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Credit Card Fraud and Credit Card Fraud Prevention

Last Updated: January 10, 2024
5 min read

Table of contents

Key points about: credit card fraud, fraud prevention, and reporting

  1. Credit card fraud is when someone makes an unauthorized purchase or withdrawal using your account.

  2. Credit card fraud, including credit card theft or virtual credit card fraud, can impact your credit score and credit report.

  3. If you suspect fraudulent activity on your credit card account, contact your credit card company, the police, and the credit bureau.

Credit card fraud, or the unauthorized use of your credit card information to make purchases, can wreak havoc on your finances and personal life if left unchecked and unreported. Let’s talk about credit card fraud, fraud prevention, and how to report credit card fraud so you may help protect yourself from unauthorized credit card activity.

What is credit card fraud?

Credit card fraud is when someone uses your credit or debit card information to make purchases without your permission or to make withdrawals from your account. 

Criminals can get your card information in various ways, like through point of sale (POS) terminals when you swipe your card at a gas pump.

Your physical card doesn’t have to be stolen for credit card fraud to occur since credit card theft can happen online, too. Criminals have adopted sophisticated ways to steal personal information. This means card information can be stolen without your credit card even leaving your sight with methods like cloning and phishing.

Credit card cloning

Credit card cloning is when fraudsters create duplicates of an existing card. This is done by stealing the information from the magnetic strip on the back of the original card or by obtaining another type of personal information (like your Social Security number). The criminals use this info to create fraudulent cards.

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If criminals make fraudulent purchases using cloned credit cards, it could impact your credit score and credit report. For example, according to Experian, if a criminal commits credit card fraud by using your credit card number to make purchases and the bills go unpaid, those late or missed payments could impact your payment history, which is one factor used to calculate your credit score.

Phishing  

This is another method cybercriminals use to steal credit card details. During a phishing scam, fraudsters send emails or text messages with links to websites that look legitimate but have malicious code. This code is designed to capture any sensitive information you may input on the website, like account number, login credentials for your credit card account, or Social Security number. The criminals could then use this information to make an unauthorized transaction with your card.

Other types of credit card fraud

There are many ways that criminals can get ahold of your credit card number and other sensitive personal data, then use it to commit a crime.

Lost or stolen credit cards

A lost or stolen credit card can lead to identity theft and credit card fraud. A thief could find a misplaced card or intercept a card being mailed to a cardmember, then use it to make fraudulent purchases.

Online scams

In online scams, cybercriminals make it look like you’re purchasing from a legitimate company, but the transaction is fake. You may be tricked into giving them your card number to run a transaction in exchange for a product that doesn’t exist. 

Fraud account openings

If criminals get ahold of your personal information (like your address, credit card account number, and Social Security number), they could use it to open new credit cards or apply for loans in your name. This identity theft could go undetected until the victim tries to apply for credit themselves. Although, as explained by the Federal Deposit Insurance Corporation,  federal law under the Fair Credit Billing Act, limits victim liability for unauthorized use of a credit card this type of credit card fraud could still impact your credit score and credit report.

Account takeover fraud

Scammers could contact credit card companies pretending to be you to get access to your personal information. If they gain access to your online account, they could change your password and PIN, then take over your financial accounts. This type of identity theft is called an account takeover. A victim usually only detects this credit fraud once they try to access the account themselves and can’t log in.

Skimming devices

According to the Federal Bureau of Investigation, thieves may collect credit card information by using skimming devices at gas stations or ATMs, going through trash cans, or looking over your shoulder as you enter your PIN at an ATM. This is why it’s important to keep your credit card in a safe place and check your surroundings before using an ATM. It’s also good practice to destroy old or expired credit cards. Additionally, if you see an unauthorized charge on your credit card statement, report it to your credit card issuer immediately.

Some credit card companies offer fraud detection and account alerts to notify you of unusual account activity. For example, every Discover credit card is equipped with safety features for credit card fraud prevention, like card identification data (CID) and card verification value (CVV).

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Public internet access 

Public Wi-Fi could expose your information to fraudsters. Avoid opening sensitive documents or accessing personal financial information while using public Wi-Fi. Cyberthieves could access your credit card account numbers or passwords if you’re browsing using public Wi-Fi.

Reporting credit card fraud

If you’re a victim of credit card fraud, debit card fraud, a scam, or other identity theft crime, the first thing you should do is contact your credit card company. Let the financial institution know that your card or card number was stolen or that you noticed a fraudulent transaction on your credit card statement. 

Once you’ve reported the crime, cancel the card, and request a new card with a new account number. 

You can also report credit card fraud to the police or local law enforcement agency. Keep a copy of the police report, which you may need to send to your credit card company or another financial institution. 

You can also contact the three major credit bureaus to place a fraud alert on your credit report. This lets creditors know they should verify your identity before issuing credit in your name. A fraud alert makes it more difficult for someone else to open new accounts in your name. Still, monitoring your accounts closely and reporting any suspicious activity immediately is essential.

Credit card fraud prevention

There are some ways you can help prevent credit card fraud

  • Keep your cards in a safe place. 
  • Report lost or stolen cards to your credit card issuer immediately.
  • Beware of phishing scams.
  • Don’t share your credit card number or other sensitive information over email.
  • Set up account alerts that notify you of unusual activity.

Credit card fraud can significantly impact your finances and credit score. Staying informed about what credit card fraud is and taking credit card fraud prevention steps can go a long way to minimize your risk.

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