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What to Know About Credit Card Fraud Protection

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If someone steals your credit card, federal law puts a strict $50 limit on how much spending you're liable for in the case of fraud. Many credit card issuers, however, go the extra mile and bring that number down to zero.

To help you prevent fraud in the first place, some banks and credit unions may also offer various security features, such as dark web monitoring, card lock features, virtual credit card numbers and more.

If you're looking for a credit card that not only protects you when someone steals your information but also helps you prevent potential fraud, this is what you should consider.

What Is Credit Card Fraud Protection?

At a basic level, credit card fraud protection covers you if someone steals your physical credit card or card information and uses it without your permission.

Under the Fair Credit Billing Act, you're not responsible for any unauthorized transactions on your credit card if you report it lost or stolen before someone uses it. If you report it after the fact, credit card issuers legally can't require you to share more than $50 of the liability.

Debit cards are treated differently under the law and have different liability limits, but some banks and credit unions may extend their own fraud protection services to cover them too.

Common Fraud Protection Features

While they're not required to, many major credit card issuers provide zero-liability fraud protection. This means that regardless of when you discover that someone has used your credit card without your permission, you'll never be on the hook for a cent of it.

Once you report that your card is lost or stolen or that someone has used it fraudulently, credit card issuers typically cancel your existing card and issue a new one with a different number. This ensures that the fraudster can't continue using your account.

Because card issuers carry the majority, if not all, the liability of credit card fraud, they employ various prevention tactics to stop it before it starts.

For example, if someone uses your credit card in a different state or country, makes an unusually large purchase or raises other red flags, you may get an email or text from your card issuer asking you to confirm whether you were the one who made the purchase. In some cases, the card issuer may decline the transaction before it reaches out to you.

Of course, this means that you may unwittingly trigger a fraud alert if you're traveling or spending more than you normally do. While that can be a momentary inconvenience, these prevention strategies can save you time and distress if you're actually a victim of identity theft.

Finally, most U.S. credit cards now have a chip installed, which provides more security over the magnetic stripe on the back of your card. Every time you insert your card into a chip-enabled reader, it creates a one-time-use token to process and validate the transaction. If someone manages to steal that token, it will be useless. This validation process is why chip card transactions take longer, but that built-in security helps make it worth the wait.

Other Valuable Fraud Protection Features

While zero-liability fraud protection services and fraud prevention strategies are fairly similar across major credit card issuers, some cards come with other features that can help you spot potential fraud or stop it altogether:

  • Card lock: A handful of credit card issuers, including Capital One, Citi and Discover, allow you to lock your card through your online account or mobile app as soon as you realize it's been lost or stolen. If you end up finding it between the couch cushions or somewhere else, you can immediately unlock the account and continue using it.
  • Dark web monitoring: Discover offers its cardholders this feature, which, once activated, may help prevent more damaging forms of identity theft. The card issuer monitors thousands of dark web sites for your Social Security number and alerts you if it finds a match. Criminals use the dark web to buy and sell personally identifiable information, which they can use to open new credit accounts in your name, file fraudulent tax returns and health insurance claims, and more.
  • Credit score access and alerts: Since the FICO® Score* Open Access program launched in 2015, several banks and credit unions have begun offering customers free access to their FICO® credit score—though some card issuers choose to provide access to your VantageScore® credit score instead. Some also provide limited information about the factors that are affecting your credit score. If you notice a negative item you don't recognize, it could be a result of fraud. Keeping an eye on your credit reports and scores allows you to respond quickly and minimize the potential for damage.
  • Virtual card numbers: Capital One and Citi offer virtual card numbers to their credit cardholders. This feature allows you to create a new card number for different websites when you're shopping online. While each of these numbers is tied to your main account, they keep your real account number safe from prying eyes. Also, if someone manages to steal a virtual card number, you can simply delete it instead of having to request a new card and account number.
  • Contactless cards: Many card issuers, including American Express, Capital One, Chase, Citi and Wells Fargo, offer contactless credit cards. These cards use the same technology as mobile wallets like Apple Pay and Google Pay, allowing you to tap your card to an enabled reader instead of swiping or inserting it. The process goes faster than using your card's chip but provides the same level of security.

While it's not necessary to have a card with these features, they do some of the hard work required to keep your identity safe.

Credit Cards With the Best Security Features

If you're looking for a new credit card and security is one of your top priorities, it's important to shop around to find the right fit. Here are some of our favorite cards based on their security features:

  • Discover it® Cash Back: Discover not only offers dark web monitoring but also allows you to lock and unlock your card through your mobile app and provides free FICO® Score access.
  • Capital One® Venture® Rewards Credit Card: This card provides most of the additional features we've covered. That includes contactless ability, virtual card numbers, card lock and credit score access and alerts. Keep in mind, though, that Capital One provides access to your VantageScore® credit score, which isn't as widely used by lenders as the FICO® Score.
  • Citi® Double Cash Card: Citi is one of the few card issuers that offer virtual card numbers. If you have this card, from our partner, you'll also get free FICO® Score access, contactless capability, and card lock.

As you consider these cards and others, take your time to consider the full benefits of each option before you make a decision. For example, consider the card's welcome offer, rewards program, promotional interest rates and other features that can provide value as you use it regularly.

How to Protect Your Credit Card From Fraud

While credit card issuers invest a lot in fraud protection initiatives, their efforts don't take the place of your own responsibility to keep your credit card information safe. Here are some concrete steps you can take to protect yourself from credit card fraud:

  • Keep your physical cards safe. It's best to keep your credit cards in your wallet or purse and to avoid leaving those around where anyone can steal them. Also, be careful about who you allow to use your card.
  • Learn how to spot phishing attacks. Phishing is a type of scam that involves an email or text message that looks like it's from a legitimate source, but will instead take you to a fraudulent web page where you may be asked to enter passwords or other information. Criminals often include links or attachments that can install harmful malware on your computer or phone if you click on them. With this malicious software, hackers can steal information directly from your device. Avoid opening email attachments unless you know for sure that they're safe, and always double-check links for the destination URL, which will appear when you hover your cursor over the hyperlink.
  • Use a virtual private network (VPN). Coffee shops, airports and other public places often provide Wi-Fi networks that anyone can access without a password. While they're convenient, they're also a hotbed for identity thieves who can "eavesdrop" on data you transmit from your phone or computer via the unsecure network. To protect your connection, consider using a VPN to add an extra layer of security.
  • Check your online account regularly. Credit card issuers have gotten good at spotting fraudulent transactions, but their methods aren't foolproof. Instead of waiting to get your monthly statement, check your online account at least once a week to make sure you recognize all account transactions. You may even choose to request transaction alerts, so you get a text or push notifications on your mobile device every time the card is used.
  • Monitor your credit. A credit monitoring service won't stop someone from using one of your current credit card accounts, but they can alert you if someone has managed to open a new credit card account in your name or do something else that can harm your credit.

Good Credit Habits Are Your Best Protection

Even with all of these actions, there's no surefire way to prevent credit card fraud. After all, there's nothing you can do if a retailer or other organization that has your card information on file experiences a data breach. But the more diligent you are with prevention efforts, the harder it will be for thieves to get your data.

What you can do: Get a card that offers special security features, check your credit report and score regularly and do everything you can to keep your card information as safe as possible.

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