'That's how you protect yourself': Kevin O'Leary says you should stop using your credit card like this — offers an alternative that is easy and legal

Modern menace online and offline

While many people are aware of the potential risks from using credit cards online, it's important to note that offline transactions are not risk-free either.

Fraudsters can gain your information through a brick-and-mortar retailer that has been hacked. A notable example occurred in 2014 when Home Depot reported that an attack on its payment terminals over a five-month period potentially compromised 56 million credit and debit cards.That same year, luxury retailer Neiman Marcus disclosed that around 1.1 million customer payment cards might have been exposed following a three-month security breach. In 2019, malware was discovered on the payment processing servers of the Wawa convenience store chain, affecting all 850 locations.

Credit card fraud can also occur if your card falls in the wrong hands or you unknowingly swipe it at an ATM with a skimmer installed.

Nevertheless, it's generally sound practice to spread financial risk as O’Leary recommended. Credit card fraud and online financial scams are not just anecdotal concerns but are backed by alarming statistics.

In the U.S., the Federal Trade Commission received over 1.1 million identity theft reports in 2022. Notably, credit card fraud was the most reported type of identity theft, with 441,822 cases involving either the misuse of existing credit card information or fraudulent activities related to new credit card applications.

Considering the widespread use of credit cards, the potential financial losses to consumers are significant. The Nilson Report forecasts that, over the coming decade, payment card fraud losses in the U.S. could reach a staggering $165 billion, with global figures anticipated to hit around $397 billion.