Recently, while I was with a friend, someone bought more than $10,000 worth of goods using my friend's credit card, even though she hadn't lost it.

Fortunately her bank, alarmed at the size of the purchases, phoned to ask if she had gone on a wild shopping spree and took responsibility for the loss.

She is still trying to find out where her card was skimmed to provide the basis of a bogus card to be used with her fake signature. Her card, of course, had to be cut up and a new one issued.

Unfortunately, my friend's experience is not an isolated one. The Australian Bureau of Statistics says 383,000 Australians have become victims of credit fraud in a year and a further 124,000 had their identities stolen.

According to Dan Svantesson, an associate professor of law at Bond University and an Australian Privacy Foundation board member, credit card fraud results in an immediate but temporary financial loss.

Identity theft, on the other hand, has more long-term effects. The identity thief can take out a mortgage or obtain credit cards and commit crimes, all in someone else's name.

Choice spokesman Christopher Zinn says that all criminals need is your name, date of birth and address to start hijacking your identity.

Those three pieces of information are in most wallets. Our personal details, in full or part, appear on up to 100 databases, including government agencies, banks, ticket agencies, employers and airlines.

There is also personal information on websites such as Facebook and MySpace.

Our computers have become a new way in for IT fraudsters, who email thousands of people in the hope of getting them to open an attachment. This allows the installation of spyware and other malicious programs designed to steal private data.

The unauthorised harvesting of personal information has even developed its own language. We're familiar with the process of skimming details from your debit or credit card and phishing, where you are tricked into revealing personal details by deceptive emails and fake websites, including those purporting to be of banks.

Clicking on links is a common fraud mechanism. Banks don't ask for personal details by email. Choice advises you to type the correct website address into your browser, rather than clicking on links.

Newer methods include tapping into mobile phones, using text messages to phish for information and "spear-phishing", where victims get an email apparently from a trusted source requesting information and passwords.

Increasingly we bank and shop online or by telephone, providing personal information to whoever is listening at the other end.

As Zinn says, the internet has become a delivery mechanism for fraudsters - thieves trick people into giving them valuable information by answering their emails.

Usually, if it is clear an ID or credit card fraud has occurred, the bank wears the loss. This is particularly the case if an ID has been stolen, a new credit card created and the signature of the rightful holder is forged.

However, if your negligence is the cause, you and the bank may end up in an ugly dispute over the loss. Putting it right can be a major hassle.

Zinn says the big cost is the time involved in getting new cards issued and proving the fraudulent transactions are not yours.

A British Government report found that clearing your name after an identity theft can take 50 hours of your time before things are back to normal.

Banks are increasingly moving from magnetic strip transactions (where the magnetic strip is swiped and read) to PIN technology (where using your debit or credit card requires you to enter a PIN and perhaps another code or password as well).

Choice and the Australian Bankers' Association have tips for avoiding the loss of money or your identity to fraud.

They include: destroying personal information such as bills and account statements by shredding them rather than throwing them in the recycling; locking your letterbox when on holidays; signing all credit and debit cards as soon as they arrive; securing personal information at home; keeping copies of credit card numbers so they can be cancelled quickly if stolen; and always checking your bank and credit card statements for suspicious transactions as soon as they arrive.

You should never give your credit card details over the phone to service providers you don't know or are not familiar with.

When you pay for restaurant meals, watch as your bill is processed to ensure it is not being skimmed, swiped twice or taken out the back for a quick copy.

Staying at your table while the waiter takes your card away to swipe it before returning it for your signature is not advisable.

The Australian Bankers' Association, the Australian Securities and Investments Commission and the Australian High Tech Centre, have a list of practical fraud prevention tips for businesses and individuals. See http://www.protectfinancialid.org.au.

Zinn says cardholders should get a low-balance credit card specifically for over-the-phone transactions - or, as the banks call it, "customer-not-present" transactions - for items such as theatre and sports tickets and mail orders. If the database used by that organisation is hacked and the cards used, the amount of the potential fraud is capped.

Choice says its most valuable tip is to treat your identity like cash because if you don't, your identity will be turned into cash.