What is credit card fraud?: 5 common types you should know

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Recent credit card fraud statistics from the Federal Trade Commission (FTC) show that there are hundreds of thousands of reports of credit card fraud each year in the United States. In some states like California and Florida, the median loss per report was $600 or more. This sort of fraud can happen to anyone and not only harm your credit score, but it can cost you a lot of money and may put you into debt.

Understanding credit card identity theft and other types of credit card fraud is the first step toward preventing it. In this post, we teach you what credit card fraud is, what to do if you’re a victim, and how to prevent it from happening in the first place. With this knowledge, you can better protect yourself and your financial well-being.

What is credit card fraud?

Credit card fraud is when someone uses your credit card account without your permission. Oftentimes, this is for the purpose of stealing funds to buy goods or services. Credit card fraud can happen when someone steals information for a current account or by opening up a new account. The FTC divides reports into new account and existing account fraud, and here’s how they happen:

• Existing account fraud: The thief uses the victim’s physical cards to make purchases. They can also take over the victim’s account with stolen login credentials or steal their account numbers. When they take over the account, they can change the contact information to lock the user out.
• New account fraud: This form of credit card fraud is when a thief is able to get a hold of the victim’s personal information to create credit card accounts in the victim’s name. Thieves can then use the credit cards to make purchases and take out cash advances.

5 most common types of credit card fraud

There are different types of credit card fraud, each involving a different method for stealing your information. With a better understanding of how credit card theft happens, you may be able to use the information to prevent it from happening in the future. 

1. Physical credit card theft

If someone steals your credit card, they can use it to make purchases. They can use the card in stores and forge your signature, or they can make purchases online if they have the necessary information. 

2. Data breaches

Hackers sometimes breach the networks of different companies that have the personal information of hundreds or even thousands of people. This information can include everything a thief needs to create new card accounts like Social Security numbers, dates of birth, and addresses. Hackers may then sell this information on the dark web.

3. Credit card cloning 

There are devices that can steal your personal information stored on the magnetic strip or chip of your credit card. After stealing this information, they can create a copy of your card to make purchases.

4. Skimming 

“Skimmers” are devices that are placed over the slot of credit card readers, and it’s often difficult to tell that it’s there. While attempting to make a transaction, this device steals your information. Thieves often put these on self-service machines like ATMs and gas pumps.

5. Card-not-present (CNP) fraud

This is when thieves get a hold of a victim’s information and use it to make purchases online without the card being present because there’s no need for a physical card.

3 signs of credit card fraud

There are ways to prevent credit card fraud, but sometimes, it’s out of your control. One of the common examples of credit card fraud that people can’t prevent is a company data breach, but acting quickly can minimize the harm. 

The following are signs to help you spot credit card fraud sooner rather than later to protect your credit score: 

1. Suspicious activity on your credit card accounts: It’s helpful to check your credit card accounts regularly. Review your accounts for any suspicious charges, regardless of how small. Many thieves make small charges to test that the information works before making larger purchases.
2. Errors on your credit report: Your credit report has all of your information about your different credit accounts, and this is the primary place to check for new account fraud. If there are accounts or other items you don’t recognize, it may be a sign of fraud.
3. Calls from collection agencies: You may receive letters or calls from collection agencies if thieves open new accounts in your name. When debt collectors call, don’t ignore them. 

How to prevent credit card fraud

There are some steps you can take to better protect yourself from credit card fraud. Below, we list some methods to prevent credit card fraud and some that will help you identify it immediately: 

• Protect your information: Thieves can do a lot of damage with pieces of your personal information. Protect it as much as possible and shred documents that have information thieves may be able to use to open up fraudulent accounts.
• Be careful what you click: It’s helpful to have a healthy skepticism when receiving emails with links or attachments. Many forms of identity theft come from “phishing” scams, which are links or attachments that can steal your information or encourage you to submit personal information.
• Use two-factor authentication: some credit card providers allow you to set up two-factor authentication. This means that when someone tries to log in to your account, they’ll need a code that’s sent to your personal email address or smartphone. Without this information, they can’t access your accounts.
• Set up charge alerts: Many credit card issuers let you receive text message alerts whenever your card is used to make a purchase. If you contact your credit card issuer promptly, they can often put a stop to the purchase.

5 steps to take if you’re the victim of credit card fraud

It’s helpful to know how to report credit card fraud and what to do if you become a victim. This can help catch the thieves and may prevent others from becoming victims as well. If you’re a victim of credit card fraud, take the following steps: 

1. Notify the card issuer: When you report credit card fraud, the issuer can cancel your card to prevent additional purchases. Some card issuers allow you to report credit card theft through their website or phone app.
2. Put a lock on your accounts: Many credit card companies offer a lock feature for your credit cards. This prevents further transactions from happening.
3. Freeze your credit reports: A credit freeze is a tool you can use to restrict access to your credit file. This prevents anyone from opening new accounts under your name. Companies can’t run credit checks, either, which can help prevent your credit score from dropping due to hard inquiries.
4. Report the fraud: The FTC has a website that allows consumers to report credit card fraud. You can file a report at IdentityTheft.gov.
5. Dispute errors on your credit report: Should any new accounts or fraudulent charges remain on your credit report, you can write a 609 letter to file a dispute. If you need help removing an error, you can also consider contacting a reputable credit repair agency.

How to report credit card fraud

If you notice fraudulent charges on your credit card statement or if you’re the victim of identity theft, it’s helpful to report it to the FTC. At their website, they have sections to file a report for the following:

• Identity theft
• Someone attempted to use your information (potential identity theft)
• Information exposed in a data breach

You should also contact your credit card company as soon as possible to report the fraud and put a hold on your account. In some cases, credit card companies require you to file a police report with the local authorities as well.

Stay vigilant and get your free credit report

Many victims of credit card fraud don’t even realize it happened because they don’t regularly check their credit scores or reports. Here at Credit.com, you can get your free credit report card. This free credit snapshot lets you see your credit health and detailed aspects of your credit score to help you spot any suspicious activity. Sign up to get your free credit report card today.

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