Prevent fraud by spending cash
The news about breaches of financial data at retailers and financial institutions has become a consistent feature for anyone paying attention to the media. The persistent return of that news is cause for anyone to take steps to decrease the chances of getting burned, but it should also be another reminder of the value of spending in cash.
In a February 6 hearing in front of the U.S. Senate Banking, Housing and Urban Affairs Subcommittee on National Security and International Trade and Finance, the National Retail Federation’s Mallory Duncan detailed how the retail industry is spending billions to protect itself and consumers from data breaches and fraud. Despite all that, he admitted, “ … data breaches are a fact of life in the United States.”
Consumers can do a few things to protect themselves from fraud:
- Never click on a link sent to you by a financial company in an email. Always go to the company’s website instead.
- Monitor activity in your bank account and other places where you spend money, daily if possible.
- Set more cash in savings, preferably in a separate bank from the one where your debit card is located, to have money on hand in case you are a victim of fraud.
- Use cash instead of your debit card to make your daily purchases.
That last point can’t be emphasized enough. It requires that you perhaps overcome a fear of being robbed, but anymore that appears far less likely than having your financial data and identity targeted by thieves. And if you make it a point to only take cash with you when you are prepared to shop, you reduce that risk even more.
The positive benefits of spending cash instead of using your debit card are many:
- You spend less when you use cash than when you use a debit card. In fact, some credit counselors recommend using cash when you are trying to get a handle on spending leaks.
- You keep better track of where you are financially.
- You avoid overdraft fees that come from unconscious spending.
- You avoid having your data stolen, requiring you to go through the headache of having fraud repaired.
While there are laws in place that help you overcome fraud in your bank account, it can take more time than you have to have your account made whole. In the meantime, you might have automatic payments, such as a mortgage, coming out of your account while you wait to repair the damage. If your money is not restored right away you run the risk of having those payments denied, adding yet another hassle from something that was not your fault.
The other potential problem if there is a data breach involving your bank account and your debit card, depending on when you report the problem you could be out as much as $500 for not reporting it quickly enough.
Many financial experts advocate using cash as your chief spending method anyway, because of the benefits that practice tends to have as you budget. The fact that it appears to be more secure just might be another reason.
Published Feb 12, 2014.