Imagine this: You’re checking your credit card statement and notice a couple of charges that you don’t recognize. You rack your brain trying to remember making them but are pretty sure you never did. This could be a sign that you’re a victim of credit card fraud.
You might not have to imagine this scenario because you might have already experienced it. After all, credit card fraud is the second most common type of identity theft, according to the Federal Trade Commission’s Consumer Sentinel Network. Consumers filed 389,737 reports of credit card fraud with the Consumer Sentinel Network in 2021, the latest year for which figures are available.
Taking the proper precautions can go a long way toward protecting yourself from credit card fraud. However, because it is such a widespread problem, even the most cautious consumers still can experience this crime. That’s why it’s important to know what steps to take to limit your liability if you become a victim of credit card fraud.
What is credit card fraud?
Credit card fraud is a form of identity theft. It involves the unauthorized use of a consumer’s credit card account or the use of a consumer’s personal information to open a new credit account.
The latter is more common. The Consumer Sentinel Network received 363,092 reports of unauthorized credit accounts being opened in consumers’ names versus 32,204 reports of unauthorized use of existing credit accounts. When thieves use consumers’ personal information to open new accounts, they can rack up thousands of dollars in debt before consumers even realize these fraudulent accounts exist.
Types of credit card fraud
There are a variety of ways thieves can create new credit accounts or make unauthorized transactions on existing credit accounts. According to credit card issuer Chase, the types of credit card fraud are common:
- Lost or stolen credit cards that thieves use to make purchases or get cash advances.
- Card not present transactions that involve purchases made online or over the phone with stolen card numbers.
- Counterfeit credit cards that can be created by thieves using skimming devices to steal consumers’ card information when cards are used to make transactions.
- Account takeovers that involve a thief hijacking a credit card account by changing the account address, reporting a card lost or stolen, and having a new card issued tothe new address.
- Credit application fraud that involves a thief using a consumer’s personal information to apply for credit in the consumer’s name.
How does credit card fraud happen?
In addition to outright theft of credit cards, thieves can get consumers’ card numbers and personal information in a variety of ways.
Data breaches: When hackers breach companies’ databases, they can gain access to consumers’ information. That information can include credit card numbers, which thieves might use themselves or sell on the dark web. Stolen consumer information also can include Social Security numbers, which can be used by identity thieves to open new accounts in consumers’ names.
Phishing or smishing: Scammers trick consumers into providing their personal information by sending emails or text messages that appear to come from legitimate companies and claim that consumers need to confirm their account information or make a payment to avoid a negative consequence.
Skimming: Thieves can attach devices at points of payment, such as gas station pumps, and steal card information when consumers’ swipe or insert their credit cards. Then, they can use the card information to make unauthorized purchases, sell the card information or make counterfeit cards.
Fake shopping sites: Some consumers are lured to fake shopping sites by ads, emails or text messages about deals. When they purchase items at these sites, their credit card information is stolen.
Hacking: Because consumers often use simple passwords, hackers can easily figure them out to access accounts.Or they take a more direct approach by calling people and claiming they are with tech support and need remote access to their computers. Once they are granted access, they steal consumers’ personal or account information.
Fake wireless access points: Consumers who use free public WIFI to login into financial accounts or make online purchases put their account information at risk. That’s because hackers can create fake wireless access points to steal consumers’ information when they connect. Or they can tap into existing public WIFI access points and spy on users.
How to prevent credit card fraud
There are several things you can do to protect your credit card account and your personal information. By staying vigilant, you can reduce your risk of fraud.
Think twice before sharing your information.Don’t provide your credit card number or personal information in response to an unsolicited phone call, email or text message. If the person contacting you claims to be with a company you do business with or a government agency, end the call or don’t respond. Instead, contact the company or agency directly to find out if it’s trying to reach you.
Stay safe online. Protect your computer from hackers by installing anti-virus software. For all online accounts, use strong passwords that have a combination of upper- and lowercase letters, numbers and special characters. A password manager such as the one that is part of the Carefull service can generate strong passwords for you and securely store them. When shopping online, use websites you are familiar with or that show a padlock symbol and https:// in the web address. For sites you're not familiar with, search the name of the site and the word “review” or “complaint.”
Protect your information offline, too. Shred documents with account numbers and your personal information before throwing them away. And be careful what information you say in public. For example, don’t share your Social Security number or credit card number when others are around to hear it.
Keep your credit cards secure. Avoid ATMs or card readers that appear altered or damaged. And keep your credit cards close to you and out of reach of potential thieves when you are in public.
How to spot credit card fraud
You should be monitoring your credit card accounts and your credit reports regularly for unusual activity. For example, you can get free copies of your credit report at Annualcreditreport.com. You also can sign up to receive alerts from your credit card issuer when there are transactions on your accounts.
However, a more comprehensive approach is to use a service such as Carefull that includes 24/7 account, credit and identity monitoring. You can link your bank, credit card and investment accounts to Carefull and get alerts when it spots unusual activity, signs of fraud and common money mistakes. It also monitors your credit report and the Internet and dark web for misuse of your personal information. Plus, you get up to $1 million in identity theft insurance coverage to help restore your identity if it is stolen.
How to report credit card fraud
If you see transactions you don’t recognize or discover lines of credit you didn’t open listed on your credit report, you need to act quickly to report the fraud and limit the damage.
Fraudulent charges: Contact your credit card issuer immediately by calling the customer service number on your card if you discover a fraudulent credit card charge or by finding the number on the company’s website if your card was stolen. Be prepared to provide as many details as possible, and write down the name of the representative you speak with, the date and time of the call, and any instructions you are provided.
Cancel your credit card if the card or card number was stolen and request a new one. Also, change your account password in case it has been compromised. Follow up your call with a letter to your card issuer. The Consumer Financial Protection Board provides instructions on what to include in your letter.
The Fair Credit Billing Act limits your liability for fraudulent credit charges to $50. You don’t have to pay disputed amounts while those charges are being investigated. If the card company determines that you owe any portion of the disputed charge, it must explain why to you in writing. If you disagree with the decision, you must respond to the creditor within 10 days, according to the Federal Trade Commission.
Fraudulent accounts. If you discover an unauthorized account that has been opened in your name, report it to the fraud department at the company where the account was opened and close the account. Contact your local law enforcement to report the crime, and file a report with the Federal Trade Commission’s IdentityTheft.gov site.
Then, place a credit freeze on your credit reports with all three of the credit bureaus to prevent thieves from opening new accounts in your name. (You will have to lift the freeze if you want to open a new line of credit.)
Staying safe online, using strong passwords, and keeping close tabs on your credit cards and personal information can reduce the risk of credit card fraud. However, because even the savviest consumer still can experience fraud, it’s important to take advantage of technology to manage your accounts, credit reports and identity. If unusual activity is spotted, then you can respond quickly to report the fraud and limit the damage.