How credit card fraud happens and examples of credit card fraud

There are many ways that criminals can get their hands on your credit card number and other sensitive personal data. Lost or stolen cards: The most basic way that credit card fraud happens is via a lost or stolen card . This can happen if a thief intercepts a credit card that is being mailed to the cardholder and uses the card to make fraudulent purchases. Online scams: In online scams, cybercriminals make it look as though you are making a purchase at a legitimate company, when really you are sending them money for nothing in return. For example, they may send you a link to a special offer that looks like it’s coming from an online store you frequent. You may be tricked into giving them your card number in exchange for a product that does not actually exist. They may even send you a fake invoice or a tracking number to make it seem as though a delivery is actually coming to your address. Fraudulent account openings: Criminals can also use your personal information (like your name, address and Social Security number) to take out new credit cards or loans in your name. Often, this type of identity fraud can go undetected until the victim tries to apply for credit themselves. Although victims are not typically responsible for any fraudulent credit card purchases (due to federal law and protection offered by credit card companies), if left unchecked and unreported, this type of fraud may impact your credit score. Account takeover fraud: Scammers can contact credit card companies pretending to be you to get access to your personal information. If they get into your online account, they can change your password and PIN so that they can take over your financial accounts. This type of identity theft is called an account takeover, and a victim will usually only detect this credit fraud once they try to access the account themselves and find themselves unable to login. Public internet access: Public Wi-Fi can be one way you might accidentally expose your information to fraudsters. It’s important to never open sensitive documents or access financial information while you are on public Wi-Fi. Hackers and cyberthieves can access your account numbers and passwords via your browsing on public Wi-Fi. Thieves may collect credit card information by using skimming devices at gas stations or ATMs, by going through trash cans, or shoulder surfing (looking over your shoulder as you enter your PIN at an ATM). This is why it is important to keep your credit card with you at all times and check your surroundings before you use an ATM, and to destroy any old or expired credit card information you may have. Additionally, if you see an unauthorized charge on your credit card statement, be sure to report it to your credit card issuer right away. Many credit card companies offer account alerts that will send you a notification if there’s unusual account activity. Signing up for account alerts will go a long way in helping you detect fraud on your account.

What to do if you believe you’re a victim of credit card fraud

If you’re a victim of credit card fraud or a scam, the first thing you should do is contact your credit card company to cancel your card and get a new one. It’s important to contact your credit card issuer as soon as possible. You can typically find the phone number of the credit card company on the back of your card, or you can find it on your credit card issuer’s website. Then, report the fraud to the police and your local law enforcement agency. Make sure you keep a copy of the police report, which you may need to send to your credit card company and other creditors. The Federal Trade Commission (FTC) recommends that you also contact the three major credit bureaus (TransUnion, Experian, and Equifax) to place a fraud alert on your credit report. This will let creditors know that they should verify your identity before issuing credit in your name. The alert stays on your credit file for 90 days (about 3 months), although you can request an extension. A fraud alert will make it more difficult for someone else to open new accounts in your name, but it’s important to monitor all your accounts closely and report any suspicious activity immediately.

How you can keep your credit card information safe

There are some ways you can help prevent credit card fraud . Only keep a few cards with you so you’re less likely to lose or misplace a card and keep the cards that you rarely use in a safe place. Report any lost or stolen cards to your credit card issuer immediately. When you’re online, beware of phishing scams and double-check that any email you receive is from a legitimate company. Remember, don’t share your credit card number or any other sensitive details over email. Always review your credit card statement and alert your credit card company if you see a fraudulent charge. This is important, even if you aren’t using your credit card frequently. Many credit card companies offer account alerts, that will alert you if they detect unusual activity. Taking these steps will go a long way in helping you protect your personal information and help prevent credit card fraud. Check out other ways that you can keep your information safe.

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Credit Card Fraud and Credit Card Fraud Prevention

Q: What is credit card fraud?

Credit card fraud is when someone uses your credit card or debit card information to make purchases without your permission or make withdrawals from your account. Criminals can get your card information in a variety of ways, but the most common way is at point of sale (POS) terminals, like when you swipe your card at a gas pump, or online. Your credit card doesn’t have to be physically stolen for credit card theft to happen. Increasingly sophisticated means of stealing information means that your card information can be stolen without your credit card even leaving your sight, via methods like cloning and phishing. Cloning, or creating duplicates of an existing card, is one way that cyberthieves can get ahold of your credit card information without physically stealing it. This is done either by stealing all the information from the magnetic strip on the back of the original card or by obtaining some other type of information (like your Social Security number) that is then used to create fraudulent cards. Phishing is another method that cybercriminals use to get your 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 steal any sensitive information you may input onto their website, like login credentials for your credit card account or your Social Security number.

Last Updated: January 10, 2024

5 min read

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

Credit card fraud is when someone makes an unauthorized purchase or withdrawal using your account.
Credit card fraud, including credit card theft or virtual credit card fraud, can impact your credit score and credit report.
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.

Did you know?

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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