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If you've fallen victim to credit card fraud, you're far from alone. In 2021, nearly 400,000 Americans reported credit card fraud to the Federal Trade Commission. Whether you've experienced credit card fraud previously or not, here are some tips to protect yourself from it, plus steps to take if you're a victim of this crime.
What Is Credit Card Fraud?
Credit card fraud is a form of identity theft where criminals make purchases or obtain cash advances in your name. This can be with an existing account, via theft of your physical credit card or your account numbers and PINs, or by opening new credit card accounts in your name. Once they're in, thieves run up charges and stick you and your credit card company with the bill.
Being defrauded is certainly a major inconvenience, but it's unlikely to cause lasting financial harm. That's because the Fair Credit Billing Act protects consumers from liability over $50 for authorized charges—and many issuers offer $0 liability. Unfortunately, dealing with credit card fraud has other unexpected costs, including time and aggravation. It can take months for credit card issuers to investigate fraud, and lingering issues can result in damage to your credit, which also takes time to remedy.
Common Types of Credit Card Fraud
Fraudsters use a variety of scams to illicitly obtain card information or open new accounts in victims' names. Some current card fraud methods include:
- Card theft: This is the old school method of snatching a physical credit card, whether from a restaurant table or grabbing an entire wallet or purse. Some criminals try to steal newly issued cards from mailboxes. If your card goes missing, or if you're notified you should have received a card that never arrived, inform the issuer immediately.
- Account takeover: A criminal contacts your card issuer and uses your personal information to change access PINs, passwords, mailing addresses and other details so they can control your account (and lock you out). Depending on how often you use your account, this can take a while to notice and resolve. Some credit card companies enable setup of a verbal password to prevent this form of theft.
- Cloned cards: Devices called "skimmers" that fit over card readers on gas pumps and retail sales terminals can allow thieves to secretly steal your card number when you swipe, then make a duplicate for their illicit use. EMV chip-equipped cards have made this process much more difficult.
- Card-not-present theft: This is the fraudulent use of a credit card account without possession of a physical card. Fraudsters might obtain your information through phishing or hacking, and some criminals sell card data online on the dark web. The thief doesn't need the physical card since online purchases only require that they know your name, account number and security code.
Tips to Avoid Credit Card Fraud
It's possible to detect credit card fraud early and before too much damage is done by routinely checking for suspicious activity and proactively protecting your finances. Here are some strategies:
- Review statements regularly. Go over your card statements at least monthly, looking carefully for unexpected purchases or cash advances. If you see any unfamiliar purchases, contact the card issuer immediately to dispute the charges.
- Check your credit report. Periodically review your credit reports from all three national credit bureaus, which you can download for free at AnnualCreditReport.com. Look for unfamiliar inquiries and loan or credit card accounts you didn't open, and if any entries look fishy, use the contact information in the credit report to notify the creditor. They can give you more information, begin an investigation and may ultimately notify the credit bureaus to remove the account. You can also file a credit report dispute if you believe there are inaccurate entries on your credit reports.
- Enroll in credit monitoring. To protect your account moving forward, it helps to enroll in Experian's credit monitoring or identity theft protection plans. This will notify you when credit checks are performed on your file, so you can spot suspicious activity and act quickly if you suspect fraud.
- Secure your physical cards. Guard your wallet or purse carefully when you're out, and don't leave credit cards unattended if possible. Keep credit cards you don't use in a safe place at home, and never carry your Social Security card unless you must (like when obtaining a passport).
- Be vigilant online. Know signs of scams and fraud attempts such as phishing emails. When shopping online, make sure the website is secure (look for "https://"), and skip storing your card number. Additionally, when using a public Wi-Fi network such as at a coffee shop, you're more susceptible to hacking, so avoid sensitive business like online banking unless you're using a virtual private network.
- Watch out for phone scams. If you're called by someone who requests sensitive information like your credit card number or Social Security number over the phone, it's very likely a fraud attempt. They may be creative and say they just need to verify information, but banks and credit card issuers already know your account numbers and won't ask you for them. Consider hanging up and calling the official phone number for the organization they claimed to be with so you can confirm if it was a valid call or a fraudster.
Steps to Take if You're the Victim of Credit Card Fraud
If you've discovered fraudulent activity on your credit card account, here's how to resolve the situation. Note that the steps don't have to necessarily be in this order.
1. Notify Your Credit Card Issuer
Immediately contact your credit card issuer of the fraudulent transaction. Some issuers allow for fraud reporting in their app or on their website, though you may need to call the number on the back of your card. If fraud is confirmed, the issuer will likely cancel that card and issue you a new one with different numbers.
2. Place a Fraud Alert on Your Credit Report
Visit the Experian Fraud Center to place a free fraud alert on your credit report. This requires potential new lenders to verify your identity before issuing any new accounts in your name. You only have to contact one credit bureau to have a fraud alert put in place on all three of your credit reports. You can cancel the alert at any time.
3. Report the Credit Card Fraud to Law Enforcement
If you've confirmed that you're a fraud victim, you may want to report the crime to law enforcement. Visit the Federal Trade Commission's IdentityTheft.gov website, where you can file an identity theft report. This is used by law enforcement agencies in their investigation, and you can then follow up with local law enforcement if desired.
Not every case of identity theft necessitates getting the police involved, but it can assist in investigations and might help you recover belongings that were stolen along with your credit cards.
4. Contact the Credit Bureaus
When credit card fraud goes undetected, thieves have a chance to run up charges in your name that they never intend to pay. Once you've discovered the situation and proved you didn't authorize the charges, creditors and credit bureaus will help you erase any damage.
In the meantime, however, anyone checking your credit may see fraudulent credit card accounts, missed payments or increased balances that are appearing as a result of the crime. Fraud can harm your credit score in a few ways:
- Late or missed payments: If a fraudster opens a credit card account in your name and never pays the bill, and it goes unnoticed, these missed or late payments could be reported to the credit bureaus in your name. Your credit could suffer since payment history is the most important factor in credit scores, accounting for 35% of your FICO® Score☉ .
- High credit utilization: If a fraudulent credit card, or one of your own cards, is being used to run up bogus charges, your credit utilization rate—the percentage of your borrowing limit represented by your outstanding balances—could skyrocket. Credit utilization is nearly as important as payment history in determining your credit scores, and a high utilization rate could cause your credit scores to suffer.
If this happens to you, contact the creditor who reported the fraudulent information to the credit bureaus and they should be able to clear it up. If they can't or won't help, consider disputing the information with the credit bureaus.
More Tools to Stay Vigilant
In addition to credit monitoring or identity monitoring, there are other digital tools that can help you stay on top of attempted fraud. For example, Experian offers a free scan of your information on the dark web to spot if your private information has been compromised. Experian also offers a free scan of people search sites, and a paid option to remove your information from these sites that can put your identity at risk.