Approximately 3.7 percent of individuals—or 8.3 million Americans—were victims of some sort of identity fraud within the past year.

The average amount stolen is somewhere in the neighborhood of $1,882 per victim, not including time and money spent trying to remedy the identity fraud. The most accurate and detailed report about identity fraud is the 2006 Identity Theft Survey Report, a national survey compiled by the Federal Trade Commission to measure the costs and prevalence of identity theft. The report’s findings are alarming.

Based on the report’s statsitics, identity thieves are stealing more than $15.5 billion each year. The out-of-pocket costs increase this number significantly. According to the report, an average victim spends $371 in legal fees, payment of false debt, lost job income due to court hearings or meetings with attorneys, and other costs associated with identity theft. Add this to the $15.5 billion stolen by the thieves, and the average victim loses more than $2,000 each time a con artist steals his or her identity.

Categories of Identity Fraud

Though the incident of identity theft is on the rise, it is not new. Stories of con artists who assume the identities of upstanding citizens are as old as mankind. Today, identity theft is generally broken into four categories:

Financial identity theft whereby a criminal obtains goods or services
Criminal identity theft in which a thief poses as another person when apprehended for a crime
Identity cloning, whereby a criminal assumes another person’s identity by stealing his or her personal information (such as Social Security number, driver’s license, or the like); and
Business/commercial identity theft in which a criminal uses another business’s name to secure credit.

The most prevalent is the first: financial identity theft. Credit card fraud is the most widely reported subtype of financial identity theft, accounting for nearly sixty percent of all identity theft. Identity thieves either open new credit cards in their victims’ names, or they make charges to an existing credit card account. However, “Medical Identity Theft” is also on the rise.

Victims will usually know within one billing cycle if a thief fraudulently uses an existing card, though some thieves have been known to redirect a victim’s credit card statement to another address to prolong their ability to access that account. By opening a brand new account whose bill is not sent to the victim’s home, thieves can rack up huge credit card bills without their victims’ knowledge. After a few default payments, these fraudulently opened accounts are generally turned over to a collection agency. Only then do victims learn about the fraudulent behavior.

How Identity Thieves Find Credit Card Account Numbers

Identity thieves are able to attain a person’s credit card information online, in mailboxes, in their personal files, and even in garbage cans. The term “dumpster diver” was created to describe a thief who sorts through someone’s garbage can to find discarded checks, bank receipts, credit card statements, or physical credit cards. There is an entire “black market” for credit card numbers, bank accounts and other forms of identity – read our post on how the black market for credit card numbers works here.

Thieves also steal their victims’ purses, wallets, or briefcases to swipe credit cards, Social Security numbers, drivers’ licenses, and checks. A more covert way of victimizing consumers is through old-fashioned eavesdropping and peeping. By listening to a phone conversation or hanging around an ATM, identity thieves can record an account number without alerting the victims that they have been targeted. At an ATM machine, an identity thief must only position himself to see over the victim’s shoulder to memorize a PIN number. Coupled with a camera, this method is used by high-tech thieves to document debit and credit card account numbers, expiration dates, and account holders’ names.

One form of stealing a credit card number is called “skimming,” and it is a popular method for dishonest employees to obtain credit card numbers from unsuspecting customers. Waiters, sales clerks, and taxicab drivers are just a few of the people who have leveraged their positions as employees to gain control of a person’s credit card information, swiping a credit card into a portable electronic devise that gathers, or “skims,” all the personal information related to the account.

Many credit cards and account numbers are taken straight from a person’s own mailbox. Credit card statements, bank reports, and order forms are generally easy to spot, as are pre-approved credit card offers that an identity thief can steal and activate in the victim’s name. In an effort to circumvent this escalating form of identity theft, some credit card companies started requiring all new account activations to initiate from the intended recipient’s home line. Though a step in the right direction, this does little to mitigate identity thieves who are family members, friends, or household employees of the victim.

After an identity thief has obtained a stolen account number, he can begin to make online and telephone purchases using the victim’s name and credit card number. More sophisticated thieves construct fake credit cards by attaching the victim’s magnetic credit card strip to a credit card emblazoned with the thief’s name. This allows the identity thief to show identification when making purchases, which are being charged to another account number!

Though credit card theft is the most common of all identity theft, it is not the only type. To help protect yourself and your family, be sure to read the checklist of crimes committed by identity thieves. You should also consider investing in an identity theft protection product which will monitor your personal credit information, alert you if key changes are detected, and reimburse you for any lost or stolen funds. Having identity theft protection is kind of like having a home alarm system on your credit cards.

Worried about Identity Theft? Get a FREE Credit Report Instantly from ProtectMyID.com and check for warning signs!