I’ve been telling friends who have shopped at Target this holiday season to make sure that they cancel their debit and credit cards and get new ones. I’ve been surprised that some seem fairly nonchalant about it, and they aren’t planning to cancel so they don’t have to deal with the hassles that go along with getting a new card. Their reasoning? “It’s not my fault, so if anything bad happens, it’ll be Target’s responsibility to pay for any fraud committed. It isn’t going to cost me anything.” This is a terrible stance to take that could end up costing you hundreds of dollars.
Javelin Strategy & Research is estimating that the Target credit card data breach will cost customers and companies $18.9 billion dollars. The vast majority of this loss with be the responsibility of Target. Other businesses like credit card companies, financial institutions and merchants will also end up losing money when the compromised cards are fraudulently used at their businesses. But customers aren’t going to escape unscathed. Javelin estimates that this breach will cost the 40 million customers affected some $4 billion in costs for items fraudulently charged to their cards (this doesn’t count indirect costs such as lost wages and additional costs to fight the fraud), or an average of $100 each.
The problem is that while $100 will be the average, some customers will end up paying much more than others to create that average. For those who quickly cancel and exchange their credit card, there should be no fraud costs and the indirect monetary costs should be relatively little compared to the time and aggravation (Javelin also estimates that the breach will cost those affected 3.25 hours of their time on average). In addition to the time, there could be costs such as getting a new card expressed mailed so that it can still be used for shopping during the holiday season, the cost of cell phone minutes used to cancel the card and to call other merchants to switch automatic payments, the cost of gas for a trip to the credit union to get a new debit card, and possibly some unexpected fees if the card was used for automatic payments that end up getting paid late as the switch between credit cards occurs. Add those with the time it takes to resolve the situation, and even those who end up never having their cards used for fraud still pay a significant price.
Those who don’t cancel their cards in time and do become a victim of fraud will end up spending a lot more. Javelin has found that while the average ID fraud loss amounts to just over $4,600, the out-of-pocket expenses for these consumers averages $631. While businesses end up paying for most, if not all, the cost of the fraud on the credit card, the customer still ends up spending a significant amount of money trying to get the fraud issues resolved. This can include time off of work filing police reports, contracting firms to help clear out fraudulent entries in credit reports, and even lawyer fees.
While it’s certainly inconvenient and it’ll take a little bit of time and money to resolve the issue, it’s far better to cancel and get a new card now (and it won’t hurt your credit score to do so), than to have to deal with the aftermath of your card being fraudulently used. Yes, Target and other companies will bear the vast majority of the cost of the items fraudulently purchased on your card, but that doesn’t mean that it “isn’t going to cost (you) anything.”
(Photo courtesy of Mike Kalasnik)