The Most At-Risk States for Credit Card Fraud and Identity Theft

Over two and a half million people in the US become victims of credit card fraud and/or identity theft every year. RewardExpert analyzed the data to rate which states are the most and least at-risk.

The threat of theft has never been greater, be it of your personal identity information, financial assets and account details, or of vast quantities of such data all at once. Major data security incidents, such as the Equifax security breach , have been widely reported on. Events such as these take place on a smaller scale almost daily, and as such, the integral role of the internet in today’s society exposes all of us to risk, especially when it comes to our bank accounts, credit cards, and our credit histories. Financial fraud is a risk not only to our present financial and personal security, but it can affect us for years to come.

RewardExpert drilled into the data to determine in which states your risk of becoming a victim of identity theft, credit card fraud, and related crimes is highest, and in which states you are at relatively less risk. We took into account the incidence rates of reported credit card fraud and identity theft, as well as  year-over-year trends and the severity of the financial losses incurred by each event.We also to into account reports of internet-mediated incidents of fraud and identity theft, which we obtained from the FBI’s Internet Crime Complaint Center (henceforth referred to as IC3).

Key Findings

• From 2015 to 2016 reports of credit card fraud increased nationwide by 5.15%

• Reports of identity theft decreased significantly, by 16.05% in the same time period.

• Across the states, we observed absolutely no correlation between per capita income and incidents of identity theft and/or credit card fraud. The average per capita income for the top ten states is $55,994, whereas the average income for states with the lowest incidence and impact of fraud and theft is $55,186. States with the lowest incidence rate displayed a greater range in average incomes ($31,491 difference between highest and lowest (Hawaii’s $73,486 vs Arkansas’ $41,995) for the lowest, versus. $20,880 difference (Virginia’s $66,262.00 vs. New Mexico’s $45,382) for the highest).

• There is a relatively strong correlation between reports of credit card fraud & identity theft and the average credit scores for the states in question: credit scores for the ten states most prone to fraud average in the 23rd percentile (660) nationwide, whereas in the states least prone to fraud average in the 68th (681).

• Once again we saw a wider range in the states where fraud and theft are least frequent and least severe: generally speaking, we can say that states with both high income and high average credit scores, and those with average incomes and credit scores that are significantly lower than the national average are safest from fraud.

• While it is impossible to properly attribute causality, being poor and having poor credit may have the advantage of having a lower risk of becoming a victim of financial fraud.

Top 10 Most At-Risk States

These are the top ten states where credit card fraud and identity theft run most rampant.

• Nevada – 100

On all measures, Nevada takes first place as the state in which the risk of credit card fraud and identity theft is highest. Nevada is one of only six states in which reports of identity theft increased from 2015 to 2016 according to the FTC Consumer Sentinel Report. The only positive development to report in this state is that on a per-incident basis, the financial losses incurred by fraud are slightly lower than the national average.

• California – 97.95

California (with Florida and Michigan) leads the nation in reports of identity theft, per the FTC Consumer Sentinel Report. Incidents in California tend to involve larger losses than the national average. The average credit card fraud incident in California incurs a $3,667 bill, and identity theft cases average $7,543  The national average losses are $2,678 for identity theft, and $2,935 for credit card fraud/. California’s higher loss figures exceed the national averages to a greater degree than the state’s average income exceeds the national average income.

• New Mexico – 95.91

Continuing the geographical pattern, New Mexico is our third place “winner.” According to the FTC, credit card fraud complaints have increased by a whopping 12.73% in the course of a year. According to the FBI, the average incident costs a resident of New Mexico $3,647, which is almost the same amount as in California, and New Mexicans are on average less financially well-equipped to absorb such a loss, with an average per capita income of $45,382 to California’s $64,500.

• Florida – 93.87

Coming in at fourth, Florida should surprise no one: Florida has the dubious distinction of having the highest per capita rate of credit card fraud incidents as of 2016 (1,305 per 100,000 residents). This represents a significant improvement over the previous year, with a decline of 13.54% in reported credit card fraud.

• Texas – 91.84

Texans have been experiencing significant trouble with fraud and identity theft, with Texas coming in at fourth for complaints filed with the CFPB, fifth for reports of fraud according to the Consumer Sentinel report, and third for internet-mediated credit card fraud. Texas also takes third place in terms of the average financial losses due to fraud, with a staggeringly high price tag of $7,275 per incident. This figure may be a consequence of Texas’ relatively loose regulatory apparatus, or due to other less political causes.

• Michigan – 89.79

Michigan is part of a second hot-spot for fraudulent credit card activity and stolen identities. According to the most recent FTC data, Michigan has the highest rate of identity theft in the nation, affecting 175 out of every 100,000 residents, at an average cost of $2,762 per incident, according to data from the FBI. Additionally, Michigan is one of six states that saw an increase in identity theft; a 17% increase from 2015 to 2016. Credit card fraud is marginally less common and severe, however the state still ranks third overall for fraud.

• Virginia – 87.75

At first glance, Virginia is a geographical outlier. However, when all of the data is taken into account, its presence in our top ten makes more sense: credit card fraud and identity theft correlate with increasing population and/or the presence or proximity of a major metropolitan area, in this case, Washington, DC. There was an 8% increase in reports of fraud in the last year in Virginia, while financial losses per capita are in the 80th percentile.

• Arizona – 85.71

Arizona is the fifth state in the Southwestern region to make our list. This is likely due to its fast growing, diverse population, as well as an relatively high number of older residents and others particularly vulnerable to fraud and theft. Arizona’s rate of identity theft is high, in the 81st percentile according to data from the FTC, and 84th according to internet crime data from the FBI.

• Illinois – 83.67

Like its neighbor Michigan, Illinois has a serious identity theft problem. Illinois ranks third in the nation for identity theft, which affects 138 in 100,000 residents. Reported losses due to theft are also very high, with an average cost of $4,700 per incident. This is mitigated, however, by a significantly lower rate of credit card fraud than identity theft, at 576 per 100,000 residents, a rate that is much lower than Michigan’s 701 per 100,000 rate.

• Washington – 81.63

As a state with a rapidly growing population and a technology industry that is a significant engine of the state’s economy, it is not surprising that the state of Washington has one of the highest rates of credit card fraud perpetrated using the internet (8 per 100,000 residents,  with an overall incidence of 555 per 100,000). Fraud reports are on the rise here, increasing 9.68% from 2015 to 2016.

Top 10 Most Secure States

These are the top ten states safest from financial depredations, including credit card fraud and identity theft.

• Iowa – 0

If you are concerned about becoming a victim of financial fraud, you might want to consider moving to Iowa. Credit card fraud reports are third lowest in Iowa both online and off, while identity theft reports to the FBI’s IC3 and the FTC’s Consumer Sentinel Network are also among the lowest in the land (4th percentile). Financial losses when fraud does strike are somewhat lower than the national average, while losses due to identity theft are miniscule compared to other states, averaging $816 per incident.

• South Dakota – 2.04

South Dakota leads the nation for having the least internet-facilitated credit card theft, with only 12 incidents reported to the FBI’s IC3, and the lowest financial losses due to identity theft, at a mere $264 per incident. Overall statistics from the FTC and CFPB are comparable. South Dakotans simply are not frequently targets of either credit card fraud or identity theft.

• Wyoming – 4.08

With Wyoming coming in at third least-impacted by fraud and identity theft, we can see a clear geographical pattern, which will become even more obvious as our list goes on: states in the Upper Midwest and Great Plains regions have the lowest rates of reported credit card fraud and identity theft. Incidents, when they happen, are apparently resolved without great financial loss, as average losses reported by the IC3 ($1,716 per incident of credit card fraud, and $386 per incident of identity theft) are well below the national average for both categories.

• North Dakota – 6.12

North Dakota residents have the highest average credit scores in the nation (tied with Minnesota), with Experian reporting an average score of 701. This may in part be a consequence of rare occurrence of fraud and identity theft in the state, and as such North Dakotans face fewer dings to their credit scores due to events beyond their control. North Dakota has some of the lowest rates of internet-mediated fraud and theft, and has the lowest per capita rate of financial fraud, with only 284 out of every 100,000 residents affected.

• Maine – 8.16

The state of Maine is a geographical anomaly in our analysis. Maine is the only state in the Northeastern region where credit card fraud and identity theft is not a major problem. Credit card fraud affects 423 per 100,000 residents (versus 547 in Massachusetts, and 463 in New Hampshire). In fact, credit card fraud incidents noted by the FTC have decreased by 5.22%, while nationally, incidents have increased by 5.15%.

• Arkansas – 10.2

It may come as some surprise that alongside states with relatively wealthy, financially stable populations, we find Arkansas, home to a relatively underprivileged population, at number six. Arkansas makes the list primarily on its very low rates of internet mediated financial fraud (with scores ranging from the 2nd to 10th percentile on all measures, and affecting fewer than 3 people per 100,000 residents).  

• Nebraska – 12.24

For number seven, we return to the peaceful, safe, and honest Great Plains to find Nebraska, yet another state in a region that appears to be a solid bloc with little fraudulent activity. Nebraska has the sixth lowest incidence rate of credit card fraud, and ninth lowest according to IC3 data. Nebraskans have a relatively high average credit score of 691, indicating either a low impact of financial fraud, or competent and comprehensive handling of incidents when they occur.

• Wisconsin – 14.28

It is somewhat surprising to find Wisconsin on our list of states least affected by credit card fraud and identity theft, given its proximity to a distinct hot-spot of identity theft activity in neighboring states like Illinois and Michigan. It turns out that Wisconsin has more in common with another neighboring state, Iowa. In fact, identity theft cases are down in Wisconsin by 46.88% since 2015 to an average rate of 87.5 per 100,000 residents. The rate of credit card fraud is slightly up over the same time period, but remains at a relatively low rate of 465 people per 100,000.

• Louisiana – 16.32

Like Arkansas, Louisiana seems like an unlikely addition to our list. However, it does appear that in some cases lower income and lower credit scores correlates with a lower risk of becoming a victim of financial fraud. Like Arkansas, internet and data-breach related incidents are rare, and when they do occur, less financial harm is done, even when Louisiana’s average income is taken into account, with an average incident of credit card fraud costing $1,551, and an incident of identity theft costing $827.

• Hawaii – 18.37

Finally, at tenth place, we have Hawaii. Hawaii is distinguished by having the lowest rate of identity theft in the nation, as reported by the FTC Consumer Sentinel Report, with only 55 out of every 100,000 residents affected. Rates of reports to the IC3 and CFPB are comparably low, consistently in the bottom tenth to 25th percentiles.

 

What You Can do to Protect Yourself

• Whether you live in one of the higher risk states or not, it is always a good idea to make conscious efforts to protect yourself from becoming a victim of credit card fraud or identity theft. The Federal Trade Commission (FTC), which serves as the nation’s consumer protection agency by preventing fraudulent, deceptive and unfair business practices, recommends a few simple habits to start practicing in order to safeguard your information.

• Tip #1: Treat your account numbers like cash.
  Finally, at tenth place, we have Hawaii. Hawaii is distinguished by having the lowest rate of identity theft in the nation, as reported by the FTC Consumer Sentinel Report, with only 55 out of every 100,000 residents affected. Rates of reports to the IC3 and CFPB are comparably low, consistently in the bottom tenth to 25th percentiles.

• Tip #2: Don’t share your account information with anyone.
  There are numerous scams out there where you suddenly receive a call informing you that you’ve won a prize or offering exclusive membership in some club. All they need is a little bit of your information to process the transaction. If you didn’t call them, don’t give them your information. Always make sure you are giving your information to a reputable organization.

• Tip #3: Carry only the card you plan on using.
  There really is no need to carry all of your credit cards and banking information with you everywhere you go. Most of us have found it convenient to keep all of these details in one safe place – our wallets. But if your wallet or purse is stolen or lost, you have essentially just made it that much more convenient for a thief to get everything they need. Leave the credit cards and checkbooks at home, and only take the one or two that you plan on using during your day.

• Tip #4: Compare your receipts to your monthly statements and report fraud right away.
  It is a good idea to keep receipts for your purchases so that you can compare the charges to your monthly statements each month, or periodically by logging into your online account. Once you have verified the transactions are correct, be sure to shred any information that has your account number on it. When you notice something suspicious that does not add up, always report fraud to your bank right away.

• Tip #5: Apply for credit cards that offer the best in fraud prevention.
  Applying for credit cards that offer an extra layer of security is a great idea, as well. Many banks now have a variety of fraud prevention features to choose from.

• Bank of America, for example, recently topped the list of companies offering their clients fraud protection. They rated highest in authenticating their customers transactions are actually being made by their customers.

• USAA ranked highest in prevention by offering two-way alerts to their customers, which notify the customer in real time when a transaction has occurred.

• Wells Fargo topped the list when it comes to detecting fraudulent activities. And Associated Bank and SunTrust tied for top honors when it comes to resolving issues of fraud on your account.

1. Methodology

RewardExpert used three key data sets to obtain the most current statistics on credit card fraud and identity theft in each state: the FBI’s Internet Crime Complaint Center’s 2016 annual state-by-state report, the FTC’s Consumer Sentinel Report for 2016 and 2015, and complaints filed with the Consumer Finance Protection Bureau. We also included population and income statistics from the Census Bureau, and average credit score statistics from Experian’s 2016 State of Credit report.

We calculated a composite score to rank the states based upon a weighted average of the per-capita incidence rates of reported credit card fraud and identity theft from these three sources, which was then combined with the average per-capita and per-incident financial losses due to fraud and theft, to estimate the severity of the impact of an average incident in each state. Finally, the severity modifier was scaled in relation to the average income of the state, to adjust for the ability of a victim to absorb their losses.