Automated banking tools like direct deposit and automated bill pay offer many benefits, including helping you better manage your cash flow, never miss a payment and increase your savings. They can also offer an extra layer of protection against identity theft.
Identity theft is the top consumer complaint to the Federal Trade Commission. Every two seconds another American becomes a victim of identity fraud, according to Javelin Strategy & Research. If you haven’t yet fallen victim, chances are you know someone who has.
Although identity thieves are constantly finding new, more sophisticated ways to steal financial identities, most identity theft still occurs in very basic ways. Common tactics include the theft of checks or documents from mailboxes or trash bins, lost or stolen wallets, or watching over your shoulder as you punch in your PIN code at a store, according to the U.S. Department of Justice. In fact, as much as 85 percent of identity theft cases involve the unauthorized use of existing account information, such as credit card numbers or bank account information, the Bureau of Justice Statistics warns.
Direct deposit and direct payment reduce the number of hands your personal financial information pass through, and eliminate the opportunity for a thief to get his or her hands on a physical check. It’s also less likely that an electronic payment will get lost or stolen, as a paper check might. Most employers now offer direct deposit of paychecks, and you can also have Social Security checks or tax refunds directly deposited into your bank account.
Paying your bills electronically can also help reduce your risk of identity theft. Many companies now allow you to receive bills via email and pay them online; about 22 million electronic payments occurred in the U.S. in 2013, according to ACA International. Direct payment:
While direct deposit and direct payment can help reduce your exposure to some of the most common identity theft tactics, it’s important to remember that you’ll need to protect the devices you use to make online payments and access your bank account. Always keep anti-virus and anti-malware software current on desktops, laptops, tablets and smartphones, and never access financial accounts or make payments over unsecured Wi-Fi networks.
For more information about electronic payments, visit electronicpayments.org. To sign up for direct deposit, talk to the company or organization (such as the Social Security Administration) providing you with payments. To sign up for direct payment on your accounts, connect with your creditors.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.