If a thief uses your credit card to make purchases or get cash advances, you are a victim of credit card fraud. According to the Federal Trade Commission, U.S. consumers reported 389,737 cases of credit card fraud in 2021, with losses totaling $181 million.
The best way to deal with credit card fraud is to stop it from happening in the first place. In many cases, you can. If you are a victim, it’s important to take swift action to avoid credit damage and being stuck with somebody else’s charges.
Types of Credit Card Fraud
There are multiple ways someone can commit credit card fraud. A thief could, for example:
- Use your physical card. If your credit card is lost or stolen, the thief can make transactions with it online, over the phone and in stores.
- Commit card-not-present fraud. Identity thieves may use your credit card account information but not your actual card to make online or phone purchases. To access your account information, they may purchase your card’s details on the dark web or execute a phishing scam.
- Clone your credit card. With a skimmer attached to a card reader, a thief can steal your credit card data and then make a counterfeit card from it. Once done, the thief will have a clone of your card and can use it as you would.
A thief could also use your personal information to open a credit card account in your name and rack up charges. With new account fraud, “thieves literally take over your identity,” says Eva Velasquez, president and CEO of the Identity Theft Resource Center, a national nonprofit organization that provides identity crime advice and victim assistance.
Because the card is associated with your personal identity, the issuer will furnish the credit bureaus with information, including evidence of any late payments, which can impact your history and scores.
How to Detect Credit Card Fraud
Credit card issuers have fraud detection services that can flag suspicious activity, such as when your card is being used in a country in which you’ve never made transactions. As a result, your credit card issuer could spot fraud before you notice it.
If your credit card issuer discovers something suspicious, it may notify you and request verification of the charge. If you explain that you did not make the transaction, it won’t go through.
As a cardholder, you can detect credit card fraud by monitoring your accounts in real time with your credit card issuer’s mobile app and by logging onto your account on a regular basis. This way you can scan the transactions as they occur, without having to wait for the issuer to send a statement at the end of the month.
Another good idea is to enroll in your credit card issuer’s alert system.
“Log into your credit card account, find where it says security alerts and notifications,” says Robert Siciliano, security awareness expert and author of “Identity Theft Privacy.” “There should be a setting to request that an alert is sent to your email or phone when the charges are above a certain amount, for card-not-present charges, online transactions, international charges. I recommend you check all the boxes.”
You may not detect small fraudulent charges on a statement, but you can’t avoid them with an alert. “It happened to me,” Siciliano says. “I was getting $20 charges from Whole Foods, when my wife and I weren’t not there. If I didn’t get the alert, I might not have noticed them on the statements because we shop at that store.”
Having a low available credit limit is another sign that you’ve been a victim of credit card fraud, according to Velasquez. If you or the credit card issuer did not pick up on the fraud, you may find that you can’t make a charge because someone has already gone shopping with your card.
You can also use a credit monitoring service for fraud detection. While they are fee-based, Velasquez says they can save you time and reduce risk.
Detecting credit card fraud for account takeovers is relatively simple compared with new account fraud, Velasquez says. If you receive collection notices for unfamiliar accounts or see a reduction in your credit score that isn’t related to existing accounts, you may be a victim of new account fraud.
Protect Yourself From Credit Card Fraud
So how can you protect yourself from becoming a victim of credit card fraud in the first place? Useful strategies include the following:
- Only shop on secure websites. Secure sites will show a padlock on the left side of the address bar in your browser, and the web address will start with HTTPS.
- Watch out for phishing scams. You may receive a call, email, text or letter falsely claiming to be from a government agency or financial institution asking for financial information. Don’t be fooled, and watch for typos and misspellings.
- Look for skimmers. Whether you’re at the gas station or the ATM, take a moment to check for tampering.
- Don’t share financial information on social media. Some thieves go through potential victims’ social media accounts looking for clues about your financial data.
- Conceal your card number. With Apple Pay, Samsung Pay and other mobile payment apps, you can pay without revealing your credit card account number. Similarly, if your credit card issuer offers the ability to use a virtual account number that changes after every transaction, use it.
- Opt out of saving credit card information online. Instead, type in your card account number when you make a purchase.
- Avoid using public Wi-Fi for financial transactions. If you submit account information while connected to public Wi-Fi, you can expose yourself to hackers.
- Freeze your account if you lose your card. Some cards allow you to freeze the card if you have lost it. This prevents you from having to cancel the card, but won’t permit any new transactions as you’re looking for it. When you find the card you can “thaw” it and use it again.
- Review your credit reports. Check your credit reports to make sure there aren’t any mysterious accounts listed in your name. You can get your credit reports from the three major credit bureaus as often as once a week through the end of 2023, though how often you should check depends on your situation.
What to Do If You Are Already a Credit Card Fraud Victim
If someone is using an account with your name on it without your authorization, you should:
- Contact the credit card issuer. Find the phone number on the back of the card (or go to the card issuer’s website if you are not in possession of the card) and let it know about the fraudulent charges. Ask to have the account suspended or closed.
- Change passwords or PINs. This is a good time to update those words and numbers, as needed.
- Add fraud alerts to your credit reports. Contact Equifax, Experian or TransUnion and ask for a free fraud alert. You should only need to request an initial fraud alert with one bureau, and the others will be notified automatically. It will remain for one year. If you want a fraud alert to stay on your credit report for seven years, a police report or FTC report will be necessary.
- Notify the authorities. Complete an identity theft report with the FTC. You may also want to file a report with your local police. If you do, bring the completed FTC Identity Theft Report and keep a copy for your records.
Under federal law, you have limited liability if your credit cards are lost or stolen, but you have to act. If you report your card as lost before someone uses it, or your account number is used without your card being lost or stolen, you aren’t responsible for any unauthorized charges, according to the FTC. If you report your card as lost after someone uses it, you may be responsible for up to $50.
“Be aware that when you report the fraud, the issuer will usually cancel the card before sending you another with new account numbers,” Velasquez says. If you have automatic payments, those charges will usually still go through, she says. Call them to check, though, so you don’t fall behind.
While credit card fraud is pervasive, most is fairly simple to resolve, says Velasquez. “When someone uses your card without your permission, generally it involves a single call to the financial institution and some kind of evidence that you did not make the charge,” she says. “But when someone opens an account in your name, it takes more steps to resolve the problem.”