A Guide to Credit Card Fraud & 4 Tips to Avoid Scams

Credit card fraud is the unauthorized use of a credit card, which is often a result of identity theft or a data breach from an unsecured website. Every year, people across the world fall victim to credit card fraud and theft. In fact, credit card fraud has become so prevalent that the FBI has a dedicated credit card fraud page on its website.

In this article, we’ll take a closer look at credit card fraud, including how it happens and what you can do to prevent it. We’ll even teach you how to report credit card fraud if it happens to you. If you want to avoid credit card scams and fraud, here’s everything you need to know.

• What Is Credit Card Fraud?
• How Does Credit Fraud Happen?
• How to Report Credit Card Fraud
• How to Prevent Credit Card Fraud

What Is Credit Card Fraud?

Credit card fraud is the practice of stealing credit card information and using it to make unauthorized purchases. In some cases, credit card fraud happens when a physical credit or debit card is stolen, but it can also occur as a result of stolen information online. If you use your credit card to make a purchase on an unsecured website, for example, somebody may be able to steal your card information.

Keeping an eye on your credit cards is an important part of preventing fraud. By looking at credit card statements and your credit report regularly, you can spot fraud as soon as it happens and alert your bank to put a stop to it.

How Serious Is Credit Card Fraud?

Unfortunately, credit card fraud is far from uncommon, but how serious is it? Credit card fraud is a serious criminal offense in some cases, but it’s not typically a huge deal for the cardholder. 

If your credit card is used to make unauthorized purchases, you can report fraudulent purchases to your bank and have them removed from your account. Because credit card fraud is somewhat common, cardholders aren’t typically held responsible for these purchases. You can even have fraudulent activity removed from your credit report to minimize the effect it has on your credit history.

What Happens If My Credit Card Is Used Fraudulently?

Spotting a fraudulent purchase on your credit card statement can be a scary experience, but there are steps you can take to minimize the impact of credit card fraud and get back on track. The first thing you should do is contact your bank and let them know your card was used to make fraudulent purchases. If these purchases affected your credit report, you should also contact one of the national credit reporting bureaus and have them place a fraud alert on your account. Maintaining a good credit score is difficult if you’re being dinged for fraudulent purchases.

How Does Credit Fraud Happen?

In order to understand how credit card fraud happens, you need to understand how credit cards work. Making a purchase with a credit card requires certain information from that card, including the card number, expiration date, and security code. 

When you use this information to make a credit card purchase online, that information has to be transferred from one server to another. This isn’t a problem if the transfer of information is secure, but unsecured websites may allow thieves to steal credit card information. 

Credit card fraud can also happen as a result of a data breach that makes customers’ sensitive information available to the public. This isn’t as common as identity theft, but it does happen from time to time. In some examples of credit card fraud, a physical card is stolen rather than credit card information. If someone has your credit card, they can make purchases at any store that doesn’t ask for a PIN.

How to Report Credit Card Fraud

If you’ve recently been a victim of credit card fraud, taking the right steps to remedy the situation is important. Credit fraud isn’t typically a huge deal as long as you report it in a timely manner and work with your bank and credit reporting agencies to get things sorted out.

The first thing you should do is contact your bank to have your card deactivated and fraudulent purchases reversed. Your bank will conduct an investigation to make sure you’re not claiming fraud on purchases you’ve made, but most people are able to get their money back with relative ease.

If your credit score was affected by credit card fraud, you’ll also need to reach out to a national credit reporting agency to have them place a fraud alert on your account. Maintaining a perfect credit score, or even a good credit score, is hard work. Credit card fraud can be a serious setback when it comes to your credit score, so reporting fraud to credit reporting agencies can be an important step.

It’s important to note that cardholders aren’t typically held responsible for credit card fraud. While you may temporarily lose access to a line of credit or a portion of your available credit, fraudulent purchases are generally reversed.

How to Prevent Credit Card Fraud

If you recently got your first credit card, it’s important to understand the basics of credit card fraud and how to prevent it. While data breaches and identity theft happen, you can prevent most credit card fraud by keeping an eye on your statements and using your credit card safely. Here are some tips to help you out.

Keep an Eye on Credit Card Activity

First and foremost, make sure you’re keeping an eye on your credit card statements for any unusual activity. Briefly reviewing your credit card statements can also help you understand what you’re spending money on and where you might need to cut back. More importantly, this helps you spot fraud as early as possible.

As soon as you notice a fraudulent purchase on your account, you can deactivate your credit card if your bank allows it. Call your bank to report any fraudulent purchases, then check your credit report (if you can) to see if there are any changes to your credit score.

The earlier you spot and report credit card fraud, the sooner you can get things sorted out and return to business as usual.

Make Sure Your Information Is Stored Safely

Preventing credit card fraud means protecting your credit card, so make sure your information is stored somewhere safe if you do store it. Consider keeping a secure notebook with sensitive information such as passwords and credit card information if you want to keep it on hand.

It’s also important to keep your credit card in a safe place. Try to keep your credit card in your wallet or purse when you’re not using it. Once you’re done shopping, you can put your credit card back where it belongs to make sure it’s safe.

You might want to avoid storing credit card information digitally. Any information that’s stored digitally can potentially be accessed by somebody else, so avoiding digitally storing credit card information can help prevent fraud.

Avoid Using Sites That Aren’t Secure

When it comes to processing credit card information, not all websites are built equal. If you want to protect your credit card information, try to avoid using websites that aren’t secure. You can start by looking for a padlock to the left of the URL of the website you’re viewing. Clicking this padlock will show you a website’s security information, including its certificate.

You might consider sticking to websites that use secure third-party payment processing tools, such as PayPal, Stripe, or Square. With these services, you don’t have to rely on each individual website to develop its own security measures.

One of the simplest ways to avoid credit card fraud is to shop with the biggest retailers. Amazon, Walmart, and other major retailers go to great lengths to offer stellar security, so the big names are typically safe.

Verify Who You’re Giving Credit Card Info To

Before you enter your credit card info online or give it to somebody over the phone, verify who you’re giving your info to. Phishing scams have become increasingly popular, where emails that appear to be legit include a link to a fake version of a popular website that steals your card or account information.

Whether you’re making a purchase online or paying bills over the phone, take an extra moment to verify before you give anybody your credit card information. At worst, you’ve wasted a minute or two of your time.

If you’re considering making a purchase with a retailer you’re not familiar with, research them before making a purchase. If a website is known for a lack of security or credit card scams, chances are there are other consumers talking about it.

Sources: FBI