Credit card fraud is a serious threat to individuals and businesses alike.
Despite measures such as mobile wallets, chip cards and near field communication technology, consumers are still at risk of fraudulent use of their credit card accounts.
Below, we’ll explain what credit card fraud is, what steps you can take to protect your card, and what to do if the worst happens and your card is stolen.
What is credit fraud?
Credit card fraud is the result of someone Making unauthorized purchases on your credit or debit card account. It could be someone you know who takes your card and makes purchases you didn’t give them permission for, or a stranger who gets access to your credit card number or physical card.
Credit fraud can also occur through digital payment methods such as automated clearing houses, electronic fund transfers or mobile wallets — although Google Pay and Apple Pay are currently the most secure forms of payment available.
American Express A survey was conducted recently About how US Millennials and Generation Z are thinking about fraud. Both age groups – 69% of them – are worried about fraudulent charges on their bank accounts, even more so if someone hacks their social media profile.
No matter what age group you belong to, it is possible to protect your credit cards and related accounts if you know what to look out for and what to do if one of your cards is compromised.
How does credit fraud happen?
It helps to understand some common examples of credit fraud. This includes:
- If the e-commerce site where you shop is hacked, your credit card number can be stolen
- Someone can rifle through your trash to find the account number
- If you log in through an unsecured Wi-Fi network, someone can hack your account
- If you use the magnetic stripe on your credit card for transactions, thieves can use skimmers attached to point-of-sale payment terminals to access your credit card information.
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How can I recognize credit fraud?
Banks have taken specific steps to identify – and prevent – credit card fraud. Your bank or credit card provider may call you if they detect unusual activity on your account.
For example, suppose you live in New York and have not informed your bank that you are going on vacation. If the bank detects card activity South Carolina, they may hold your card or contact you by phone, email, or text message to make sure the purchase is authorized.
Your bank or related financial institution may also get in touch if it detects unusually large purchases or multiple purchases that don’t match your normal spending habits.
Additionally, you can set alerts for purchases over a certain amount. But be aware that thieves often process small payments first to see if they can get away with it. You can also set up your account to receive notifications of any purchase, regardless of amount.
Finally, reviewing your credit card statement or going online to check activity can help you stay on top of detecting credit fraud in time.
Related: Credit Card Fraud: How to Spot and Report It
How can I prevent credit card fraud?
The first step to preventing credit card fraud is to recognize that it can happen to anyone, no matter how savvy they are. In fact, if you made a purchase through a secure, reputable e-commerce site a thief could gain access to your card information that was later involved in a major data breach.
It happens. But there are steps you can take to protect yourself:
- Pay with an EMV (tap-to-pay card developed by Europay, Mastercard and Visa) chip cards, NFC “contactless” payments or mobile wallets whenever possible.
- If possible, avoid paying by card at businesses that only have a magnetic stripe payment system.
- Shred all credit card statements before throwing them away.
- When using a secure wireless network Making online purchases or accessing your financial accounts.
- Set up alerts so you’ll know immediately if your card has been used fraudulently.
- Do not share your card information with anyone.
- Protect your smartphone and tablet with a password.
- Monitor your credit card and other financial accounts frequently.
“Elevate your mobile security: Help avoid account takeovers by using strong and unique passwords for each of your online accounts and change them regularly,” said Rajat Jain, senior vice president of risk and information management, fraud and banking risk at Amex. “Wherever possible, download apps and enable two-factor authentication for your online accounts, which add an extra layer of security by requiring a code, fingerprint or device to verify your identity. Also, beware of phishing emails or messages, and Do not click on any links, open any attachments or provide account or personal information to parties about which you are unsure.”
What is the difference between credit fraud and identity theft?
In the case of identity theft, the criminal or hacker gets access to your financial information not only to use your credit cards or accounts but also to open new accounts in your name.
Once thieves have your Social Security number and address, they can take out loans in your name, apply for mortgages, and even get insurance — such as medical coverage or auto insurance — in your name. When this type of crime is committed, it is called “real name fraud”.
Solving an identity theft case involves tracking down all the instances the thief used your information, proving you didn’t open fraudulent accounts, and closing them down. Recovering from identity theft can take years.
Related: Credit Card Fraud Vs. Identity Theft — How to Know the Difference
What should I do if I am a victim of credit fraud?
Fortunately, recovering from credit card fraud is much easier than solving an identity theft case.
If you discover that you have been a victim of credit fraud, the first step is to contact your bank and report the fraudulent charges. Review your statements to make sure you’re reporting all fraudulent charges and make sure you can account for every purchase you’ve made with the card in the past two months.
By federal law, you are not liable for fraudulent credit card charges over $50 as long as you report them within 60 days. Visa, MasterCard, American Express and Discover have zero-liability fraud policies. If you report fraudulent charges quickly, you won’t have to pay for any of them.
Similarly, the Electronic Funds Transfer Act limits your liability for debit card fraud to $50 if you report the charge within two business days or less of $500. Your credit card issuer may recommend that you file a police report for fraudulent activity.
If a thief steals credit card information from your account, there’s a chance they’ll gain access to another account as well. So, also check all your accounts for fraudulent activity.
Finally, change your passwords on any financial accounts and e-commerce sites like Amazon, where you may store your credit card information.
The bottom line
Once you have taken immediate action to prevent additional fraudulent activity, request your copies Credit reports from all three credit bureaus to ensure fraud does not extend beyond credit fraud to identity theft.
As security measures increase with the advent of mobile payments, EMV chip cards and contactless payment systems, thieves are also getting more creative.
Monitoring your accounts and acting quickly if you notice unusual activity is the best way to save yourself the stress and hassle of dealing with credit fraud.
RELATED: So You’ve Been a Scam Victim: 5 Steps to Take When Your Personal Information Is Compromised