10 tips on how to keep bank accounts safe from fraud

Robert Anglen
The Republic | azcentral.com
Officials at Arizona Federal Credit Union tapped an elderly woman's account to pay of thousands in fraudulent credit card charges.

Putting your money in banks and credit unions is no guarantee it will be safe from fraud. And federal insurance won't protect your deposits if the bank decides you owe them money.

But there are ways to protect your accounts and to prevent banks from seizing your money in a dispute. 

What happened to an elderly Scottsdale woman illustrates the vulnerability of consumers and the limited obligation banks and credit unions have to protect them.

Arizona Federal Credit Union tapped 79-year-old Anna Kroger's accounts to pay off her drug-using son's bogus credit card charges. After her son drained $130,000 from her accounts and racked up another $30,000 in credit-card purchases, Arizona Federal officials froze her accounts and used their internal access to pay off charges they knew she didn't make.


Credit union officials contend Kroger was responsible for the charges because she authorized her son to use the account. Kroger, who was physically and cognitively impaired, gave son her power of attorney and control of her finances. 

A judge called the credit union's actions "distasteful" but ruled it did nothing illegal. Financial institutions don't have to act in the best interests of their customers, he said.

Banks aren't police agencies and don't have a duty to prevent large financial transactions — even suspicious ones. So, it is up to consumers to monitor their own accounts and carefully limit who can use them.

Here is some advice from financial advisers, consumer watchdogs, lawyers and fiduciaries. 

1. Avoid credit cards issued by your bank.

Keep separate your credit card accounts from the credit union or bank where you deposit money for savings and retirement accounts. This will help prevent the institution from raiding your accounts to pay off in-house credit cards in the event of a dispute. 

2. Monitor auto-payments and limit withdrawals. 

Auto payments for credit cards are convenient but should not be open ended. You should strictly control payments, indicating a specific amount to be paid each month.  

3. Put monthly deposits into restricted accounts.

Direct pension and Social Security payments into restricted accounts that only you can access. A savings account, for instance. Then move the money into separate accounts that others can access on your behalf.

Doing this puts you in control of your finances and limits relatives or others with a power of attorney from being able to access your life savings.

You can establish automatic transfers from the savings account to a checking account for living expenses.

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4. Don't give out debit and credit cards. 

 Restrict use of debit and credit cards.

Don't allow someone with a power of attorney access to them. Instead, use checks to pay for specific purchases.

Make sure to fill out the checks completely. Do not leave the payee and amounts blank.

5. Establish daily maximum withdrawals.

If you cannot avoid giving your power of attorney access to your accounts, establish limits with the bank about how much cash can be withdrawn in a single day. 

The bank will make sure that the account is frozen once the limit is released.

Any withdrawal over the designated amount should require you to go to the bank and sign a release. 

6. Update your power of attorney while you can.

Consider having a lawyer draft your power of attorney, and custom-tailor it to your needs and expectations.

Do this before you are forced by circumstances to elect a power of attorney. Your surviving relatives or kids might not be your best choice.

RELATED: Probate court: A troubled system. Read The Republic's 2010 series

7. Add stipulations to power of attorney. 

Don't sign a generic power of attorney, but design it specifically for you. Add restrictions to it.

Add advance directives requiring two physician letters in order to activate the power of attorney. That ensures a bank won't just open your account up based on a single signature. 

It could also put the bank on notice that doctors have reviewed your case and have decided you are incapable of managing your own finances. That could lead them to take monitor your accounts.


8. Name more than one person as your agent.

Consider appointing more than one power of attorney. This serves as a check-and-balance system so that one person does not have complete control over your finances.

9. Consider hiring a private fiduciary.

Private fiduciaries are licensed and bonded and are answerable to the court in a way that relatives are not.

Yes, they do charge for services. But their fees will almost certainly be less than what will happen if you are a victim of fraud.

It will also cost less than a court action, which could happen if relatives get into a dispute over how best to handle your finances or care.

RELATED:The top 5 ways Arizonans get scammed

10. Check your homeowners policy for coverage.

Some homeowners insurance policies offer limited fiduciary coverage.

In the event your fiduciary, or your designated power of attorney, abuses that position, you could be covered up to a certain amount.

These policies are often sold as individual riders but might be worth the cost if you are worried about protecting your assets.

An account has been set up to aid Anna Kroger at Arizona Bank and Trust. Donations can be made to: Anna B. Kroger, account number 9361190376, routing number 122106015.