Credit card fraud can cost you a lot of money. In 2023, Experian found that nearly 60% of credit card users faced credit card fraud. The Nilson Report noted that global losses from card fraud reached $33 billion in 2022, out of which $13 billion occcurred in the US. They predict that card fraud will cause $400 billion in losses in the next decade.
That's why learning about credit card fraud prevention and what to do if you become a victim is crucial. So what is credit card fraud?
People commit credit card fraud when they use card information without permission. Cybercriminals do this to steal money from your account or purchase stuff for themselves.
Credit card fraud can happen in different ways. Attackers could steal your card, use keyloggers to obtain credit card data or get your details from stolen data. In sneakier cases, they might copy your card details at a store or fool you into sharing your card info.
In this article, you will learn:
The different ways credit card fraud happens
How credit card fraud impacts people
How to keep yourself safe from credit card fraud
What to do if you're a victim of fraud
And more…
Let’s get started.
How does credit card fraud happen?
Credit card fraud can occur in many different ways, but here are some of the most common ones:
Physical Theft: Scammers might steal your credit card or seize your mail to get new cards or credit card data.
Malware: If harmful software (such as keyloggers, spyware, trojan horses, or ransomware) infects your computer or smartphone, the scammer can observe your keystrokes to obtain your login credentials and steal your credit card data.
Data Breaches: This occurs when an unauthorized person gets into a company's database and gets hold of customer data, which could include credit card details. They can then use this information to carry out transactions.
Skimming: This physical method involves the scammer using a tiny device to scan and save your credit card data when paying at eateries or fuel stations.
Email Scams: This phishing technique involves sending emails pretending to be from trustworthy companies to trick you into exposing your credit card details. For instance, the email may ask you to refresh your credit card information through a link that leads to a scam website.
Card Not Present Fraud: Often shortened to CNP fraud, this type of credit or debit card scam happens when the card isn't physically shown to the merchant. This fraud typically occurs in phone, online, or mail transactions.
Stolen Identity: This occurs when the scammer uses your personal information (like your Social Security number, name, and address) to open new credit cards in your name without your knowledge.
By understanding these techniques, you can actively work to safeguard your credit card details.
Credit card fraud phases
Credit card fraud usually goes through some stages. Here's a quick breakdown:
Stealing Your Info: The first thing a scammer does is get your credit card details. As explained above, there are several ways to do this. They might steal your card, copy it at a sketchy card reader, find your details online, or trick you into giving them your info.
Profiting: Once they have your card information, the scammer starts using it. They might buy things online or by phone, make fake cards with your details, or even sell your info on the dark web. Also, they might sell items they bought with your card, get cash from ATMs using your card, or move money from your account to theirs.
Covering Their Tracks: During the credit card fraud process, the scammer tries to hide what they've done. They might use fake names, connect to free Wi-Fi or VPNs to hide their online activity, move money fast between different accounts, or use other sneaky ways to stay hidden.
These stages can help you see how digital fraudsters operate.
How credit card fraud affects you
Credit card fraud can create several issues:
Financial Loss: If your credit card or debit card agreement does not include a zero-liability policy, you could be held liable for any fraudulent charges made using your card, even if the card was stolen. The good news is that most banks provide a zero-liability policy for credit card holders.
Damage to Credit Score: If your card is misused or bills are unpaid, it can damage your credit score. A low score can make getting loans or buying a house harder later. It takes a while to improve a poor credit score.
Stolen Identity: Credit card fraud is sometimes a part of identity theft. That's when someone uses your details, like your name and address, to open new cards or loans in your name. This can cause even more issues and might lead to legal trouble.
Legal Issues: You could face legal issues if your card is used for unlawful things. Even if you're the victim, proving your innocence can take a long time.
Stress and Time: Fixing credit card fraud takes a lot of time. You must discuss this with your bank, report it to the police, and monitor your card statements. It's stressful and eats up a lot of your time.
To avoid these issues, it's vital to stay alert. Monitor your account activity, set up transaction notifications, and be mindful about where and when you use your card. We'll talk more about how to prevent credit card fraud in the next section.
Credit card fraud can cause major problems, such as loss of money and identity theft.
How to protect yourself from credit card fraud
Protecting yourself from credit card fraud involves several strategies:
Protect your physical credit cards:
Always keep your credit cards somewhere hard for others to reach. For example, use a small wallet that's tough for thieves to grab.
Regularly check to ensure your credit card is still in your wallet, even if you last used it a while ago.
When you get a new credit card, check that the package hasn't been tampered with. Sign the back of the card as soon as you get it.
After buying something, put your card away immediately. Thieves can use their phones to take pictures of your card and steal its details.
Use RFID-blocking wallets. Cards that you don't need to swipe, known as contactless cards, have an RFID chip in them. This chip can make using the card easier but can also be scanned by thieves nearby. An RFID-blocking wallet can help prevent this kind of theft and keep your card safe.
Don’t let other people use your card. Allowing a friend or family member to use your card may seem friendly but could cause problems. If you want to help them, giving them cash, sending them money, or buying the item is better. This keeps your card details safe, you control your money, and you still get to help them.
Keep card info private. Always be mindful of who sees your credit card info. This includes your card number, expiration date, and CVV code on the back.
Don’t share your PIN code with anyone. This may seem obvious, but protecting your pin is critical to protecting your credit card health.
Use a strong PIN. Make sure your banking PIN isn't the same as other codes you use, like your phone's unlock code. Also, avoid using:
Review your card statements. Always check your credit card statements. Be on the lookout for any unfamiliar fees. Tell your bank immediately if you discover anything suspicious.
Report missing cards fast. If your card gets lost or stolen, contact your bank immediately. They can stop anyone else from using it.
Use card alerts. Many banks can send you alerts if they spot strange activity on your account. This helps you catch fraud quickly. It's an excellent way to stop theft before it gets out of hand.
Keep an eye on your credit. Make a habit of checking your credit report often. It can help you notice any odd changes or accounts you didn't open. Did you know? U.S. laws give you a free credit report once a year from each of the three main credit agencies: Experian, TransUnion, and Equifax.
Destroy sensitive documents. Before tossing out documents with private info, like credit card statements or old cards, shred them. This helps keep sneaky people from collecting your personal information from your trash.
Stay alert with ATMs and card skimming. People who want to steal your info might put skimming tools on ATMs. Skimming is when someone takes your credit card data while you're making a real purchase at a place like a store or gas station. They use this data to make a fake card. Here's how you can avoid skimming:
When you give your card to a restaurant or gas station worker, ensure you can see it.
Try to use ATMs that are inside banks. These are safer because they're less likely to have skimming tools on them.
Opt for credit cards over debit cards. Credit cards usually offer better security against fraud. If someone steals your debit card info, they might empty your bank account. So, it's safer to use a credit card, particularly when shopping online.
Only have a few cards. The more cards you have, the more challenging it is to monitor them all. Having fewer active cards means less chance for fraud.
Try using virtual credit cards. These are single-use credit card numbers you can use for online shopping. This way, your real credit card number stays safe from possible theft. Check your banking app for more information.
Safely get rid of old cards. Don't just throw away your old card when you get a new one. Cut it up or shred it so no one can read the numbers.
Don't store card info online. It might be handy to save your card details on websites for easy buying, but it's safer to type it in every time. This is especially true for sites you use sparingly.
Use separate cards for autopay and daily use. Have one card for auto-paying online subscriptions, phone bills, or electricity bills. Use a different card for things like eating out or shopping. This won't stop fraud but can prevent late fees if your card gets stolen and you must wait for a new one.
Use mobile wallets for payments. Paying with mobile wallet apps at stores is safer because your phone usually needs your fingerprint, a swipe, or a password before making payments, so no one else can use it. Also, wallets use tokenization. This technology changes your real credit card details into a unique code called a "token." This token is made randomly and doesn't have any real value. So, if someone steals it, they can't use it for anything.
Set a spending cap. Credit card companies let you set limits for ATM withdrawals, in-store purchases, online shopping, and contactless payments. Usually, they put this limit to the maximum you can spend with your card. Lowering these limits to what you typically spend each day is a good idea. You can do this anytime using the mobile app.
Watch out for phishing scams. These scams usually come as emails that seem to be from your bank. They trick you into giving them your card details. If you get an email like this, don't click any links. Instead, type the company's real website into your browser.
Be wary of phone calls. Be careful if a call catches you off guard asking for your card info. Actual companies won't usually ask for these details over the phone. If you're not sure, hang up and call the company back on their official number.
Regularly check your mail. If you're getting paper statements or new cards in the mail, pick them up quickly. If your mailbox is overflowing, it might tempt thieves.
Use antivirus software. Antivirus software is designed to protect your computer from viruses and other types of malicious software, also known as malware. Cybercriminals can use these harmful programs to steal your credit card information. When choosing antivirus software, pick a reputable product that offers real-time protection, such as Bitdefender and Norton.
Avoid public Wi-Fi for card transactions. Try to avoid using your card online when you're in public places like libraries or airports. Public Wi-Fi isn't always safe. If you have to use it, add an extra layer of security with a VPN.
Use a VPN. A Virtual Private Network, or VPN, is a service that encrypts your internet connection to protect your data while it's being sent and received. This can be particularly useful if you're using a public Wi-Fi network, such as at a cafe or an airport, where your data may be vulnerable to eavesdropping.
Follow these credit card fraud prevention tips to keep cyber criminals away from your hard-earned money.
If your credit card information has been compromised, don't panic. Here's what you need to do:
Freeze your card. As soon as you realize what's happened, freeze your card from the banking app. Alternatively, call your bank. They'll block your card so no one else can use it. They'll also help you fight any fake charges and get a new card.
Look at your transactions. Keep an eye out for anything weird, even if it's just a few cents. Thieves often test a card with little amounts before they buy bigger stuff.
Change your online banking password. This keeps anyone else from getting into your account. Make a new password that's strong and unique. Don't use a password you've used elsewhere. Also, change the password of your email.
Check your credit reports. As noted earlier, you can get a free report from each of the three big credit agencies. Look through each one for any accounts or changes you still need to make. If you see anything fishy, let the credit agency and the lender know right away. An additional step you can take to prevent identity theft is to place a fraud alert or credit freeze on your credit report.
Report the fraud to the police. If you've been defrauded, you should tell the police. It might not always be necessary, but it could help you regain any stolen stuff and your card. The Federal Trade Commission's IdentityTheft.gov site lets you file a report.
If you suspect credit card fraud, freeze your card from the banking app and call your bank.
What is the punishment for credit card fraud?
The consequences of credit card fraud depend on the place, how severe the crime is, and how many people were affected. Credit card fraud is a severe crime and can lead to harsh punishments.
In the U.S., federal laws mainly control credit card fraud, and it's taken very seriously. If found guilty, a person could face hefty fines and even jail time. The crime could be a misdemeanor, leading to less than a year in jail and fines, or a felony, leading to more than a year in prison.
According to the Identity Theft and Assumption Deterrence Act, a person found guilty of credit card fraud could face up to 15 years in jail. The U.S. Sentencing Guidelines also state that those guilty may have to pay restitution, meaning they must repay the victims.
Other factors like the amount of money stolen, if the crime was part of a bigger scheme, and the person's criminal history can also affect the penalties. The penalties could be even tougher if it was part of a larger scheme or involved lots of money.
In other countries, like the UK, the Fraud Act 2006 states that fraud offenses, including credit card fraud, could lead to up to 10 years in prison.
Punishments can vary greatly, so look at the laws in your area or talk to a legal expert for more information.
Conclusion — here’s how to prevent credit card fraud
Safeguard your physical credit cards. Keep only a few in your possession and store them in a compact wallet.
Opt for RFID-protective wallets. These can shield your cards from RFID theft.
Avoid sharing your card with others. Lending your card to a friend or relative might appear kind but can lead to complications.
Never disclose your PIN. Securing your pin is crucial in maintaining your credit card's security.
Opt for a secure PIN. Ensure that your banking PIN is different from other PINs you regularly use.
Choose a card with reliable security. Opt for a credit card that doesn't hold you accountable for unauthorized purchases.
Act swiftly when your card goes missing. If you lose your card or it gets stolen, inform your bank immediately. They can prevent further use of it.
Monitor your credit regularly. Develop a routine to check your credit report frequently.
Dispose of sensitive materials appropriately. Make sure to shred documents containing sensitive details, like credit card statements.
Be wary of ATMs and card skimming. Keep your card handy when handing it to employees at eateries or gas stations. Prefer bank-located ATMs for use.
Favor credit cards over debit cards. Credit cards tend to have superior fraud protection mechanisms.
Implement a spending limit. Reduce your daily withdrawal limit to align with your typical daily expenses.
Use virtual credit cards and mobile wallet apps. These are generally safer to use than physical cards.
Use an antivirus solution and a VPN. These protect against credit card fraud, mainly when doing transactions online.
Octav Fedor (Cybersecurity Editor)
Octav is a cybersecurity researcher and writer at AntivirusGuide. When he’s not publishing his honest opinions about security software online, he likes to learn about programming, watch astronomy documentaries, and participate in general knowledge competitions.