Published in: Credit Cards | Nov. 29, 2019

How Credit Card Fraud Is Changing -- and How to Protect Yourself

By:  Lyle Daly

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Credit card fraud is always evolving.

Credit card fraud is becoming more and more common, with the number of fraud reports almost tripling from 2014 to 2018. As a consumer, it's always frustrating to be a victim of fraud. It can cost you money, time, and could even affect your credit score until you're able to resolve what happened with the credit bureaus.

It makes sense to try to avoid being a victim of credit card fraud in the first place. To protect yourself, you need to know what types of credit card fraud happen most often, and that's something that has changed dramatically in recent years.

A man on the phone with a laptop and documents in front of him.

Image source: Getty Images

EMV chip cards have reduced counterfeiting

The United States' move to EMV chip technology has had the biggest impact on credit card fraud. Although this has been a gradual process, the most noteworthy date was October 1, 2015, which is when merchants not using chip card readers and banks not issuing chip cards officially became liable for in-store counterfeit credit card fraud.

It's much harder to steal the information from chip credit cards or to clone them. Because this type of card is now the norm, we've seen a significant drop in card-present fraud, which is when a counterfeit card is used for in-store transactions.

This type of fraud affected 2.4% of consumers in 2016, but that number fell to 2.1% in 2017 and just 1.4% in 2018.

Card-not-present (CNP) fraud, on the other hand, became more common during the transition to chip cards. CNP fraud is when the card's information is used without the physical card, such as transactions made online or over the phone. This type of fraud affected 2% of consumers in 2014, but that rose to 3.8% by 2017. It did, however, dip back down to 3.1% in 2018.

How to prevent CNP fraud

The most effective way to prevent CNP fraud is to be vigilant with your credit card information, especially online. Here are a few tips for keeping your card information safe:

  • Only make purchases online from trustworthy retailers.
  • Never enter your credit card information if you're on a public Wi-Fi network.
  • Don't provide your card information to anyone who calls you over the phone. If a caller claims they're with your credit card company, call the number on the back of your card to ensure it's not a scam.

In addition, monitor your credit card transactions and make sure you've provided your contact information to receive either text messages or email alerts. These can be instrumental in spotting fraudulent transactions on your account right away.

Fortunately, just about every credit card has a zero-liability fraud policy nowadays, so if you do notice any fraudulent charges, you can dispute them and have them removed.

New account fraud is on the rise

There was a decrease in the percentage of consumers affected by both card-present fraud and CNP fraud from 2017 to 2018. Despite this, credit card fraud reports increased overall. How did this happen?

What many don't realize is that the most common type of credit card fraud is new account fraud, which doesn't involve using a consumer's existing account. This is when criminals use a consumer's information to open a new credit card.

New account fraud went from 105,209 reports in 2017 to 130,928 in 2018 -- an increase of 24%. Existing account fraud happens far less often, as it went from 34,260 reports in 2017 to 32,329 in 2018 for a decrease of 6%.

Of the different types of credit card fraud, new account fraud isn't just more prevalent, it's also more of a hassle. If you don't know about a fraudulent credit card account that was opened in your name, a criminal could max out the card and never make a payment, damaging both your credit utilization and your payment history.

How to avoid new account fraud

You have multiple options to protect yourself from new account fraud:

  • Credit monitoring -- These services can notify you every time a new account is opened in your name, allowing you to immediately check that you authorized it. You don't need to pay for credit monitoring, either, because there are free services available. Complimentary credit monitoring may also be a benefit of one of your current credit card accounts.
  • Fraud alerts -- You can set up a fraud alert with each of the three credit bureaus, and they'll then be required to take reasonable steps to contact you anytime there's an attempt to open a credit account in your name or change something on one of your existing accounts.
  • Credit freeze -- When you freeze your credit report, third parties can't access it. Because lenders and banks can't check your credit, they can't open new accounts in your name. To open any new accounts, you would need to remove the freeze or temporarily lift it.

As you can see, these more secure options also make it more inconvenient to open a new account. Credit monitoring is a good starting point for most consumers, but you may want to set up fraud alerts or a credit freeze if you've been a victim of identity theft in the past.

Staying safe from credit card fraud

It may seem like there's always some new type of credit card fraud you need to worry about. However, if you take advantage of the tools available to protect yourself and you're careful with your credit card information, you have a much better chance of avoiding fraud.

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