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Credit Card Fraud and Scams: How to Avoid Both

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Credit cards are convenient ways to make purchases, but they're not perfect. Credit card scams are everywhere, and credit card fraud is a growing problem. Read on for answers to common questions about spotting and reporting credit card fraud.

What is credit card fraud?

Credit card fraud is when someone uses your credit cards without your permission. They might use it to make purchases or withdraw funds. Credit card fraud can happen when someone steals your physical credit card. It can also happen if your credit card data is stolen and used online.

Another form of credit card fraud involves identity theft. This can occur when someone uses your personal information to open a credit card in your name. For example, a thief could use your Social Security number to apply for a credit card without your knowledge. More than 270,000 cases of credit card fraud occurred in 2019 alone.

What is a credit card scam?

A credit card scam is a lie or trick used to get your credit card information. It can be as simple as a phone call from someone pretending to be your card issuer. There are also more complex scams that involve fake web pages designed to look like your issuer's login page.

Credit card scams are extremely common. They can happen in person, by phone, through an email, or even via social media.

How do credit card companies spot fraud?

Credit card companies have developed extremely sophisticated tools for detecting fraud. They monitor every transaction on every card. Then, credit card issuers use complicated computer algorithms to look for unusual transactions. For example, if you rarely leave your city and your card is used in another state, your card issuer might flag your card for possible fraud.

Depending on the company, flagged transactions can have a variety of results. Some issuers will send text messages or automated phone calls. This allows you to confirm whether it's you making the purchase -- or not.

In some cases, the purchase might be denied, especially if the credit card company is unable to contact you. This could happen if your card account is used in another country, for instance. The transaction might also be denied if you try to make a purchase with a website known for fraudulent activity.

How to spot credit card fraud

Although cardholders don't have the fancy algorithms that card companies use, you can still spot fraud. The simplest way to catch credit card fraud is to keep a vigilant eye on your accounts.

Check your transactions at least once a month. If you spot a purchase you didn't make, dispute the charge right away. Of course, you should also report a lost or stolen card as soon as possible.

Don't forget to regularly check your credit report for signs of credit card fraud. You are entitled to a free report from each of the three credit bureaus every year. Immediately report any accounts you didn't open yourself.

How does fraud happen on credit cards?

Fraud can occur when thieves get either your credit card data or your physical credit card. For example, credit card fraud happens when criminals acquire your credit card information or your account login information.

Common ways fraudsters get your credit card information include theft and scams. For example, a thief may steal your mail or get old documents from your trash. Your physical credit card can be stolen. Your card can also be copied via a skimmer or scanner. Thankfully, chip credit cards have reduced the amount of fraud from copied credit cards.

Phone scams are also common. Fraudsters may pretend to be a bank or government agent and demand your account data. Other scams can include complex fronts like fake charities or counterfeit businesses.

Another common type of credit card fraud happens when your identity is stolen. Identity thieves can use your personal information to open credit cards in your name. They can then rack up debt on the cards and disappear.

How do I report credit card fraud?

The process for reporting credit card fraud depends on the type of fraud. If you spot fraudulent purchases on your card, you can report them to your issuer. You can easily report credit card fraud to your card issuer through its website or mobile app. Of course, you can also call the number on the back of your card.

If the credit card fraud involves unauthorized accounts opened in your name, there are two steps you need to take. First, contact the card issuer and alert them to the fraudulent account. You can usually do this online or by phone.

Next, contact the credit bureaus and report the credit card fraud by disputing the account. You'll need to file an account dispute with each credit bureau -- Equifax, Experian, and TransUnion. Identity theft should also be reported to appropriate legal authorities, including the Federal Trade Commission (FTC). Check identitytheft.gov for help reporting identity theft.

What to do if you're the victim of credit card fraud

The exact steps to take if you're a credit card fraud victim can vary.

If your card is stolen and used fraudulently, report the theft to your issuer. You should also freeze your credit. Make sure you dispute unauthorized transactions, too. Your issuer will send you a replacement card, likely with a new number.

Even if it's just your credit card data that was stolen (not the physical card), immediately dispute any transactions on your card you did not make. Consider freezing the credit card until the issue is resolved. Your issuer may decide to replace your card and give you a new number.

If a thief has obtained your login credentials, report the fraud to the card issuer right away. You should also change your account password and username. Be sure to change your credentials for any other accounts that use the same username or password.

In all these cases, remember that your liability for fraudulent credit card purchases is limited. Many card issuers have $0 liability policies in place.

If a credit card is opened in your name without permission, it gets more complicated. This means you are the victim of full-scale identity theft. You'll need to report the credit card fraud to the card issuer. You should also file a dispute with each of the three credit bureaus.

Lastly, report the identity theft to any required authorities. This can include filing a police report and contacting the FTC or the Social Security Administration. If you're not sure where to start, try identitytheft.gov for more information.

Although your liability is limited, identity theft can be hard to prove. Unfortunately, your credit score may suffer in the process. You may need to take steps to increase your credit score while you work to resolve your identity theft. It can be frustrating to have your credit damaged through no fault of your own, but there are steps you can take. Credit cards for bad credit can be useful if you have trouble getting approved for a new card after identity theft. Check out our guide for more on how to rebuild your credit.

Common credit card scams

There are as many different credit card scams as there are scammers (if not more). But most common scams fit into a few main categories:

  • Phishing: These are email scams that include links to fake login pages. The email will claim there's an issue with your account or pretend to be a fraud alert. When you use the email link, you are taken to a counterfeit website that may look very real. When you use your login credentials on the fake site, the fraudster gets access. Never log into your credit card account through an email link. Instead, go directly to the issuer's website through your address bar or search engine.
  • Impersonation: These scams often occur by phone but may also be by email. Fraudsters pretend to be your bank, a government agency, or even law enforcement. They may use fear or threats to coerce you into giving up your information. Remember that no legitimate agency or bank will ask for your credit card login credentials by phone or email.
  • Fake organization: Some scammers will pretend to be part of a charity or popular organization. They may ask for donations or try to sell you something that doesn't exist. When you give them your credit card information, they can use it to make fraudulent purchases. Avoid giving out your card data by phone or email.
  • Get rich quick: This common type of scam will offer quick cash or free credit card rewards -- they just need your personal and/or card information. Always be wary of anyone who asks for your Social Security number or other personal info. If it seems too good to be true, it probably is.

Of course, these are just a few of the most common types of credit card scams. Always use caution before giving out your personal or credit card information.

How to report credit card scams

Credit card scams and card fraud are crimes. If you fall victim to a credit card scam, you can report it to your local government -- specifically, your state consumer protection office. You can also report scams to the FTC at the federal level. This is particularly important if the scammer is impersonating a government entity.

If you lost money or possessions to a credit card scam, you can also file a police report. Contact your local police department to file a report.

What to do if you're the victim of a credit card scam

As soon as you know you've been scammed, report it. Dispute any fraudulent credit card transactions with your issuer. You can do this online or by phone. Next, report the scam to the local government authorities. You may also want to file a police report with your local law enforcement. Watch your credit reports and pay attention to activity on all your accounts to catch any additional fraud. You might also consider setting up a fraud alert or credit freeze.

Still have questions?

Here are some other questions we've answered:

FAQs

  • Credit card fraud is the unauthorized use of your credit cards to make purchases or withdraw funds. Card fraud can involve your physical card or your digital card data. An identity thief could also use your personal information to open a credit card in your name. Credit card fraud statistics typically also include debit card fraud. Like credit card fraud, debit card fraud can use a physical card or digital information.

  • Credit card issuers have made it easy to quickly report card fraud online or in their apps. If you see a transaction you did not authorize, simply file a dispute. This usually can be done by opening the transaction and clicking a "Dispute" link. The issuer will investigate the fraud and may send you a new card. In most cases, the issuer will cancel and/or refund the fraudulent transaction.

  • Be suspicious of any emails or phone calls requesting your card information. This is especially true of requests for login credentials. Your issuer will never request your login information in an email or phone call. Also, avoid using links from emails to log into your credit card account. Instead, go directly to the issuer's website and log in from there. Only give your credit card number to businesses or websites you trust. Check your receipts and transactions regularly for any signs of trouble.

  • If the scam involved your login credentials, immediately change your passwords. You may also want to request a new username and consider freezing your card accounts. Next, report any fraud to your card issuer. Dispute any transactions made without your permission. This can be done by phone, online, or through the issuer's mobile app. Additionally, report the crime to the appropriate authorities. The FTC's identitytheft.gov website can help you figure out who to notify.

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