How To Prevent Credit Card Fraud (2024)

Credit card fraud is a financial crime that involves unauthorized use of someone else’s credit card information to make purchases or withdrawals. It is an issue that affects millions of Americans every year. Bad actors can steal your credit card information or use your personal information to open a new credit card account.

How Does Credit Card Fraud Happen?

Once fraudsters have your information, they can use it to make purchases, transfer funds or withdraw cash, leaving the victim with the bill and potential damage to their credit score. Your information may be obtained in several ways.

Phishing/Imposter Scams

The most common type of fraud, known as phishing, is a type of online scam that uses a fake identity to send out emails, text messages or social media messages posing as a legitimate source, such as a bank or credit card company. The messages typically ask the recipient to click on a link or provide personal information, such as their credit card number or login credentials. Since bad actors can send out mass communications at one time and increase their chance of someone falling victim, this technique is generally the most common and is named phishing partly due to its similarity to casting out a wide net in hopes of “fishing” for victims.

Many of these scams also include social engineering, which is the psychological technique of communicating with someone in order to get them to reveal sensitive information. Likely, you’ve received a text or email that seems like it came from a wrong number; many of these can be scammers who are looking to get information by posing as someone else.

Clicking on links from these messages or downloading information from fraudulent websites can also open you up to spyware and malware. These programs embed themselves on your device and are capable of recording keystrokes to obtain your login credentials, accessing your app data or even seeing your active screen.

Online Shopping Scams

Often, scammers create fake websites or online marketplaces that look legitimate but are designed to trick unsuspecting victims into providing their credit card or other personal information. The scammers may advertise popular products at low prices or offer limited-time deals to create a sense of urgency.

Once the victim provides payment, the scammers disappear and the victim never receives the promised goods or services. These nefarious scammers may also make fraudulent purchases or steal money from the victims’ accounts.

Card Skimmers

Card skimming is a method of stealing credit card information by placing a device on or near a legitimate card reader, such as an ATM or gas pump. The device reads the credit card information and stores it, allowing the fraudster to retrieve the data later and make unauthorized purchases. Skimming devices can be difficult to detect as they are often designed to blend in with the legitimate card reader.

The FBI estimates that skimming amounts to over $1 billion in loss each year.

Data Breach

Your credit card information may be compromised through no fault of your own. If a data breach occurs at any institution that has your credit card on record for purchases, your credit card number could be among the exposed data. Data breaches and data leaks—accidentally exposing personal information—are on the rise. In 2023, U.S. data leaks and breaches impacted the personal information of 353 million people. Cybercriminals can exploit this information to make unauthorized online purchases or they may sell your account information.

Theft

Despite the complicated schemes, simple theft is still a real risk for credit card fraud. While you will likely be aware if your wallet or credit card is stolen, some thieves may simply steal your card information when processing a legitimate payment. Theft can also include a friend or family member using a saved credit card when purchasing online.

You should also be vigilant about your mail and the personal information you throw away. Thieves can potentially use information from card offers or statements to access your accounts.

Thankfully many major credit cards offer $0 fraud liability to their credit cardholders. But you will still need to stay vigilant to maintain the security of your accounts. Here are some recommended steps to protect your credit accounts:

Keep Your Credit Card Information Secure

One of the most important ways to prevent credit card fraud is to keep your information safe.

• Update your passwords regularly. Make sure you choose a unique password for each site and select one that meets or exceeds the strong password requirements.
• Avoid making purchases or logging in to your credit card account while using public Wi-Fi.
• Keep your physical card in a secure place, and be careful allowing your card out of your sight. Only give your card number over the phone when you initiate the call.
• Be careful which websites you allow to save your credit card information.
• Register for paperless statements to minimize access to personal information in your mail or trash. It’s also a good idea to shred any sensitive information before throwing it away.
• Sign out of your accounts when they’re not in use.

Monitor Your Credit Regularly

Keep a close eye on your credit card account and transactions, and report any suspicious activity to your card issuer immediately. Many card issuers offer email or text alerts for transactions. Make sure to turn these alerts on to quickly identify any unauthorized charges.

It’s also wise to regularly review your credit report. You can access your credit report for free at AnnualCreditReport.com.

Use Secure Websites for Online Purchases

When shopping online, make sure to only use secure websites that use encryption to protect your information. Look for the lock symbol in the browser bar and “https” in the URL. If you have security software on your device, make sure it is up to date. For phone purchases, ensure you’re using the most current software release.

Be Aware of Phishing and Skimming Scams

Be wary of unsolicited emails, text messages or phone calls asking for any personal information. Never click on links in these messages, and don’t provide any personal or financial information unless you are sure of the legitimacy of the request. When in doubt, navigate directly to the website from their home page or call the merchant or financial institution directly.

When shopping in person or getting cash from an ATM, pay attention to the card reader. Be on guard for card skimmers. When in doubt, use the tap to pay option if available.

Use Additional Security Measures

Some credit card issuers offer additional security measures like two-factor authentication. This requires a second form of verification, such as a code sent to your phone, before a transaction can be completed. You can also consider using virtual credit card numbers or mobile payment services, which offer an extra layer of protection.

If you suspect credit card fraud, there are several steps you should take to protect yourself and minimize the damage:

1. Contact your credit card issuer. Call the phone number on the back of your credit card immediately to report suspected fraud. Your issuer will freeze your account and issue you another card while they investigate the unauthorized charges. Report any suspicious transactions to your credit card issuer.
2. Update your passwords and security settings. Change your passwords and security questions for any online accounts that may have been compromised, including other accounts that used the same password. Use strong passwords and enable two-factor authentication when possible.
3. Place a fraud alert. Contact one of the three major credit bureaus—Equifax, Experian or TransUnion—and request a fraud alert be placed on your credit report. This will alert potential creditors to take extra steps to verify your identity before opening new accounts in your name.
4. File a complaint. Report any suspected crimes to law enforcement. Especially in the case of identity theft, having a police report on file can help the investigation process. You should follow the steps outlined by the FTC. You can also file a complaint with the Consumer Financial Protection Bureau or your local district attorney if you suspect an online business or were the victim of a phishing attempt.
5. Monitor your credit reports. Check your credit reports regularly to ensure that no new accounts have been opened in your name without your consent. You can obtain a free copy of your credit report from each of the three major credit bureaus once a year at AnnualCreditReport.com. If you discover inaccurate information, you can file a dispute.
6. Consider a credit freeze. You can also request a credit freeze, which will prevent anyone from accessing your credit report without your permission. But since this will prevent legitimate lenders from checking your credit too, you’ll need to unfreeze your credit file before you apply for a credit card, mortgage or any other loan.

The punishment for credit card fraud varies depending on the jurisdiction and severity of the crime. In the United States, credit card fraud is typically charged as a felony offense, which can result in imprisonment, fines, probation and restitution. The penalties may also vary depending on the amount of money involved, the number of victims and whether the fraud involved offenses against senior citizens, identity theft or other aggravating factors.

In addition to criminal penalties, individuals convicted of credit card fraud may also face civil penalties, including lawsuits from victims seeking compensation for their losses. It’s important to note that credit card fraud is a serious crime and can have long-lasting consequences, including damage to credit scores and difficulty obtaining credit in the future.