More than two and a half million people in the US become victims of credit card fraud and/or identity theft every year. Financial fraud is a risk not only to your present financial and personal security, but it can affect you for years to come.
Where you live can have a large influence on whether or not you become a victim. RewardExpert, a company that provides tools, data and analysis to help consumers choose the best credit card to help them “turn spending into earning” conducted a study to find out which states had the best and worst rates of credit card fraud and identity theft.
RewardExpert looked at the incidence rates of reported credit card fraud and identity theft, as well as year-over-year trends and the severity of the financial losses incurred by each event. They also took into account reports of internet-mediated incidents of fraud and identity theft, which were obtained from the FBI’s Internet Crime Complaint Center (henceforth referred to as IC3).
Their key findings were:
- From 2015 to 2016 reports of credit card fraud increased nationwide by 5.15 percent
- Reports of identity theft decreased significantly, by 16.05 percent in the same time period.
- Across the states, Reward Expert observed absolutely no correlation between per capita income and incidents of identity theft and/or credit card fraud. The average per capita income for the top ten states is $55,994, whereas the average income for states with the lowest incidence and impact of fraud and theft is $55,186. States with the lowest incidence rate displayed a greater range in average incomes ($31,491 difference between highest and lowest (Hawaii’s $73,486 vs Arkansas’ $41,995) for the lowest, versus. $20,880 difference (Virginia’s $66,262.00 vs. New Mexico’s $45,382) for the highest).
- There is a relatively strong correlation between reports of credit card fraud & identity theft and the average credit scores for the states in question: credit scores for the ten states most prone to fraud average in the 23rd percentile (660) nationwide, whereas in the states least prone to fraud average in the 68th (681).
- Once again there was a wider range in the states where fraud and theft are least frequent and least severe: generally speaking, we can say that states with both high income and high average credit scores, and those with average incomes and credit scores that are significantly lower than the national average are safest from fraud.
- While it is impossible to properly attribute causality, being economically disadvantaged and having poor credit may have the advantage of having a lower risk of becoming a victim of financial fraud.
The five worst states for credit card fraud:
Worst states for credit fraud
- #1 – On all measures, Nevada takes first place as the state in which the risk of credit card fraud and identity theft is highest. Nevada is one of only six states in which reports of identity theft increased from 2015 to 2016 according to the FTC Consumer Sentinel Report. The only positive development to report in this state is that on a per-incident basis, the financial losses incurred by fraud are slightly lower than the national average.
- #2 – California (with Florida and Michigan) leads the nation in reports of identity theft, per the FTC Consumer Sentinel Report. Incidents in California tend to involve larger losses than the national average. The average credit card fraud incident in California incurs a $3,667 bill, and identity theft cases average $7,543. The national average losses are $2,678 for identity theft, and $2,935 for credit card fraud. California’s higher loss figures exceed the national averages to a greater degree than the state’s average income exceeds the national average income.
- #3 – Continuing the geographical pattern, New Mexico is our third place “winner.” According to the FTC, credit card fraud complaints have increased by a whopping 12.73% in the course of a year. According to the FBI, the average incident costs a resident of New Mexico $3,647, which is almost the same amount as in California, and New Mexicans are on average less financially well-equipped to absorb such a loss, with an average per capita income of $45,382 to California’s $64,500.
- #4 – Fourth place Florida should surprise no one: Florida has the dubious distinction of having the highest per capita rate of credit card fraud incidents as of 2016 (1,305 per 100,000 residents). This represents a significant improvement over the previous year, with a decline of 13.54 percent in reported credit card fraud.
- #5 – Texans have been experiencing significant trouble with fraud and identity theft, with Texas coming in at fourth for complaints filed with the CFPB, fifth for reports of fraud according to the Consumer Sentinel report, and third for internet-mediated credit card fraud. Texas also takes third place in terms of the average financial losses due to fraud, with a staggeringly high price tag of $7,275 per incident. This figure may be a consequence of Texas’ relatively loose regulatory apparatus, or due to other less political causes.
The five most secure states:
- #1 – If you are concerned about becoming a victim of financial fraud, you might want to consider moving to Iowa. Credit card fraud reports are third lowest in Iowa both online and off, while identity theft reports to the FBI’s IC3 and the FTC’s Consumer Sentinel Network are also among the lowest in the land (4th percentile). Financial losses when fraud does strike are somewhat lower than the national average, while losses due to identity theft are miniscule compared to other states, averaging $816 per incident.
- #2 – South Dakota leads the nation for having the least internet-facilitated credit card theft, with only 12 incidents reported to the FBI’s IC3, and the lowest financial losses due to identity theft, at a mere $264 per incident. Overall statistics from the FTC and CFPB are comparable. South Dakotans simply are not frequently targets of either credit card fraud or identity theft.
- #3 – With Wyoming coming in at third least-impacted by fraud and identity theft, we can see a clear geographical pattern, which will become even more obvious as our list goes on: states in the Upper Midwest and Great Plains regions have the lowest rates of reported credit card fraud and identity theft. Incidents, when they happen, are apparently resolved without great financial loss, as average losses reported by the IC3 ($1,716 per incident of credit card fraud, and $386 per incident of identity theft) are well below the national average for both categories.
- #4 – North Dakota residents have the highest average credit scores in the nation (tied with Minnesota), with Experian reporting an average score of 701. This may in part be a consequence of rare occurrence of fraud and identity theft in the state, and as such North Dakotans face fewer dings to their credit scores due to events beyond their control. North Dakota has some of the lowest rates of internet-mediated fraud and theft, and has the lowest per capita rate of financial fraud, with only 284 out of every 100,000 residents affected.
- #5 – The state of Maine is a geographical anomaly in the analysis. Maine is the only state in the Northeastern region where credit card fraud and identity theft is not a major problem. Credit card fraud affects 423 per 100,000 residents (versus 547 in Massachusetts, and 463 in New Hampshire). In fact, credit card fraud incidents noted by the FTC have decreased by 5.22 percent, while nationally, incidents have increased by 5.15 percent.
What You Can do to Protect Yourself
- Whether you live in one of the higher risk states or not, it is always a good idea to make conscious efforts to protect yourself from becoming a victim of credit card fraud or identity theft. The Federal Trade Commission (FTC), which serves as the nation’s consumer protection agency by preventing fraudulent, deceptive and unfair business practices, recommends a few simple habits to start practicing in order to safeguard your information.
- Tip #1: Treat your account numbers like cash.
- Tip #2: Don’t share your account information with anyone.
There are numerous scams out there where you suddenly receive a call informing you that you’ve won a prize or offering exclusive membership in some club. All they need is a little bit of your information to process the transaction. If you didn’t call them, don’t give them your information. Always make sure you are giving your information to a reputable organization.
- Tip #3: Carry only the card you plan on using.
There really is no need to carry all of your credit cards and banking information with you everywhere you go. Most of us have found it convenient to keep all of these details in one safe place – our wallets. But if your wallet or purse is stolen or lost, you have essentially just made it that much more convenient for a thief to get everything they need. Leave the credit cards and checkbooks at home, and only take the one or two that you plan on using during your day.
- Tip #4: Compare your receipts to your monthly statements and report fraud right away.
It is a good idea to keep receipts for your purchases so that you can compare the charges to your monthly statements each month, or periodically by logging into your online account. Once you have verified the transactions are correct, be sure to shred any information that has your account number on it. When you notice something suspicious that does not add up, always report fraud to your bank right away.
- Tip #5: Apply for credit cards that offer the best in fraud prevention.
Applying for credit cards that offer an extra layer of security is a great idea, as well. Many banks now have a variety of fraud prevention features to choose from.
- Bank of America, for example, recently topped the list of companies offering their clients fraud protection. They rated highest in authenticating their customers transactions are actually being made by their customers.
- USAA ranked highest in prevention by offering two-way alerts to their customers, which notify the customer in real time when a transaction has occurred.
- Wells Fargo topped the list when it comes to detecting fraudulent activities. And Associated Bank and SunTrust tied for top honors when it comes to resolving issues of fraud on your account.