From helping you build a credit history to providing a source of funds in case of emergency, credit cards have their benefits. But credit cards do come with risks, like the potential for out-of-control spending, the stress caused by excessive debt – and the lurking threat of fraud.
There are some credit card threats you’ve probably heard of through the media, like cybercrime and retail data breaches (remember Target’s?). This guide will introduce you to a variety of credit card scams and other criminal practices, in addition to providing suggestions for how to protect yourself, your identity and your financial wellness.
What is Credit Card Fraud?
According to FindLaw, credit card fraud is defined as “a form of identity theft that involves an unauthorized taking of another’s credit card information for the purpose of charging purchases to the account or removing funds from it.” Generally, credit card fraud occurs when a perpetrator:
A perpetrator opens a fraudulent account in your name (with stolen personal information).
Perpetrator commandeers an existing account (with stolen personal information).
While credit card fraud is a global issue, the incidence of these crimes is disproportionately high in the United States. In fact, a 2015 report from Barclays showed that 47 percent of worldwide credit card fraud occurs in the United States, even though the country accounts for just 24 percent of all card use. Counterfeit credit cards – complete with issuers’ logos and encoded magnetic strips, created by criminals using stolen account information – accounted for 37 percent, with lost or stolen cards totaling 14 percent.
The move to EMV or “chip” cards in the United States will eliminate a common type of in-store fraud known as “skimming”, but you still need to be vigilant to protect yourself from other scams. This guide covers easy, no-cost measures you can use to protect your identity and prevent your financial information from falling into the wrong hands.
Scam and Cybercrime Tactics
Both online and offline credit card activity are susceptible to theft. Among other things, this means you need to keep an eye on your wallet or purse while shopping, make sure your mailbox is secure and take precautions when buying online.
Online Credit Card Theft
Identity theft using credit cards accounted for 17 percent of all identity theft in 2013, according to the Federal Trade Commission (FTC). Though card fraud at the point of sale (i.e., in person) is decreasing – thanks largely to EMV technology – the incidence of online credit card theft is expected to increase.
If you become a victim of credit card fraud, how far you’ll have to go to repair your credit depends on the type of scam and scope of the damage. Identity theft, in which someone steals your credit card information and uses it to take out a loan or open a new account, represents the worst end of the spectrum. More modest credit card fraud, on the other hand, may result in someone simply racking up charges on your existing accounts.”
Though identity theft can affect people of all ages and occupations, veterans and military servicemembers are particular targets for several reasons:
Their government health benefits are attractive to criminals;
Military identifiers are often linked to the individual’s Social Security number; and
Serving overseas can make it difficult for active duty personnel to keep an eye on their finances.
MoneyGeek has a guide specifically to help servicemembers and their families in navigating crimes and unethical practices that target veterans.
Online theft of your credit card information can occur in a variety of ways. Here are three common methods thieves use and how to avoid being a target:
Short for malicious software, malware is specifically designed to gain access to or steal information from computer systems and networks. Malware is often installed when users inadvertently click on suspicious links or download damaged files. The type of malware known as spyware is usually what transfers your credit card numbers and other sensitive information back to the offending party.
How to avoid it:
Being careful about what you click on and download can help protect you against malware, but quality antivirus software and/or a firewall designed to block unauthorized access to your computer and other devices are your best lines of defense.
A phishing email is a message that appears to come from a legitimate entity such as your bank, school or local utility company. These emails can include links to dangerous websites (riddled with malware) or request you provide your account password, date of birth or other information that can be used to commit credit card fraud. Phishers often use urgent warnings and high-pressure tactics to push you into revealing too much.
How to avoid it:
Reputable organizations will never ask you to provide such information via email. To avoid falling prey to email phishers, look closely at the sender’s email address; it will likely look similar to a company’s valid email with the exception of a single letter or number. When in doubt, contact the business directly to see if action is really required on your part. You should also delete the email message immediately, from both your inbox and deleted items folder.
While convenient, free Wi-Fi at hotels, coffee shops and other public locations could expose you to hackers who can connect with any unsecured device on the network. As a result, a hacker can send malware to your computer or access sensitive information such as your emails, passwords and credit card numbers.
How to avoid it:
When using the Internet in a public place, add a layer of encryption by enabling the “always use HTTPS” option on websites that require a login or credentials. You should also turn off Internet Connection Sharing (ICS) sharing in your computer’s control panel or system preferences. Antivirus software can alert you if your system becomes compromised while connected to an unsecured wireless network.
Other Types of Credit Card Theft
Virtual criminals aren’t the only ones you have to worry about. Offline fraud accounted for roughly half of all credit card fraud in 2014 – and it still presents a risk today.
Making a purchase at a brick-and-mortar store isn’t the only way your financial information could be at risk. Consider these types of offline credit card fraud and how to defend yourself against them:
Phone phishing (call or text).
While email phishing is a common gateway to online fraud, crooks also resort to deceptive phone calls and text messages as a means of double-crossing you. One such swindle might be an automated phone call asking you to confirm your credit card number in exchange for a lower interest rate on your account, or a text message claiming you’ve won a contest with “no strings attached” – so long as you provide certain identifiable information, of course.
How to avoid it:
Unless you initiate the exchange as a customer, chances are these communications are duplicitous in nature. If you receive such a text, don’t reply or click on any links contained within the message; simply delete it. If you get an unexpected call from someone trying to sell you something or pressuring you into giving up personal information, hang up and report the incident with your credit card company and at www.donotcall.gov.
Though it’s illegal to open mail addressed to someone else, would-be fraudsters may sift through your mail – before or after you’ve read it – in search of bills or other correspondence that could provide them with the information they need to create a counterfeit credit card.
How to avoid it:
Call your bank and switch to paperless; you will still be able to see all your card information via the bank’s website. If you still want to receive your mail traditionally, always cross-shred documents with personal information and put a lock on your mailbox.
Skimmers are small devices that scan data from the magnetic stripe on your credit card. Commonly installed at ATMs, restaurants, gas stations and other retail outlets, skimmers record information that criminals can use to make a counterfeit card or sell to a third party. Unfortunately, victims of skimming are often none the wiser until they receive an account statement listing goods and services they never bought.
How to avoid it:
Switch to an EMV or “chip” card to prevent skimming. These cards use a computer chip to keep transactions more secure. EMV, which stands for Europay, MasterCard and Visa, eliminates the need to swipe your credit card’s magnetic strip to complete a purchase. Instead, EMV allows you to “dip” your card into the machine, providing enhanced consumer protection and making it more difficult for criminals to use what they steal. However, the transition to EMV technology in the United States, though ongoing, is far from complete; if you haven’t been reissued a credit card (or debit card) with an EMV chip, contact your bank and ask when you can expect to receive one.
Small cameras affixed to ATMs and hidden from view are designed to capture your PIN number. Often used in conjunction with data obtained via skimmers, thieves then burn the information onto a counterfeit card to access your money.
How to avoid it:
Cup your hand around the PIN pad when standing at an ATM, even if there’s no one in your immediate vicinity. Avoid ATMs entirely that look like they’ve been tampered with or scratched around the area where you insert your card. Some skimmers look very like a part of the ATM, so if the card reader slot looks different than the straightforward slot you are used to—you may notice misalignment, or mismatched colors—skip it and notify bank staff, if possible.
Though most perpetrators of credit card fraud are elusive and unseen, theft of your actual card is an ever-present threat, especially if you live in a high-crime area. In addition, you should know that EMV credit cards – while more effective than traditional cards – don’t completely eliminate the risk of fraud. Your data can still be stolen and used to make online and telephone purchases where the chip isn’t used to complete the transaction.
How to avoid it:
When shopping in a brick-and-mortar store, keep your wallet and/or purse with you at all times and don’t let cashiers or salespeople disappear with your card. It only takes a minute to skim your credit card or otherwise copy your account number. Hang on to receipts for comparison against account statements so you can monitor unauthorized purchases. Immediately report any suspected fraud to your card issuer.
What to Do if You’re a Victim of Fraud
Call your credit card company and ask for your hacked account to be closed and to receive a new card with new account information.
File a grievance with the FTC by visiting ftc.gov/complaint and clicking on the FTC Complaint Assistant icon.
Put a fraud alert on your credit reports and consider a credit freeze if your identity has been stolen (i.e. if loans or new cards were opened in your name).
File a police report with your local police station or the police department where the crime occurred.
Protecting Yourself from Credit Card Theft and Scams
With all of the online and offline risks of credit card fraud, you may be tempted to cut your plastic in half and use only cash. However, a little research goes a long way toward helping you protect your financial information and enjoy the benefits of credit cards.
When shopping online, opt for well-known chain stores to reduce the potential for theft. Before making a purchase with a virtual retailer you’re unfamiliar with, do a little digging on Google to find reviews from the site’s existing customers and investigate potential complaints with the Better Business Bureau. Keep your antivirus software current and use credit, not debit, whenever possible because the federal government limits your liability loss if you report your credit card stolen, but there are more caveats with liability when it comes to stolen debit cards.
For maximum protection, use a PIN, rather than a signature, with your EMV card.
Don’t set yourself up for becoming a victim of scam or fraud. Any personal information that could allow someone to hack your credit card or steal your identity needs to be kept on lockdown.
Driver’s License Number
Health Insurance Card Info.
Mother’s Maiden Name
Password Hints (Child’s name, Hometown, Favorite band, etc.)
Social Security Number
Don’t give away this information to strangers, including websites and people who email, text or call you.
Justin Lavelle is the Communications Director of BeenVerified.com, where he often writes about ways to avoid cyber scams, identity theft and more.
Is cybercrime on the rise?
Absolutely yes. Last year, breaches stemming from cloud-based devices alone jumped by a whopping 152 percent. The more connected we are to the cloud, the more threat exists. There’s also a growing trend to use Internet-based household appliances, like home security systems, which also puts users at greater risk. Today’s hackers are super smart and are able to break the most safety-critical systems out there.
Let me put it to you this way: Eugene Kaspersky, founder of one of the world’s most well-known anti-virus companies, said, “You call it Internet of Things. I call it Internet of Threats.”
What are warning signs that you have been a victim of a credit card scam?
In all honesty, everyone is a potential victim of identity theft, so you always have to be aware and on the lookout for signs that you’ve been affected.
Look for errors on all your bank statements and credit card statements. You’re looking for unexplained or inaccurate entries, withdrawals, a cleared check you’re not aware of, an electronic funds transfer (EFT) or a purchase you don’t recognize.
Check your credit report a few times a year. The most common signs of identity theft on your credit report are an inquiry you don’t recognize or a new account you didn’t open.
If you receive a notice about an irregularity on your account, take it seriously. Make sure it’s not a phishing email first. Call the company or bank directly to make sure. Do not click on any link within an email you receive if you’re not 100-percent sure it’s legitimate (and it’s very difficult to determine this sometimes).
If you begin receiving phone calls from debt collectors about debts you know nothing about, there’s a good chance you’ve been victimized.
Is there a warrant out for your arrest? If you’ve done nothing wrong, there’s a chance your identity was used to commit a crime. Do a background check on yourself and you’ll be able to see what’s on record and whether it’s accurate.
If you don’t receive your bank statement or other mail, there could be a problem. Someone could have taken your mail to get your address and other personal information. If you receive unexpected mail, this is a red flag as well.
If you have good credit but you’re denied a new credit card or a loan, that may be an indication your identity has been stolen.
Which populations or transaction types are most affected by credit card scams?
Government documents or benefits are the No. 1 identity scam. Credit card and debit card scams follow. The transactions are mostly done online with your credit card number and with no actual card. Scammers usually buy stuff online for themselves, from small-ticket items to more expensive things like computers, TVs and even washing machines.
Is having a credit card still a good idea? Are there credit cards that are more insecure than others?
In terms of reducing your risk of being victimized by fraud, credit cards have some advantages. You can get your funds issued back to you faster because most reputable credit card companies offer fraud protection. Debit cards take money straight from your bank account, and filing a claim can take days or weeks to see your money returned. Try signing up for a chipped (EMV) card that requires a PIN.
How effective is credit card chip technology?
As long as your credit card offers chip technology and requires a PIN, it will combat fraud dramatically. However, many credit card companies are only using the chip and signature method – which will not eliminate fraud; it will simply shift the type of fraud that occurs. Other types of fraud, such as “card not present” fraud, will remain unaffected by the introduction of this new technology.
Am I responsible for credit card purchases I don’t make?
In most cases of fraud, no. If you catch purchases fairly quickly and alert your credit card company, most credit cards offer fraud protection and will not charge you for the purchases. Today, many credit card companies flag people’s cards if they find questionable activity such as overseas purchases, purchases being shipped to other states, etc. They will typically do an investigation internally.
What are some legitimate fraud prevention services?
Sign up for free online banking and mobile apps to monitor your checking and credit accounts daily. You can get free annual credit reports from each of the three major credit-reporting bureaus (Equifax, Experian and TransUnion). Stagger the requests every four months from one bureau to the next.
Don’t stop at simply checking your credit; you need to manage your whole identity. This can include running a self-background check to identify impostors trying to utilize your name outside of your credit card, which can be a first warning. Keep in mind, a lot of identity theft and credit card fraud can originate from inside your own family.
With a mission to protect and educate consumers in the digital age, Consumer Action offers a 24-page guide detailing the many aspects of credit card fraud, including tips for recognizing and preventing fraud.
Operated by the Federal Trade Commission, consumer.gov is a website that provides tips on money management, credit, loans, debt, scams and identity theft.
Experian is one of the nation’s leading credit bureaus, aiding businesses in preventing fraud and helping consumers to protect themselves against identity theft.
The Federal Trade Commission is the nation’s consumer protection agency and works to prevent fraudulent, deceptive and unfair business practices in the marketplace.
The Financial Fraud Enforcement Task Force was established by President Barack Obama in November 2009 to investigate and prosecute many types of financial fraud.