How Online Fraud Alerts Work

Notification to Reduce Damage

An online fraud alert can make you aware of suspicious activity on your bank or credit card accounts. By being notified early, you can let the financial institution know quickly if an unauthorized person is using your accounts. And you can find out about that activity without having to wait to receive a bank statement or credit report.

A fraud alert is a specialized type of electronic notification. Here's how it works. First, you, as the account holder, and the bank or other organization set parameters on when you want to receive notification. This could be each time more than $200 is withdrawn from your checking account, whenever a charge of $500 or more is made to your credit card, or when the bank receives a change of address request for you. You also indicate how you want to be notified: e-mail or SMS message (text message).

Once parameters are set, the bank or other organization monitors activity in your account electronically. A transaction that exceeds the set amount automatically triggers the command to send you a fraud alert. If no unauthorized activity has taken place, you can ignore the alert. But if there's a problem, you can respond quickly.

If the fraud alert is an interactive notification, you'll be given a way to respond immediately to approve or deny a suspicious transaction. For example, an interactive notification might say, "Mr. Smith, a $500 charge occurred on your credit card on May 3. If you did not perform this transaction, press 1 now."

Beyond free fraud alerts, some financial institutions offer more customized online alerts as part of add-on fraud protection programs. JP Morgan Chase, for example, offers the Chase Fraud Detector program to account holders for an additional $8 per month. Users can choose to receive additional online alerts about account activities including:

  • International transactions (outside the United States)
  • Cash advances
  • Internet transactions
  • High-dollar single transactions ($1,000 or more)
  • Change of address requests
  • New PIN requests
  • Balance transfer requests
  • New credit card requests
  • Authorized users added

[source: Chase Online]

Credit card companies also offer online fraud alerts and protection against identity theft. Discover card customers can pay a monthly fee for an identity theft and fraud-protection plan that sends e-mails or text messages detailing suspicious account activity [source: Discover Card].

The three main credit agencies -- Equifax, TransUnion and Experian -- also offer subscriber-based, online fraud alerts. Subscriber fees are about the same for the Equifax program as for the Discover card plan.

The most important thing to remember about online fraud alerts is that you have the ultimate responsibility for acting on the information. Your account is designed to notify you of activity in your file, but you -- the customer -- must file a complaint, report suspicious activity and take direct action.

Finally, let's look at the steps you should take if you are a victim of account fraud.