Data breaches at large retailers are becoming so common that some consumers are now rethinking where they shop and how they shop, both in brick-and-mortar stores and online. The reaction is understandable when it comes to credit card theft, identify theft and other potential problems related to the mass hacking at stores last year. But overreacting to the breaches could be among the worst moves consumers make.
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In the past year, Kmart, Sears, Home Depot, Target, Neiman Marcus and a slew of other retailers experienced breaches that exposed the personal data contained on consumers’ credit cards and debit cards resulting in a new fear of swiping.
That fear of paying by plastic could have undermine add to the holiday blues for retailers this season. Two-thirds of consumers have already said they’re limiting their monthly spending (regardless of any data breach), according to a Bankrate report released last week.
But consumers could be making big mistakes since some of their protection plans could backfire. Here are four ways customers are adjusting their shopping habits in light of major data breaches – and why they may want to pause and reconsider their moves:
One: They stop shopping at certain retailers. A CreditCards.com survey released on Monday found that 45 percent of major credit card and debit-card holders say they now won’t shop at a retailer that’s suffered a breach and exposed personal information.
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Why that’s a bad move: A store that’s been hacked is likely to have increased its cybersecurity making it a safer than ever place to shop. That’s something higher earning shoppers may have known all along and it’s a sure silver lining for retailers this fall and winter: Higher income shoppers are the least likely of all shoppers to stay away from hacked stores, the CreditCards.com survey found. Because those stores know they have to “earn” their customers’ trust again, they’re more likely to have early sales and bargains to lure people back. Check them out.
Two: They replace plastic with cash. Nearly half of credit card and debit card holders plan to pay with cash more frequently this holiday season because of data breaches said the same survey.
Why that’s a bad move: Carrying a large amount of cash is risky, as you could easily lose it or become a target for a mugger. Anyone who sees you with a wad of cash in your wallet could stalk you when you least expect it.
Three: They switch to another credit card. After the Home Depot data breach, roughly 17 percent of consumers stopped using their credit card and replaced it with a new one, according to a study released this week by market research firm Lightspeed FSG.
Related: 4 Scams Consumers Must Avoid
Why that’s a bad move: It may sound like a smart consumer move, but consider this: Replacing credit cards costs financial institutions millions of dollars, which they’ll almost certainly pass on to consumers one way or another. Instead, try a new service like Apple Pay, which allows consumers with an iPhone 6 or 6 Plus to buy goods with the mere touch of a finger and the wave of the phone over a point of sale (POS) item.
Four: They may look more closely at their credit card charges. After the Home Depot data breach, 35 percent of people surveyed by Lightspeed FSG said they’ve been checking their credit card charges more carefully as a result.
Why this is a good move: Consumers should always check their statements closely, especially since they’re often unknowingly paying for fees or services they may not have requested. They should also be aware of any late fees they’ve incurred and any changes to their interest rates as a result of that.
When it comes to data breaches at retail outlets, “a lot of people have the initial emotional reaction of, ‘Wow, I don’t want to shop there anymore if they’re going to be that loose with [consumer] data,” David Just, professor of applied economics management and director of graduate studies at Cornell University, told CreditCards.com.
“Your initial response is fear. You feel like you’ve been violated. You don’t know what’s going to happen to your credit.” Consumers often decide later, however, that they need to or want to return to particular stores, he added.
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