If you've ever reviewed a credit card statement and saw charges you didn’t recognize, you’ve found potential signs of fraud. Credit card fraud occurs when someone uses your stolen credit card or its information to make unauthorized purchases in your name. To help you detect and prevent credit card fraud, we'll explain how it happens, and how you can use identity theft protection services like LifeLock Ultimate Plus to help keep you safe.
How does credit card fraud happen?
Credit card fraud occurs when a third party takes your credit card information to make purchases or steal funds. In the past, this usually happened when someone stole the physical credit card from you. However, thanks to today’s online purchases and web databases, your card information alone can lead to identity theft.
Here are some common ways fraudsters can get their hands on your credit card information:
- A thief digs through your trash and finds discarded receipts or credit card statements that include your account number. They can use that information to rack up fraudulent charges.
- An identity thief lures you to a fraudulent website where they trick you into providing your card number. The thief then uses your credit card information to siphon your funds.
- Sometimes credit card information gets stolen through no fault of your own. Your card number might become exposed in a data breach that hits one of your favorite retailers. Thieves can use this information to rack up online charges with your account.
- Thieves often buy stolen credit card numbers on the dark web. There, you can find an entire market built around stealing and selling credit card information.
Types of credit card fraud
You can organize credit card fraud into a few distinct categories. The most common types of credit card fraud include:
- Application fraud: With your personal information, fraudsters can open accounts in your name, then make purchases or move your money into their accounts. This may go unnoticed for months, damaging your credit.
- Account takeover: Identity theft often involves hijacking accounts that already exist in your name. In many cases, someone committing fraud doesn't need your physical card. With enough information, they can access funds remotely or send a new card to themselves.
- Skimming: A credit card skimmer is a small device that thieves can install anywhere you swipe your card. Once you swipe on a skimmer, thieves clone your card to make purchases or move funds in your name.
- Lost or stolen cards: Fraudsters can take another person’s physical card and make purchases on them.
15 credit card fraud protection tips
Criminals see the credit card industry as a place to make a quick buck. Fortunately, you can minimize your risk of credit card fraud by taking steps to protect your information.
Here are the top 15 tips for credit card fraud prevention:
- Promptly and carefully review every credit card statement. When your bill arrives, don't just make the payment. Review each purchase and call the card issuer if any look unfamiliar. If you see other warning signs, get ahead of the statement by reviewing charges on the card issuer's website.
- Protect your account information. Don't leave account information in the open where others might see it. Keep all of your PINs and passwords in a secure location.
- Destroy old documents. When you finish reviewing monthly statements and other documents, shred them before tossing.
- Carry only the cards you need. Do you need more than one when you're out and about or traveling? Reduce your risk by leaving unneeded cards at home.
- Don't fall for phishing scams. You might receive emails from what looks like your cable company, internet provider, or bank asking for your credit card information to maintain service. This is a phishing attack method. Call your service provider's customer service number to ensure a request is legitimate.
- Check your credit reports. Once a year, you can order a free copy of your credit report from Experian, Equifax, and TransUnion at AnnualCreditReport.com. Once you order these reports, check for accounts or loans in your name that you don't remember opening.
- Watch out for phone scams. Thieves might call you saying they are from your credit card provider and asking for your credit card number so that they can "update" your account. Instead, call your bank directly to verify any issues.
- Go paperless. Sign up for online statements from your credit card provider and cancel any monthly paper statements. This lessens the chance that thieves will be able to find papers that include your account information.
- Report lost cards or suspected fraud immediately. Reporting credit card fraud quickly can help reduce financial damage. Your credit card provider can put a hold on your card or cancel an account if you’re worried.
- Access your credit card account online. You can spot fraud quickly if you sign up with your credit card provider's online portal. This way, you can check your credit card account daily instead of waiting for your monthly statement.
- Sign up for transaction alerts. Transaction alerts send you notifications after purchases or balance transfers, which can help streamline account monitoring.
- Choose a credit card with $0 liability on unauthorized charges. Credit card companies offer cards with no penalties for fraudulent charges. Even if someone makes a purchase in your name, you won't face any liability.
- Only shop on secure websites. Only purchase from websites with "https" before the URL. The "s" denotes a higher level of web security.
- Avoid using public Wi-Fi for financial transactions. Public networks offer less protection than private Wi-Fi. Data breaches on public Wi-Fi can reveal information about your transactions and accounts.
- Use identity theft protection services. Services like LifeLock Ultimate Plus can help you monitor your credit and send alerts after signs of fraud. By locking down your credit cards, these identity guards help pay for themselves.
Steps to take after credit card fraud
While credit card fraud prevention will get you far, you need a plan in case someone still manages to get your information. If you have a confirmed case of credit card fraud on your hands, do the following:
- Notify your credit card company. Contact your credit card provider to ensure they cancel your lost or stolen cards. From there, they'll investigate the fraud, give you new cards, and reinstate your account access.
- Contact the three main credit bureaus. Report credit card fraud to one of the three main bureaus ASAP. Once you prove the activity was fraudulent, they can repair your credit score. The bureaus can also freeze your credit and place alerts. When doing this, you only need to contact one bureau, and they’ll reach out to the others.
- Update your security information. After cases of fraud, change your security credentials on all financial accounts. Remember to update your login details and create strong passwords, PINs, and security questions.
- Place a fraud alert. Credit bureaus can place a fraud alert on your credit report. These alerts make lenders verify your identity before opening new accounts or moving funds.
- Report fraud to law enforcement. You can file an identity theft report on the Federal Trade Commission's website. The details you enter can help law enforcement find the fraudster responsible.
- Check your statements going forward. Review your statements each month for signs of fraud. If you notice any of the same red flags, check for other signs of fraudulent activity.
Shop online more safely with LifeLock
While shopping online can feel safe on an established website, there are still precautions to take. By learning about the types of credit card fraud and how to prevent it, you can work to protect against fraud. Additionally, signing up for a service like LifeLock Ultimate Plus streamlines monitoring your statements, shares social security alerts, and helps you get reimbursed for lost funds.
FAQs about credit card fraud
The conversation on credit card fraud doesn’t begin and end with prevention and detection. To cover the important bases, we’ve answered some frequently asked questions.
Is credit card fraud considered identity theft?
Credit card fraud is a form of identity theft. Thieves use a portion of your identity—your credit card information—to make fraudulent purchases or access cash advances.
Are you liable for credit card fraud?
You generally aren’t financially liable for credit card fraud. According to the Fair Credit Billing Act, the most you have to pay for unauthorized credit card charges is $50.
You may not owe anything if:
- You lose your credit card and report its loss before someone else uses it
- Someone steals your credit card number but not the card itself
Is credit card fraud a felony?
Depending on where you live, credit card fraud may count as a felony or misdemeanor. Different states set unique penalties and classifications for credit fraud. Whether or not credit card scams count as felonies also depends on how much a thief racks up in fraudulent purchases.
Federal statutes govern interstate and foreign commerce, making it illegal to use a stolen or fraudulently obtained credit or debit card.
What are the red flags of credit card fraud?
Generally, any account activity you don’t recognize could point to identity theft. The most common signs of credit card fraud include:
- Unauthorized transactions or fraudulent charges on statements
- Credit report changes such as new credit searches and inquiries, new accounts, or an unknown address registration
- Receiving correspondence, invoices, and collection notices for unfamiliar accounts