances—the average APR is now around 16%—usually greatly exceed what you’d earn on your money elsewhere. So you’re better off erasing your debt before putting a lot of attention toward college. Plus, an improved credit score will make it easier for you to obtain higher education loans for your kids should the need arises in the future. DO prepare for the worst The majority of parents of younger children haven’t established wills, guardians, and other necessary legal steps—much less purchased enough life insurance to ensure that the tragic death of a parent will only be an emotional nightmare, and not a financial disaster as well. Moms and dads should see lawyer as soon as possible, and plan on spending a few hundred to a few thousand dollars, depending on the complexity of the situation. You should then purchase enough term life insurance to cover all future expenses—including college—that the survivors might endure. DON’T pre-pay the mortgage Well-meaning parents often try to pay down their housing debt as quickly as possible, thereby saving interest expenses and freeing up money that would otherwise go toward the monthly mortgage payment. But that step should only be considered if the parents are ahead of their retirement savings schedule, have no other debt outstanding, no future major expenses on the horizon, and have at least a year’s worth of living expenses saved up. Those parents who don’t meet these criteria should stop paying anything extra on their mortgage until they have fulfilled the other aforementioned financial obligations. Otherwise, parents could end up house-rich and cash-poor—just when it’s time to pay for their kids’ college expenses and their own retirement. _____________________________________________________ Kevin McKinley is a financial planner and owner of McKinley Money LLC, a registered investment advisor in Eau Claire, Wisconsin. He’s also the author of Make Your Kid a Millionaire. His column appears weekly.

MONEY credit cards

What MasterCard’s Zero Liability Pledge Means for Your Debit Card

MasterCard's new policy makes using your debit card a lot safer. Here's what you need to know.

June 4 (Reuters) – In the wake of a spate of data breaches highlighting the vulnerability of companies that hold consumer information, MasterCard Inc announced last week it would apply the same rules to PIN-based debit card transactions as those used for credit cards: zero liability when fraud is reported.

“Fraud and identity theft have been in the news a lot lately. We want to give cardholders peace of mind,” says MasterCard spokeswoman Beth Kitchener. The breach at Target last year, which affected more than 40 million customers, is still a top concern for many.

For consumers who have MasterCard-branded debit cards, the extension of zero liability means some things will change, while others won’t. Here is what you need to know about the new policy, which takes effect on Oct. 1.

Q: Does this mean that using a debit card is just as safe for transactions as using a credit card?

A: Not exactly. While those who have MasterCard-branded debit cards will benefit from the policy change, the inherent issues with debit cards remain. The main difference between debit card and credit card transactions is debit cards are tied to users’ bank accounts.

“With credit cards, it’s not a big deal. It’s their money not yours,” says Gerri Detweiler, director of consumer education for Credit.com. “With a debit card it is a big deal. Consumers still need to be very careful when a debit card is tied to their main financial account.”

Q: How much money could I be on the hook for right now if someone steals using my debit card?

A: Federal laws extend protection to consumers using both credit and debit cards, but losses for victims of fraudulent credit card transactions are capped at $50. Most credit card issuers, however, set the cap at zero. Responsibility for fraud on a debit card is tied to when it is discovered and reported.

If you report the loss within two days, federal law caps consumer responsibility at $50. If you report it within 60 days of receiving a statement that shows the fraudulent transactions, liability is capped at $500. If you don’t report it within 60 days, that liability is unlimited.

Q: Why isn’t a PIN enough to protect me?

A: Theoretically, using a PIN protects the cardholder because it’s a secure password. However, card skimmers can steal numbers, and some people use PINs that are easy to figure out.

Javelin Research & Strategy, which analyzes banking and fraud, found that about 10 percent of identity fraud victims had their debit card PIN taken. That works out to more than 1.2 million cards.

Q. How do I get money restored to my account if it is stolen?

A: You should contact your bank as soon as you learn your account has been compromised, says MasterCard’s Kitchener. Call the phone number on the back of your card or the financial institution that issued the card. How quickly the money is restored varies from bank to bank.

Q. What’s the biggest issue for consumers when someone commits fraud with their debit card?

A: Getting back the money in a timely fashion. Only about a quarter of the leading financial institutions offer to make money lost to fraud available in bank accounts the day after it is reported, according to Javelin. However, that one quarter includes some of the largest banks in the country: JP Morgan Chase and Bank of America.

Q. What are the exceptions to the zero liability rule?

A: There is one exclusion for exercising “reasonable care in safeguarding your card.” Consumer experts complain that this is not very specific. “Reasonable can have variable definitions depending on who you ask,” says John Ulzheimer, credit expert for CreditSesame.com.

Kitchener says it’s up to individual financial institutions to determine what would be considered a violation of the “reasonable care” rule. An example, says Detweiler, would be giving your card and password to someone to buy a gallon of milk and ended up spending $200. Or writing your PIN on the card.

Q. Is this policy change a good thing for consumers?

A: Credit experts say that it is. “Certainly the notion that certain transactions weren’t covered by zero liability was confusing to the consumer,” Detweiler says. “It’s great that they’re simplifying that for their customers and covering all transactions.”

Given that so many consumers use debit cards as a way to control spending – using their own cash rather than borrowing on a credit card – Ulzheimer says any effort to protect users is beneficial.

“By and large this is a good thing for consumers who choose debit over credit,” he says. “It lets them keep their budgetary controls in place while worrying less about fraud.” (Editing by Beth Pinsker and Sofina Mirza-Reid)

TIME

Wal-Mart Is About to Make a Major Change

Doug McMillon, President and CEO, Wal-Mart International, speaks at the shareholders meeting in Fayetteville, Ark., on June 7, 2013.
Doug McMillon, President and CEO, Wal-Mart International, speaks at the shareholders meeting in Fayetteville, Ark., on June 7, 2013. April L Brown—AP

Roughly six months after Target’s massive data breach became public, the big-box giant’s top rival has thrown down the gauntlet in the credit card security wars.

Sam’s Club parent Wal-Mart Stores Inc. announced that holders of the warehouse club’s co-branded MasterCards will receive new cards containing a security-enhancing chip beginning later this month when the company switches from Discover to MasterCard. Customers who have Wal-Mart co-branded credit cards will get their chip-containing cards when the switchover for them occurs later this year, MasterCard says.

“MasterCard has taken a strong stance on the need for the U.S. market to make the transition to chip-enabled credit cards,” MasterCard’s North America president Chris McWilton said in a statement.

“Sam’s Club is the first mass retailer to actively implement chip-enabled technology. Each credit card has an embedded chip that makes the card more difficult to duplicate, which provides enhanced security from fraudulent activity,” Wal-Mart said in a statement of its own.

Although banking tech security experts have known — and have been warning people — for years that our antiquated mag-stripe technology is seriously under-equipped to protect consumer data from today’s sophisticated cybercriminals, the situation only came to a head last year. The Target breach affected an estimated 40 million customers who had payment information compromised, and as many as 70 million more had personal information like email addresses, phone numbers names and home addresses exposed.

The event triggered a Department of Justice investigation and led to the ouster of Target president and CEO Gregg Steinhafel, who said last month he would step down following revelations that Target had brushed off early indications of the problem.

But despite the risks, retailers have been reluctant to undertake the major changes that switching to more secure payment methods would entail. Chip-based cards cost eight to 10 times as much as ordinary mag-stripe cards, says Brian Riley, a senior research director at CEB TowerGroup. Although the industry has set a cutoff of next year by when store card readers and the cards themselves to be converted, the initiative was off to a slow start so far. “What the industry has not seen yet is a major player going out and chaining their cards yet,” Riley says.

It’s likely that MasterCard is helping to shoulder the cost in this case, he says. “You can expect in a deal that brings MasterCard into Wal-Mart, certainly some concession on the MasterCard side for who’s going to be paying for this,” he says. Wal-Mart declined to disclose details of the cost.

 

MONEY Ask the Expert

Should I Use My Roth IRA to Pay Off Debt?

Q: I am trying to pay off some debt to become debt free. I’m 44 years old. Is it possible, at my age, to withdraw from my Roth IRA to pay off debt? – James, Nashville, TN

A: Yes, you can withdraw money from your Roth IRA to pay off debt. But it is rarely a good idea to tap money earmarked for your retirement.

First, you should understand the rules. IRS regulations allow you to withdraw your contributions from a Roth IRA without incurring a penalty, since you’ve already paid taxes on that money. But if you withdraw earnings on those contributions, and you are under age 59 1/2, you will incur a 10% penalty and income taxes. “That’s a hefty price to pay,” says Ed Slott, founder of IRAhelp.com.

You have to weigh the benefit of erasing high-cost credit card debt with the impact on your future retirement income. And that impact could be significant. Roth savings are an especially valuable stream of retirement income because they offer both flexibility and tax diversification. After age 59 1/2, if you’ve kept the money in the account for five years, all withdrawals are tax free. Moreover, Roths aren’t subject to required minimum withdrawal rules after age 70 1/2, like traditional IRAs. That means you can pull out a large sum for a health emergency in retirement without worrying about taxes. And if stock prices plummet, you won’t be forced to make withdrawals at a market bottom.

At age 44, you’ve got two decades till retirement. Even if you withdraw a small amount, it will end up costing you a lot when you consider the 20 years of compounded growth you are giving up. Look for other ways to free up cash to pay down the debt. Do you have expenses you can cut back on? Can you drum up some extra income? If you do decide to use the Roth, stick with contribution withdrawals so you don’t lose money to penalties and taxes.

MONEY credit cards

The Right Credit Card for Your Trip Overseas

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Your credit card may not work on your summer vacation to Rome. Hans-Peter Merten—Getty Images

The magnetic strip is dead technology in much of the rest of the world. If you're planning a trip overseas, you'll want to make sure you get a new credit card—and the right kind of new card.

Every traveler flying to Europe this summer knows to bring a passport and a stash of Euros. But now your bank is suggesting something else to take: a new, safer credit card similar to what’s already prevalent abroad. Problem is, the kind of cards most issuers are pushing might not actually work when you need them overseas.

As shoppers at Target and Neiman Marcus now understand, most U.S. credit cards are particularly inept at thwarting would-be hackers. While your card most likely has a magnetic strip on its back, that technology has—in many other parts of the world—been replaced with a more secure technology. The “smart cards” that are de rigueur in Europe have an electronic chip embedded in them and require swipers to enter a PIN to make a purchase.

“Obtaining the pin is extremely hard and the effort it takes to get it significantly reduces the risk that a hacker will try,” says CreditCardInsider.com’s Eric Adamowsky.

European banks and merchants started adopting EMV (which stands for Europay, Mastercard and Visa) early last decade. Americans have been slower on the uptake.

Only in the last few years have American banks and financial institutions started to issue cards with a chip. But the majority of U.S. cards with EMV are chip-and-signature cards, rather than chip-and-PIN.

Whereas a chip-and-PIN card requires the numerical combination to be entered, chip-and-signature cards only require, well, a signature–much like your old magnetic strip card. This makes them less secure than PIN cards, although safer than the card you probably have. Chip-and-signature cards are more available here than chip-and-PINs, but they may not work abroad, particularly in unmanned venues like toll booths, train stations, and gas stations.

It’s a credit card Catch 22.

So, what to do if you’re going abroad this summer? Consider signing up for the GlobeTrek Rewards Visa, one of MONEY’s Best Credit Cards from 2013. This chip-and-PIN card from Andrews Federal Credit Union—which you can join by signing up for free with the American Consumer Council—has no annual fee and no foreign transaction fees. So you’ll never have to think twice before reaching for your wallet.

Bon voyage!

MONEY Odd Spending

There’s Probably No Cash in Your Wallet. Could That Cost You?

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Nikola Bilic—Alamy

If you walk around with little or no cash, you're in the majority. But choosing plastic over cash for everyday purchases could mean you'll spend more in the long run.

According to two recent surveys, the majority of consumers walk around with little or no cash. Most prefer plastic for the sake of convenience and safety. There could be an unfortunate side effect, however, based on the theory that people spend more when making purchases with credit or debit cards rather than cash.

Last week, VoucherCloud, a UK-based deals and coupon site, released the results of a survey of 2,341 Americans indicating that “over half of American citizens (57%) ‘never’ carry cash, instead relying solely on credit and debit cards to pay for their daily expenses.” Only 10% of survey participants said that they “always” carry cash, and another 33% said that they carried cash “rarely” or “sometimes.”

Could this be true? Do the majority of American adults you pass on the street really have empty wallets? There’s reason for skepticism. Let’s start with the question that prompted the responses: “How often do you carry cash with you on an everyday basis?” Many may read this question as essentially asking, Do you always carry cash? That’s different than asking if you usually keep a few greenbacks in your pocket.

What’s more, another recent survey, from Bankrate, focused on the same subject but ended up with very different results. In its survey, which asked, “How much cash do you usually carry on a daily basis?” Bankrate found that only 9% selected the option “Don’t carry cash/does not apply.”

There’s no denying that folks carry a lot less cash than they used to. According to Bankrate’s data, more than three-quarters of people generally walk around with $50 or less: 40% usually have less than $20 on hand, 29% say $20 to $50, and 9% typically go cashless (or “does not apply,” whatever that means).

In both surveys, participants said they felt safer that way. The top reasons given in the VoucherCloud survey were “concerns over safety and the risk of theft” (65%) and “risk of losing my wallet and/or its contents” (53%). Women tend to carry less cash than men—77% of female respondents said they keep $50 or less handy, versus 61% of men—perhaps owing to the fact that women “may prefer to carry less cash than men so as to reduce the risk of being a target for criminal activity,” according to Bankrate chief financial analyst Greg McBride.

As for whether it’s wise to carry little or no cash, the surveys come to very different conclusions. When asked, “Do you spend more or less when paying by card instead of cash?” 84% of VoucherCloud respondents said they do more damage when spending with plastic. “While using payment cards rather than cash is a widespread modern phenomenon, because it is so quick and convenient, it can become a dangerous trend for some of us!” VoucherCloud’s Matthew Wood warned. “It’s much harder to keep up with what you’re spending as you don’t see the money leave your hands and, because it’s just a little piece of plastic, it doesn’t feel like a real exchange. It’s easy to get carried away.”

There’s plenty of research out there to back up this theory. Generally speaking, the idea is accepted that handing over cash feels more tangible and “hurts” more compared to quickly swiping a card. Many budget and personal finance experts recommend going cash only and maybe even freezing credit and debit cards in a block of ice as a strategy to limit one’s spending.

The Bankrate study, on the other hand, makes the argument that people today think of any cash as “petty cash” that will inevitably be spent quickly and carelessly. So it stands to reason that people don’t want to carry around too much. “If you’re carrying more, maybe you feel you have more, and you feel you spend more easily,” Joydeep Srivastava, a professor of marketing at the University of Maryland, told Bankrate. To many consumers, cash on hand is as good as cash spent. “As soon as you draw it from the ATM, it’s like you’ve already spent it,” said Srivastava. “You don’t feel that pang of guilt of spending it anymore.”

So which theory is true? If you’re trying to avoid unnecessary spending, should your primary mode of paying be plastic or cash? And by extension, is it best to carry lots, some, or no cash? The truth is, the answers probably vary a lot from person to person.

If you’re the type who is constantly piling up credit card debt or getting hit with overdraft fees on a debit card, it may be time to put the plastic on ice and limit yourself to cash-only expenditures. And it’s probably best to try to plan out your daily expenses and limit how much cash you carry around. Because if you have more cash than you need, you know you’ll just spend it.

MONEY Debt

WATCH: One Minute Money: How to Fix Credit Report Mistakes

These easy steps for finding and correcting errors on your credit report can potentially save you thousands of dollars.

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