In 1982, Michael Quinones struggles with the free package of American cheese his mother received as part of a government aid program. In the '80s, the nation's economy was hit hard by a painful transition from a manufacturing economy to one based on services.
Updated: May 3, 2013 12:14PM
What's your favorite pizza topping? That's not an idle question when it comes to protecting your identity. In fact, it's one of many security questions now being used by banks to verify your online banking transactions.
Identity theft is a growing problem, with more than 217 million people affected by data breaches since 2005, according to the nonprofit PrivacyRights.org. Most cases will go unsolved and unprosecuted. Financial institutions simply pay for the losses (passing along the costs), or put the blame on the consumer.
That makes it all the more important that you know the many forms of identity theft, along with what will -- and won't -- protect you.
Credit 'freeze' isn't solution
Services that promise to put a "freeze" on your credit report really can't protect you from the most expensive types of identity theft. In fact, consumers are paying big monthly fees for something they could easily do themselves for free by going to www.annualcredit report.com. There you can contact each of the three major credit bureaus to order your free credit report (safely authenticated), and at the same time request a 90-day credit freeze if you want one.
But protecting against someone opening new credit in your name doesn't give you any protection against several identity theft schemes. According to the Federal Trade Commission, credit freezes take care of only about 30 percent of the theft problems.
Identity theft dangers
Here are a few examples:
**Unauthorized use of an existing credit card. You're not liable for unauthorized use of your credit card, but check your balances online regularly to avoid having to dispute fraudulent charges.
**Unauthorized use of your debit card to withdraw cash. A debit card doesn't have the same protections as a credit card. If someone has your debit card and PIN, and uses it to withdraw cash, including your line of credit, you'll be fighting it out with your bank to prove that you didn't make the withdrawal.
**Unauthorized use of your debit card for purchases. If someone uses your debit card to make a purchase at a store, Visa will offer a guarantee against loss only if the merchant sent your transaction over the Visa processing network.
**Unauthorized use of your Social Security number that doesn't involve establishing new credit. Undocumented immigrants often use existing Social Security numbers at work or to get a driver's license. That uninsured driver could create a paperwork nightmare and impact your future insurability.
**Synthetic identity theft. The credit bureaus don't want you to know about this, and I'm hesitant to publicize it. But simple manipulations of your Social Security number can "fly beneath their statistical radar" and allow someone to use your Social Security number to establish credit under a different name and address.
**"Phishing" online scams. Amazingly, people still fall for these e-mails pretending to be from your bank, brokerage firm or PayPal asking you to click on a link for a message of urgent importance. Thousands of people each month "log in" to their accounts at a fake site, thus exposing their account numbers and passwords to the thieves. Never click on a link!
Pizza and protection!
All of which brings us back to the issue of your favorite pizza topping! Your bank has probably asked you to create a new and more complex password and PIN lately. If you have multiple accounts, the temptation is to use the same formula for each one -- again exposing you to the devastating financial consequences of identity theft!
Now they're asking you to choose new "security" questions and answers, for verification of a transaction or query. Among the choices: best friend in high school; favorite subject in school; name of your first pet, or favorite pizza topping!
Maybe answering these questions will really improve banking security. Or memories! In the meantime, be vigilant about your identity. Check online balances frequently. And don't fall for false promises of protection. Your identity is a valuable thing to lose. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.