While dramatic and scary, those big breaches are still rare. More common — and more likely to get you — are these underhanded practices…
1. Pre-acquired account marketing
On several occasions, I’ve received something in the mail that looks like a check for a small amount, along with an offer for some service, usually travel related. You probably have, too.
In fact, the company that sent this to you already has your credit card information (that’s the “pre-acquired” part) and if you cash the check, you’ve somehow agreed to have your credit card billed every month for a “membership” with some sort of service. Of course, their service is nearly worthless, and you’ll find that your “membership” becomes very difficult to cancel.
How to avoid it: Be extremely skeptical of any checks that arrive in the mail that you weren’t expecting, especially if the envelope includes marketing material. If there’s any fine print below the area where you endorse that refers to a membership or some other authorization to bill your account, just rip up the check and throw it away.
You receive an urgent email from your bank: You need to log in and take some action regarding your account! In fact, the email itself is not actually from your bank, even though it has all the right logos. The link in the email is fake, although it might only be off by a few characters, such as mybankname.somethingelse.com. Once you attempt to log in to this bogus site, the scammers have your username and password and are free to raid your real bank account.
How to avoid it: Any time you get an email, or even a phone call from anyone claiming to be from your bank, don’t offer any information or click on any links. If you’re online, open up a new browser and log into your bank’s website the way you normally would. If you get a phone call, hang up and call the number on the back of your card.
3. Foreign transaction fees
Technically, these aren’t credit card scams, since credit card issuers can legally collect these fees. But I consider these fees an ethical crime — because it costs a bank nothing to trade currency. Banks do it electronically all day long, and they get the best exchange rates, too.
Yet they charge you a “foreign transaction fee” that’s typically 3 percent, which is outrageous. Furthermore, these fees are charged on transactions processed outside the United States, so you could get hit when making a purchase from an overseas company or when traveling, but paying your bill in U.S. dollars.
How to avoid it: I always keep at least one card that has no foreign transaction fees, such as any card from Capital One. Fee-free cards are the only ones I use when traveling outside the United States or when making a purchase from a foreign company.
4. Dynamic currency conversion
Credit card processors sell this “service” to foreign merchants, who then pitch it to unsuspecting U.S. tourists overseas. They ask if you’d like your bill in dollars — but fail to detail the atrocious exchange rate you’ll receive. They get a nice kickback for doing it, so they have little incentive to explain this to you, assuming they even speak your language. What’s worse is that your bank still charges you any foreign transaction fees that apply to your card.
How to avoid it: Just say NO repeatedly if you suspect you’re being offered this, and make sure your receipt is in the local currency before you sign anything.
5. Payment protection
Again, legal (sort of) but still devious: Credit card companies love to pitch these offers that supposedly make your payments for you if you’re injured or lose your job. All you have to do is agree to be billed every month, in perpetuity.
In fact, this service only pays a customer’s minimum payment while they continue to incur interest charges. Furthermore, the expense is far greater than other form of disability insurance. Banks have even been the subject of massive litigation and enforcement actions for padding customer’s bills without their consent.
How to avoid it: Always decline these offers and scrutinize your bills for services you didn’t authorize.