With Christmas next month, consumers will be hitting the plastic hard getting presents and enjoying the festivities. This may be the season to be jolly, but it is also a time to be cautious as card fraudsters see easy pickings.
Although there is meant to be protection in place for people whose cards are stolen, there have in the past been cases of banks refusing to refund losses. Often this is because an original card and the correct PIN have been used. The problem is that banks refuse to accept there is any weakness in the chip and PIN system. Banks may presume negligence on your part, whether it be leaving your PIN with your card or giving another person access to your card.
But now that the voluntary Banking Code has been replaced by regulation from the Financial Services Authority (FSA), this no longer supposed to be a problem. Now the onus is meant to be on the card provider to prove that you either deliberately or carelessly enabled someone to discover your PIN.
"This is now not a good enough reason on its own for a claim to be turned down. If this does happen, you need to ask your bank exactly why they have refused the claim," says Jemma Smith from the UK Cards Association.
Where problems can arise, however, is in determining what is considered negligent or careless on the part of the cardholder. If a credit card is left behind a bar, for example, most banks will offer a refund for any resulting unauthorised transactions. What is not clear is what would happen if the cardholder left the card overnight or for several days. Similarly, writing down a PIN and keeping it with the credit card is clearly careless and will often result in claims being refused, but what if the number was in code?
"Unfortunately, banks haven't always been transparent about what is negligent and what isn't," says Paul Lawler, from comparison website moneysupermarket.com.
With no recognised definition of negligence, it will remain difficult to predict how claims handling for card fraud will be even under FSA regulation. While consumer groups have welcomed the move to place the burden on banks to prove negligence, it remains to be seen how this will pan out in reality.
"We welcome shifting the onus on to banks but the proof of the pudding is in the eating," says Martyn Saville, a senior researcher at the consumer group Which?
Both the FSA and banks insist that all claims are dealt with on a case-by-case basis, so until these questions can be answered, consumers must take it upon themselves to stay safe. Here are some dos and don'ts of card protection.
DO review your bank and credit card statements
Look out for any unfamiliar transactions from companies or individuals. Thieves will often make a tiny initial purchase to check that an account hasn't been cancelled. If the cardholder doesn't notice, the crooks will then make a much larger purchase. Few fraud alerts set up on an account will be triggered by such a small amount so combing through your statements carefully and making sure you are aware of all your purchases is the best way to beat the fraudsters.
DO protect your PIN
When it comes to choosing your PIN, avoid any obvious numbers that can be easily guessed. More importantly, don't write it down. Memorise it and make sure you have a different PIN for each card you hold. Never disclose your PIN, even to friends and family.
DO stay safe at ATMs
Check for any attachments, particularly in or around the card slot. It could be an electronic device placed by thieves that captures your credit card information when you swipe it. These can be fairly innocuous but if you're at all unsure, don't use it. If possible, use the ATM machines inside banks rather than on the high street. Try to shield the key pad when you're at an ATM, and once you've made the transaction put the money away immediately, not while you are walking away, when someone can easily snatch the cash from your hands.
DO keep safe online
Register for MasterCard SecureCode or Verified by Visa as an extra security measure. Shop only at secure websites: look for a locked padlock symbol in your browser window. Never access your account in an internet café or library and keep your own computer up to date with the latest antivirus software. Avoid opening emails from unknown sources and delete any messages asking for any personal information, particularly your bank details.
DON'T let your cards out of your sight
Most shops and restaurants now have portable card readers so there should be no reason for your card to be taken away. Don't leave your card behind the bar to run up a tab. Once out of your sight, your card is far more vulnerable to skimming – the illegal copying of card details electronically.
DON'T let your guard down abroad
The majority of credit card fraud occurs abroad, so be extra careful if you're planning a trip this Christmas. Consider leaving the credit cards at home and take a prepaid card instead. These can be used in the same way as a credit card, except you spend only what's on the card. This is not only a handy way to curb your holiday spending but it also means that if a thief gets hold of your card, they can spend only what is on the card. When you're out and about, use a concealed money belt to carry your cards and cash and take the emergency 24-hour telephone numbers for all of your cards so that you can report any loss.
DON'T bother with identity theft insurance
Identity theft insurance is largely pointless. Most aren't actually designed to cover for financial losses. Instead, the main feature of these policies is a regular credit check to alert you to any changes. However, this is something you can do by yourself at low cost or even for free, through contacting credit reference agencies directly. Moreover, many home insurance policies offer identity theft cover as standard.