A credit card lets us buy items without cash, one of the most common methods of electronic payment. Credit cards are a strong payment instrument as they let us easily avail a quick line of short-term credit while making transactions.
It enables us to increase our purchasing power, with advantages like ease of use, reward points, and cashback. Credit cards are financial instruments that must be used with utmost cautiousness.
Utilizing a credit card responsibly is also an excellent way to build credit. The most prominent way to save money using credit cards is by earning credit rewards. By having the proper mix of credit cards based on our respective spending patterns, we can save a good sum of money every year.
Regular, on-time payments can also enhance our credit score which leads to easier long-term loan authorizations. Although there are many merits, credit cards have the risk of being targeted for fraud. While there are several types of credit card fraud, there are safeguards you can put in place to protect our money.
If someone has fallen victim to credit card fraud, they are not alone. Closely 1.17 Lakh credit card fraud complaints worth Rs. 615 Crores were reported to the National Crime Records Bureau in the past 10 years. And the figure grew approx. 44% from 2019 to 2020. The key to reducing the damage of this insidious offense is to detect it at the earliest and act swiftly. The correct steps can even help you avoid becoming a victim altogether.
And just to enable you to stay safe from such frauds, this article will help you understand
Table Of Content
- The ways by which the fraudsters get our information
- Protection from credit card fraud
- Easy tips to avoid falling into the traps of frauds
- Credit score and financial planning
- Benefits of personal financial planning
- One threatening life story
Credit Card Fraud
It can be classified as unauthorized purchases or receipt of cash using other credit cards by means of individuality theft. This is when the criminals use the credit card that is assigned to someone else.
The ways by which the fraudsters get our information are
- Lost or stolen credit cards
- PoS Fraud – Skimming your credit card, such as at a gas station pump
- Hacking your computer
- Calling about fake prizes or wire transfers
- Phishing attempts, such as fake emails
- Looking over your shoulder at checkout
- Stealing your mail
- Phishing and vishing
- Keystroke logging
- Application fraud
- Card-not-present theft
- Account takeover
- Social engineering fraud
- Unexpected repeat billing
- Confirm Information for Your EMV Card
- Card Fraud Department
- Free WIFI
- Counterfeit doctored or faked cards
Above all, the fraudsters also steal your data by promising you to reduce the rate of interest on your existing loans or even by making you fill out an application form for a new credit card.
Just like the ways mentioned above, hackers are constantly finding unique ways to tap into our information and there is no fool-proof way found yet to stop the hackers. But we can decrease our chances of being a victim and reduce the damage from fraudulent activity.
Once we realize that our credit card is hacked, we must immediately call the customer care of the card company and block the card to avoid any further suspicious transactions. It can also be blocked through internet banking or mobile banking.
Protection from credit card fraud
In 2020, OLX executed an online survey in the month of February. 7,500 people participated and it was discovered that 52% of the respondents publicly shared their personal addresses and phone numbers online and 26% of them shared one-time passwords with others. Around 22% admitted to sharing a bank account, UPI, credit or debit card PIN details.
The considerable practical way to safeguard ourselves from credit card fraud is by taking preventive steps wherever doable. Keep our credit card secure and only enter our card details on reputable online stores. Numerous credit card companies offer extra protection in the way of identity theft monitoring services.
These services alert you to any changes in your credit report, questionable activity on our credit account, or instances of our stolen information appearing on the internet. Credit card fraud protection starts with us. Being aware is essential for every credit owner.
Quick intimation protocols are usually provided by the card service providers and it is essential to use them to inform the service providers, in case something out of the ordinary happens. Customer literacy on such frauds and how to stay safe is a key strategy when it comes to avoiding fraud.
Self-educate and be aware to avoid falling into the traps of fraud. Follow these easy tips:
- All credit card transactions done online should be carefully observed
- Avoid paper trails of your credit card number
- Avoid signing any blank receipts
- Never share credit card information with anyone
- Double-check your online transactions
- Immediate reporting of lost or stolen card
- Review the billing statement
- Making strong passwords
- Keep the credit card safe
- Using RFID-blocking wallets
Credit Score and Financial Planning?
Our credit score is the main element of our financial plan. So, establishing and maintaining an excellent credit history is extremely essential. The primary reason for this is that our credit score affects how much it costs to borrow money. Whether we are financing a mortgage or a car, or applying for a credit card or personal loan, a higher credit score can get us a lower interest rate.
In other words, having a good credit score is key to achieving our financial goals, both now and in the long run. To achieve financial goals, have short and long-term financial plans. The need for financial planning in India and the vision of enhancing financial literacy as a national project has been slowly built.
A big number of stakeholders like the central and state governments, financial institutions, financial regulations, civil society, and educationists are involved in increasing financial literacy by spreading information related to financial planning, the importance of investment, financial exploitation, frauds, avoiding unnecessary debt, etc.
Proper Financial planning helps:
No matter what the uncertain situation is in life, be it credit card fraud or theft, good financial planning helps in easing the tension to some extent. Proper financial planning is the process of setting and creating a strategy to achieve our financial goals.
Whether we are planning for short, medium, or long-term desires, having a financial plan in place makes money decisions easier every step of the way. Knowing where we stand with our money and creating a plan for our financial goals is important for financial success.
While not having a financial plan may not affect your daily life, having a financial plan will definitely help you live a life with financial stability, security, and freedom. Maintaining a plan in place serves as helpful guidance when questions of how much to spend and how much to save come up.
The major benefits of personal financial planning are
Keep Records Of The Expenses
The most primary point to start with is to keep a record of the expenditures made using your credit card. This will not only help with a good financial plan but will also keep you informed about any suspicious payments made using your card.
Importance Of Emergency Fund
Having an emergency fund is necessary because we never know when we’ll need it. This may include the different types of insurance you may need: health, life, disability etc, and how much one can provide some security when things go extremely bad is equally important. With a good strategy, we’ll be able to plan for risk management tools and fit them into our budget. It will reduce the dependence on credit cards as well.
Why Have A Safe Retirement Plan:
Credit card fraud can take away your savings for a retirement plan. Paying off debt is important, part of a financial plan can include specific actions that can be taken to accomplish that goal as fast as possible in the most secure way.
Depending on our goals, we can set aside cash for a home down payment, buying a car, house renovations, vacation, and so on. A financial plan can help us chalk out how we will meet our savings goals and motivate us to do it. We’ll be ahead on long-term goals.
Whether we’re saving for retirement, a vacation or a child’s college education, financial planning can help us understand exactly how much we need to accomplish our goal and what we need to do to get there. The sooner we start with this process, the easier and it will make us aware of the expenses made and usage of credit cards.
Benefits Of Budgeting, Planning and Investing
Begin by writing out your income and expenses to get an idea of where your money is going. Also, invest in stocks, funds and bonds. This will give you an alternate source of income and will make you financially stronger to reduce dependency on credit cards.
Plan a budget for all your investments and make expenses based on that. Making a budget is one of the most fundamental things we can do to achieve our financial goals because it helps us take control of how we use our money. Financial plans can also include a plan to reduce our expenses so that we can gain more cash flow to use for our financial goals.
Enables You To Save More Tax
The investors who save and invest more will be able to create more wealth. Saving and investing according to a financial plan instills a greater sense of meaning in our journey for financial well-being and financial independence in the long span. A goal linkage with investments is the most important aspect of a good financial plan.
If we do not have a financial plan, we may invest in assets that give higher returns in bull markets and this may increase the risk in your portfolio. One of the benefits of financial planning is to protect our financial goals from the impulses of capital markets. If we carry out goal-based investing, we can better our lifestyle in a sustainable way, prevent over-dependence on credit cards and keep us alert from frauds. A good investment plan can help us save taxes under section 80C and also help us invest in the most tax-efficient investment options according to our financial goals.
Provides Security During Emergencies
Financial planning has a net valuable impact on all elements of our life, from emotional and health benefits to social and financial benefits. Having a financial plan establishes a goal and a strategy for achieving it and also forces people to consider how they will go from one point to another, which is almost as important as taking the actions to get there. Track the savings objectives with a financial plan, whether it’s an emergency fund or a retirement investment. This may encourage us to save more than we had planned.
If you have continuously made a good financial plan then the dependence on tools like credit cards and loans may reduce. It also promotes financial well-being and it gives individuals and families a sense of security, regardless of the situation or emergency that may arise.
Additional Benefits Of Financial Planning
We need to know the importance of financial planning in our life. It delivers us with a set of tools for creating wealth and amassing it for use in an emergency. So, if we haven’t started yet then we should start our financial planning from today itself to make our and our loved ones’ future more protected and happy.
Financial planning is a step-by-step approach to meeting one’s life objectives, it acts as a guide as we go through life’s journey, helping us to be in control of our income, expenses, and investments so that we can manage our money and achieve our goals.
Planning is one of the most significant characteristics of human beings. When it comes to money, planning needs to be tangible as there are enough variables that can affect our financial planning.
‘Failing to plan is planning to fail’ according to Allen Lakein. Fulfilling future needs and enhancing the standard of living relies on the plans we make today. The plan for the future, considering the factors that can shake any financial plan.
Inflation is the biggest problem of purchasing power. In order to get through inflation in the future, today is the day we have to be strongly planning finances. Financial planning guarantees us to sustain inflation while keeping our goals untouched.
Financial planning is an effort towards our dreams. We might have thought of a foreign trip, an independent house or living a vision with our family. May the dreams never go away due to commitments. Financial planning helps our dreams while taking care of our responsibilities.
There might be inevitable and unforeseen times ahead that may become hurdles before our goals. Financial planning involves being ready for such situations without impacting primary objectives. Furnishing security to our family is an essential part of financial planning.
A financial plan is not to make fast money, get rich quickly, or minimize expenses. It is to ensure our money is safe, well-invested, and is available to us when needed. Ultimately it helps us lead a stress-free and relaxed life.
Few tips to use a credit card in the most secure way
- Establish spending limits: Identifying this amount will help you determine your ideal credit card spending limit.
- Keep a running total: Keep an eye on your credit card spending and be aware as you approach your sending limit or suspicious payment.
- Understand our monthly expenses: Have a budget and make note of your expenses.
- Simplify your billing schedule: If you have the option to select the date of your credit card billing cycle, you may want to choose a date that aligns with your pay period. This will help stay alert and manage your bills smoothly.
- Be strategic: Have an emergency fund for health or any other unforeseen problems.
- Avoid carrying a balance: Carrying a balance to next month may add up to the existing amount and the increased amount may lead to a delay or default in your payment.
- Use debt wisely: Credit Cards gives you a convenient easy short term loan. Use it carefully and never share your credit card details with anyone.
One threatening life story that will make you rethink financial planning
Story of Rajesh and his accident
Rajesh and his wife were earning well. But Rajesh was not confident whether that would be sufficient enough to take care of the kids if his wife has to run the house all by herself. Or will it be enough to make them feel financially secure, to let them attain the life they desired? They hold a whole life ahead of them. Rajesh was a consultant working for a Mumbai-based company. He was not the regular guy who was earning and having a successful career but took his personal finance very seriously and so, he had his life covered, saved an amount monthly via SIP, and also invested in Mutual Funds consistently. He had all the required investments and tax solutions to help him achieve his wealth creation and tax-saving goals. Overall, he had all the basics done correctly with an excellent financial commitment.
On a dreadful day, Rajesh met with an accident and woke up on a hospital bed and that made him realize how much out of control everything is in life. Panic started to set in. He was worried for his family. For him, that was worse than the fear of death. His wife received a call from the hospital and was shocked by the conversation. Even with good investment decisions and financial stability, the financial future of Rajesh and his family was still a question. Uncertainty has been the biggest enemy of a human being’s peace of mind and it’s a terrible thing to live in the fear of it. Fortunately, Rajesh got a second chance to fix some things and increase the odds against uncertainty. The accident that doctors told was fatal did not take his life. After months of recovering and spending a big amount on hospital expenses, some were covered by medical insurance and the rest by Rajesh’s credit card. Rajesh’s wife took help from her friend as to how she can use his credit card to make hospital payments. She thought her friend was a blessing in disguise.
Slowly Rajesh recovered and he learned the importance of having an emergency fund. After 6 months Rajesh resumed work and checked all his expenses and credit cards bills. To make things worse he noticed that every month, Rs. 1 lakh was getting added to his bill. He immediately called his wife to inquire and his wife was surprised as she was not the one using his card anymore. After much thought, she remembered she shared his credit card details with her friend. Upon calling the friend multiple times, they received no response and they were now sure that their credit card was getting misused by that friend.
Rajesh immediately blocked his credit card and created a financial plan teaming up with his dear wife. They started it as a preventive measure in case anything happens again. He educated his wife on the dangers of sharing credit card details with anyone and constructed a financial plan as a family that absolutely boosts financial freedom. Rajesh was lucky enough to get a second chance with his life and was also able to block the card before much damage. Others may not, we may not. Budgeting, planning, and monitoring can make you financially stable, and staying careful with the financial details will prevent such credit card frauds. It allows us to confront some of the worst possibilities ahead and make plans to tackle them in advance. It raises our odds against life’s uncertainties.
The most useful thing about such stories is that they give us a heads-up. They give us the blueprint to equip ourselves for our uncertain future. Life is very uncertain and none of us are blessed to see the future. If we are stuck with a quick need or a roadblock we did not foresee, we should not feel bad about it. We got to make a few adjustments and start the journey again. The plan is not to predict or evade obstacles; it is about staying alert and never sharing the financial details even in the most difficult of times. It may sound easy, but the process needs practice and discipline. Establishing goals, finding the right routes to invest, predicting the periods when we may require money, all of these are not straightforward. We do not have to be visionary, but we need prime financial understanding to create a successful financial plan. We can never make a perfect plan, and no process is perfect. The concept is not to make a full-proof plan. We have to start by determining the goals and begin fast to pursue them. To step towards our dreams linearly, year after year is the goal.
Being alert and careful while making financial plans is like navigating securely to where we want to reach without any misfortune event like this fraud. The challenge arises when we do not know how to navigate or where to go. In such situations, we should not hesitate to speak with a financial planner and seek assistance. Never share your credit card details with anyone and educate your family members about it. This will help safeguard your finances and protect you and your family from such fraud.
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