Rate tarts holding unused credit cards risk ID theft

Do you have credit cards that you never use? Did you know that leaving unused card accounts open could leave you at risk of identity theft? Identity theft is the UK's fastest-growing crime, and costs the economy an estimated £1.7 billion a year.

Earlier this year the Information Commissioner, Richard Thomas, told the Government that the sale of stolen personal information was getting worse. He also recommended a two-year jail sentence for fraudsters trading in stolen financial data. The current maximum penalty is a paltry £7,000 fine.

No one should be unaware these days that anyone who is careless with their personal information runs the risk of having their bank account raided by unscrupulous thieves, who impersonate genuine customers using stolen and forged documents.

Shredder companies have been doing a roaring trade, as people latch on to the fact that they should destroy unwanted bills and statements and not simply toss them in the waste paper basket for the so-called "bin bag raiders" to collect.

But how many people realise they are leaving themselves open to fraud by opening accounts and never cancelling them when they stop using them?

According to the bank payments association, APACS, at the end of last year 31.5 million people in the UK held an average of 2.4 personal credit and charge cards. However, research shows that around one in three cards issued is no longer active.

"Stoozers" or "rate tarts" - people who have opened tens or even scores of accounts to take advantage of 0% interest deals by extracting the interest free credit and moving the debt from account to account - could be particularly at risk.

In a parliamentary submission, APACS reported, "In recent times we have seen an increase in multiple cardholding (around 10% of cardholders held four or more cards in 2001 compared to more than 20% in 2004).

"Cardholders don't take out new credit cards and discard others. Old cards, and the available credit, are commonly retained, although in most cases they then lie dormant... in some of the cases we have seen in the media, the cardholder has accumulated cards over many years. There is intense competition in the market, making cardholders much more likely to switch and to accumulate cards."

What you should do to prevent fraud

The problem is that, if you don't cancel your cards when you stop using them, you could forget you ever had them. If your account is dormant, you won't necessarily receive a statement, so if someone hijacks the card and changes the billing address you won't miss it. If you move house, you could easily forget to notify the card company of your change of address, and leave yourself open to fraud that way, too.

According to credit reference agency Experian, almost half of all identity theft happens at a previous address, while research by Prudential Home Insurance found that a quarter (23%) of households have, alarmingly, received bank statements addressed to a previous resident. On top of this, almost half of us have received utility bills, polling details, insurance certificates or credit card statements belonging to other people, making impersonation for fraudulent purposes relatively easy.

Mel Mitchley, director of consumer credit reference agency Callcredit, says of dormant cards, "Millions of people have stopped using a credit or store card without telling their lender, so the facility is still available, and a fraudster can quite easily use it to rack up debts in someone else's name without fear of early detection.

And the risk is not just with existing credit facilities, it's also with ones offered to people through direct mail. If you've been pre-approved for a credit or store card, and you throw that information in the bin without shredding it, you're handing a fraudster an open invitation to impersonate you and get credit in your name."

Even more foolish are people who don't even open their own bank statements - because if they are being defrauded, they won't find out.

Research conducted by Experian for the Royal Bank of Scotland found that 7.4 million account holders in Britain are failing to open their bank statements each month. This equates to almost one in five account holders (18%) never opening, reading or checking their bank statements for accuracy, with a further 23% who claim to check failing to do so regularly.

Mitchley says, "People need to take care of their ID by checking their credit file and cancelling any unused credit facilities. They also need to shred personal documents, including direct mail, before they throw it away."

What happens if you cut up but don't cancel a card?

• If you cut up a credit card or leave it in a drawer the credit facility remains open and on your credit file until you inform the lender.
• Credit and store cards remain live until their expiry date and are normally reissued automatically.
• if the account is dormant, a statement is not necessarily issued, which might lead you to think the account has been closed.
• A fraudster can hijack a card by obtaining personal information, change the address for the card and then use it without the victim knowing.
• It can take many months before a victim becomes aware of ID fraud.
• It can take a typical victim 60 hours' work to prove they have been a victim of ID fraud.
• In extreme cases it can cost up to £8,000 and 300 man-hours to clear your name.

How to protect yourself from ID fraud