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If you've fallen victim to credit card fraud, you're far from alone. There were nearly 400,000 reports of credit card fraud reported to the Federal Trade Commission last year, a number that grew 44% from 2019 to 2020. The key to minimizing the damage of this insidious crime is to detect it early and act immediately. Adopting smart habits and taking advantage of resources from Experian and others can help. The right moves can even help you avoid becoming a victim altogether.
Here are some tips on how to protect yourself from credit card fraud and recover as quickly as possible if it does happen.
What’s credit card fraud?
Credit card fraud is a form of identity theft in which criminals make purchases or obtain cash advances using a credit card account assigned to you. This can occur through one of your existing accounts, via theft of your physical credit card or your account numbers and PINs, or by means of new credit card accounts being opened in your name without your knowledge. Once they're in, thieves then run up charges and stick you and your credit card company with the bill.
Credit card issuers are acutely aware of this scourge, and are continually developing new methods to thwart unauthorized card usage. At the same time, however, resourceful fraudsters (including international organized crime syndicates) keep finding work-arounds for new security measures.
Because card issuers are well-versed in dealing with card fraud, it's unlikely being defrauded will cost you money out-of-pocket over the long haul, but necessary investigations can take months and, as discussed at greater length below, unaddressed credit card fraud can do major damage to your credit reports and scores.
Dealing with credit card fraud can cost you a great deal of time and aggravation, and the theft of hundreds of millions of dollars every year adds to the overall cost of using credit cards (in fees and interest) for all account holders.
Credit card fraud is a form of a broader category of crime known as identity theft, by which criminals use your personal information to impersonate you and hijack your finances. In addition to credit card information, identity thieves can use credentials including your name, date of birth, address and Social Security number to take over bank accounts, take out loans in your name, and apply for bogus tax refunds, unemployment benefits and Social Security checks – taking advantage of benefits you've earned.
Look out for the common types of credit card fraud
Credit card fraudsters are eager to use new technologies in their schemes for ferreting out credit card numbers and PINs, adding to tried-and-true methods as old as credit cards themselves.
Credit card fraud methods include:
|Card theft||Snatching a card from a restaurant table, bar or wallet (or just grabbing an entire wallet or purse) is a classic way to get access to someone's credit card. Swiping newly issued cards from mailboxes is a variation on this ploy. If your card goes missing or if you're notified you should’ve received a card that never arrived, inform the card issuer immediately.|
|Account takeover||In this approach, a criminal contacts your card issuer and uses your personal information to change access PINs, passwords, mailing address and likely take control of your account so you can no longer get into it. Depending on how often you use your card, this can take a while to notice, and even longer to sort out with the card issuer. Some credit card companies enable setup of a verbal password that isn't documented anywhere else to prevent this form of theft.|
|Cloned cards||Devices called "skimmers" fit over card readers on gas pumps and at retail sales terminals can allow thieves to grab your card number when you swipe your card, then make a duplicate for their illicit use. EMV chip-equipped cards have made this process much more difficult.|
|Card-not-present theft||This refers to the fraudulent use of a credit card account that doesn't require possession of a physical card. Commonly a method used to make online purchases, it requires only the thief knows your name, account number and the card's security code. In recent years, millions of users' information has been exposed through data breaches at retailers and other companies that maintain large card-number databases, and illicit websites traffic in lists of card-user data.|
Detecting and fending off credit card fraud
It's possible to detect credit card fraud early by routinely checking for signs of shady activity on your credit accounts:
|Review your card statements monthly||Whether you get them online or in hard-copy form, 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 reports||
Check your credit reports from all three national credit bureaus (Experian, TransUnion and Equifax). You can download your reports for free at AnnualCreditReport.com. Once you have your reports, look for unfamiliar inquiries – credit checks associated with applications for new credit – and loan or credit card accounts you didn't open. If you see any credit report entries that look fishy, use the contact information in the credit report to notify the creditor in question. 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.
If you suspect you’ve been the victim of identity theft, consider visiting the Experian Fraud Center to place a free fraud alert on your credit report. When a fraud alert is in place, potential new lenders are asked 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.
|Credit monitoring||Enrolling in a credit monitoring or identity theft protection service such as those available from Experian, automates the process of checking your credit reports and accounts. They also notify you by text or email when credit checks are performed, so you can spot suspicious activity and act quickly if you suspect fraud.|
Reporting the credit card fraud to law enforcement
If you've confirmed you're a victim of credit card fraud, you may want to report the crime to law enforcement. To begin this process, visit the Federal Trade Commission's IdentityTheft.gov website. The site will then give you the opportunity to file an identity theft report, which is used by law enforcement agencies in their investigation. You can then follow up with local law enforcement, as advised by your creditors.
Not every case of identity theft necessitates getting the police involved, but doing so can help assist in investigations of theft and might help you recover belongings that were stolen along with your credit cards.
How can credit card fraud impact my credit?
When credit card fraud goes undetected, thieves have a chance to run up charges in your name – which they never intend to pay. This can be damaging to your credit profile. In most cases, you'll be able to clear up these matters by proving you didn't authorize the charges. 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 fraud. The presence of these fraudulent items could paint a less-than-flattering picture of your credit habits. Card fraud can put negative marks on your credit reports, including:
|Late payments||If a fraudster opens a credit card account in your name and never pays a bill, late payments could be reported to the credit bureaus in your name and your credit scores could suffer. Payment history, 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 – 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 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. And, again, you might consider disputing the information with the credit bureaus.
Protecting yourself from credit card fraud
The growing prevalence of credit card fraud means there's no surefire way to avoid becoming a victim, but common-sense precautions can help you avoid it:
- Guard your wallet or purse carefully when you're out and about, and don't leave credit cards unattended.
- Keep credit cards you don't use in a safe place at home, instead of carrying them with you, and never carry your Social Security card unless you must (when obtaining a passport, for example), and put it back in safekeeping when you're done using it.
- When shopping online, make sure the website is secure (look for "https://" at the start of the site address), and skip the option of storing your card number at the website.
- If asked to provide a credit card number, Social Security number or other personal information over the phone, verify you’re talking to a person or company you trust. If the request comes from someone who called you, ask yourself if the organization they claim to represent should already have the information they seek. (Banks and credit card issuers already know your account numbers and wouldn't ask you for them, for instance.) If in doubt, insist on calling them back and use a verifiable number.
Take a look at the Experian Fraud FAQ and Fraud Alert Center for more information and tips on protecting yourself from credit card fraud. Experian will offer support by providing a free copy of your credit report, investigating disputed credit report information, and if fraud is verified, remove the information from your credit report.
Fraud is an ugly side effect of the convenience of using credit cards. Knowledge and vigilance can help you stop it, and if you become a victim, acting quickly and decisively can help limit the damage.