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Same thing happened to me a few years ago. Someone hacked my gmail account by sniffing the password over the network (Google had a windows app that 'stored' the password and checked for emails- don't use it). After much complaining to Google the account was permanently shut down.
I never thought I would be 'hacked' but needless to say, security was stepped up a notch or two after that.
There is always a danger when you use the same username/password for multiple accounts, although so many of us do it.
Having to use your email address as a username is also annoying as it takes half the guesswork out of the equation for a hacker.
Social networking sites are also a menace as they give people a lot of useful information about you, special dates, names of friends, pets names, places you've been etc - any one of which could be your password to something. Same reason why some people go through the rubbish, hoping to find a piece of useful information about you - and there we are sticking it all on the Internet for them.
'To err is human, but to really foul things up you need a computer' Anon, 1978
I think the vast majority of accounts that get hijacked, either email, social sites or shopping sites are down to the fact that people use crap passwords. Every password I use comes from a randomly generated string and is as long as the site will allow one to be. Secure passwords are essential.
Try this site to give you the perfect password easily.
Surely there comes a point where the password becomes so complex that you are increasing the liklihood that someone will have to write it down or store it somewhere else, which surely defeats the object.
'To err is human, but to really foul things up you need a computer' Anon, 1978
Firefox and IE7 will remember them for you, and if you loose the password for a site just click the forgotten password link and change it. You don't even have to type things in, just copy and paste everything
use strong passwords, change them frequently, don't EVER have a web browser remember them for you and make sure your browser is closed & your workstation locked/logged off when you aren't using it.
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'To err is human, but to really foul things up you need a computer' Anon, 1978
I think having your browser remember your passwords is safer than typing them in each time. Keyloggers are all over the internet, although saying that its not so hard to steal passwords from a browser. Either way your vulnerable, but you have to enter passwords in sites somehow.