Lose Your Keys, Lose Your Wallet Too?

The guy came running back to the airport security station at a rate of speed that would have alarmed the guards had they not seemed to know what was next.

The running man was looking for his keys, which he last recalled having at the screening area about an hour earlier.

He had barely finished his out-of-breath sentence when one security officer pulled out three different bowls, each with a set of keys in it. The guy picked up his keys by a keychain fob, one of those little tags that many credit-card issuers are offering as a replacement for the traditional plastic card.

"At least it wasn't my wallet," he said, panting, before thanking the security guard and rushing back to catch his flight.

But because the tag is a newfangled credit-card device, the guy's keychain actually was functioning a bit like his wallet. Moreover, losing his keys exposed him to potential credit fraud and identity theft.

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You can scarcely watch television these days without seeing commercials for quicker and faster ways to pay using your credit card. The basic idea behind services like PayPass from MasterCard, Blink from Chase and ExpressPay from American Express is that you can use your cards faster and easier, often thanks to a chip implanted in your card that wakes up when it is passed over a scanner at the register at a fast-food restaurant or convenience store. The idea is to make small-dollar transactions fast and easy, which also encourages consumers to spend just a little bit more.

It's not just keys, either. Card issuers are working on technology that would embed a credit chip in other items, like cell phones, so that you need only pass the phone over the scanner at the register to pay your bill.

Invariably, one of the parts of the pitch for these new services -- especially when they involve the little key tags -- is that the cards and fobs are "safer than cash."

That's correct, in that if you lose money, it's gone, but a lost card can be cancelled and has consumer protections to limit your liability if you notice quickly that the card is missing.

But the serial number on the lost bills doesn't contain your personal information, while the little keychain fob does. And people misplace their keys all the time; empirically speaking, they waylay the keys more often than their wallets, with experiences like what I saw at the airport last Sunday being proof. They also leave their keys on desks at the office, with parking attendants and more, all places where a clever identity thief would not need much time or technology to gather a treasure trove of personal data, or to run up an incidental bill that might slip by unnoticed.

"What bothers me is not the fraud aspects here, but the identity theft issues, and the ease with which you might be able to have your information stolen," says Greg McBride, senior editor at BankRate.com. "Someone getting your key tag and running up charges is no different than losing your credit card, in that you have all of the same protections when you report it missing. The problem in my mind is that your financial identity can be compromised by leaving your keys behind, and that the identity theft is the problem. Most people don't safeguard their keys the way they do their wallet.

The key fobs also are leading to other yet-to-be-answered questions. Typically, parents don't loan their wallets to their teenagers, but they may give the keys over when the child needs to use the car. If the child's friends then use that key tag, those expenses may not be covered by the fraud protections, because the card was turned over willingly -- and then returned to its rightful owner -- without ever being lost or stolen.

Studies have shown that friends and acquaintances frequently are involved when an ordinary consumer falls victim to identity fraud. No one should assume they are immune.

None of this means that consumers should avoid the new technology. It's more that they should not forget that in the rush to have the cutting edge of convenience and technology, they should protect themselves from the razor's edge of financial fraud.

Balancing balance transfers getting tougher

Consumers who have reduced their credit-card bills by surfing from one low-rate offer to the next are finding the latest wave increasingly difficult to ride.

It appears that card issuers are removing some of the caps and fee waivers they had previously allowed on balance transfers, so that moving money from one card to the next can be increasingly expensive.

This is not a statistic that industry-watchers track, but most believe it is a logical progression of industry trends.

When card issuers started adding balance-transfer fees, it slowed the rate of people surfing the teaser rates. But the fees were typically capped, so that the fee was 3 percent or $50, whichever was less.

Now, issuers are removing the "whichever is less" component, so that a balance transfer of $5,000 that carried a $50 fee under the old rules will carry a $150 fee.

So if that lender says it is offering a 0 percent interest rate on balance transfers, you're actually getting a rate of 3 percent once you think of the process on an all-inclusive basis. Unfortunately, lending laws do not require card issuers to roll fees into the calculations of the annual percentage rates shown in big print.

"Credit card companies have continued to push the limit in terms of what they can charge in rates and fees, so it wouldn't surprise me one bit if caps on balance transfers become a thing of the past," says Gerri Detweiler, author of "The Ultimate Credit Handbook." "People who see a low rate need to factor in the fees, because it might not be such a good deal any more. And people who are used to jumping from one card to the next really need to factor the fees in, because the more often you face a big fee, the worse it is."

Consumers should know the new rate, the balance-transfer fee and any other terms of the deal -- such as if the balance transfer comes with a universal default clause that could raise your rates if you are late with a payment to any lender -- before accepting. The best balance transfer deals not only cap the fees, but also offer a low rate that lasts for the lifetime of the balance.

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