Credit Card Fraud
Credit card fraud is skyrocketing, and makes up a large part of the $1.48 billion the Federal Trade Commission reports Americans lost to scams in 2018.
Recognizing the risks, protecting your accounts and knowing how to undo damage can keep you from becoming part of the growing number of victimized consumers.
To protect yourself, it’s important to understand that credit card fraud is less about the physical card and more about the account it represents. As cards have evolved to become more secure, online fraud, including identity theft, has increased.
Some 5.9% of Americans in 2018 lost money to credit card fraud, according to the American Bankers Association. And being computer savvy doesn’t mean you’re less likely to get scammed. The Federal Trade Commission reported that people ages 20-to-49 are the most likely to lose money to fraud.
“It’s what the data have been telling us for a while, but it’s hard for people to grasp,” Paul Witt, supervising data analyst for the FTC’s Consumer Protection Bureau said in a news release. “Last year, of those people who reported fraud and their age, 43% of people in their 20s reported a loss to that fraud, while only 15% of people in their 70s did.”
What is Credit Card Fraud?
Credit card fraud is, at its core, theft. Someone you haven’t authorized is using your financial account, whether it be a credit card, or other payment tool.
Identity theft is the fastest-growing type of credit card fraud. Stolen personal information is used to open an account in the name of someone who has no idea it’s happened. The FTC said that 157,688 people reported that their information was used to open a fraudulent credit card account in 2018, up 24% from the previous year.
It’s not just about credit cards, any payment tool is at risk, warns the FBI, including:
- Debit cards
- Prepaid cards
- Account Clearing House (ACH) transactions, which means electronically using your bank account to pay a bill.
- Electronic Fund Transfers (EFT), which is moving money between accounts.
Simply put, any account you use to move money around the internet can be at risk of fraud.
Techniques Used by Credit Card Frauds
The EMV chips that have been required on credit and debit cards since 2015 have led to a drop in fraud tied to actual cards. The bad news is, access to the information that comes with the card is more at risk than ever.
CNP (card not present) fraud has soared, according to the American Banker Association. Some 3.8% of consumers in 2018 were victims of it, as opposed to 2.10% who were victims of POS (point of sale) fraud, where the card itself is illegally used.
Some top fraud methods are:
- Application Fraud – This is the most common form of identity theft fraud, where stolen information is used to apply for a card.
- Hacked Point-of-Sale System – Hacking into a business customer database to steal account information.
- Phishing – Making phone calls or sending out emails posing as a legitimate business or organization seeking credit card information.
- Online Order Scam – Fake online retail sites or charities that look like the real thing.
- Lost or Stolen Cards – Stealing the physical credit cards.
- Credit Card Skimmers – Devices placed into a card reader to steal information, for instance at a gas pump or ATM.
- Account Takeover – Accessing credit card or bank account information online.
- Careless Disposal of Information – Discarding hard-copy personal financial information where someone can access it, such as the wastebasket at the ATM.
Common Credit Card Scams
It would be impossible to list all the methods scammers use to access credit card or other financial information. However, here are some of the most common credit card scams:
- New Card Fraud – An unauthorized account is opened in your name.
- Phony Fraud Alerts – A fake alert that looks like it’s from your bank or credit card company says fraud has been detected on your account, and asks for a PIN, password or account number.
- Reduced Debt or Interest Rate Scams – Fake credit repair services that take money up front, claiming they’re reduce debt or lower interest rates.
- Tax Debt Scams – Fake call or email from the “IRS” asking for financial information, or payment, because of a tax debt. The scammer sometimes poses as a law enforcement officer, and says you’ll be arrested if you don’t pay by credit card over the phone immediately.
- Free WiFi Hotspot Scams – A WiFi public hotspot set up without password protection designed to steal information from a phone or computer.
- Confirm Personal Information for EMV Cards – A call or email from someone posing as a bank or credit card company asking you to confirm your personal information before you can be issued your new card.
- Fake Hotel Front Desk Calls – Someone posing as the front desk at the hotel you’re staying at calls and gives you some reason they need your credit card information again.
How to Detect Credit Card Fraud
Some fraud will be obvious right away. For instance, you never get the item you ordered, and when you email customer service, no one responds or the email bounces back. But some of the other methods of fraud, particularly those involving identity theft, are harder to spot.
The best way to keep an eye out for credit card fraud is to be on top of your finances. Specifically:
- Check your credit card and bank statements frequently online, or when they come in the mail monthly, and comb them for unfamiliar charges.
- If your card company has text or email alerts for when large purchases are made, the credit limit is approached, and other notifications, set them up.
- Check the mail for billing statements for unfamiliar cards.
- Calls from collection agencies for unpaid charges you don’t owe are a sign that there are accounts open in your name that you don’t know about.
- Monitor credit reports for any loans, credit cards or other debts that aren’t familiar. You can get your credit report for free once every 12 months from Experian, TransUnion and Equifax.
What to Do If You’re Credit Card Fraud Victim
If you are a victim of credit card fraud, it’s important to act immediately. It’s common for victims of scams to be embarrassed and not want to report them. Swallow your pride and save your financial life.
- Report fraudulent use of a credit card to the credit card company.
- Change online passwords and PINs.
- Place a fraud alert or credit freeze on the card with the credit bureaus.
- Report it to the police, even if they tell you they can’t do anything about it. Some companies require a police report before they’ll look into your claim. Also report it to the Federal Trade Commission, which has an easy online reporting tool.
- Check all your credit card and bank accounts to make sure the problem isn’t more widespread.
Credit Card Fraud Liability Laws
The Fair Credit Billing Act and the Truth in Lending Act provide some protection for scam victims.
Basics of the laws are:
- Consumers can’t be held liable if they report the card is stolen before fraudulent charges are made; if they are held liable, liability is limited to $50.
- Debit card liability is $50 if a lost or stolen card is reported within two days; it’s up to $500 if it’s reported after two days.
- A card holder can be liable for all charges if a lost or stolen card, or a scam, isn’t reported until after 60 days.
Some credit card issuers also have zero fraud liability policies to protect consumers from unauthorized transactions
Credit Card Safety Tips
The best way to protect yourself from fraud is to protect your information and be savvy about how you use your card.
When using a credit card online, make sure the site is secure and reputable.
The FBI suggests starting by looking at the “https” in the URL or an icon of a padlock.
“This icon is not a guarantee of a secure site, but provides some assurance,” the FBI says.
The FTC’s top tip is to keep an eye out for imposters. “Scammers often pretend to be someone you trust, like a government official, a family member, a charity, or a company you do business with,” the agency says. “Don’t send money or give out personal information in response to an unexpected request — whether it comes as a text, a phone call or an email.”
- Get a phone number and email address from the source you want to buy from, and test both to make sure they’re legitimate.
- Google the company. The FTC advises typing in the company’s name and the word “scam” or “review” to see what comes up. Check them out with the Better Business Bureau, and if the company website has reviews, read them.
- Use a credit card rather than debit card when buying online — it’s easier to dispute the charges.
- Use your own computer to make purchases or check financial accounts.
- Sign the back of credit cards as soon as they arrive.
- Report lost or stolen cards immediately
- Keep PINs and cards separate
- Don’t provide card information over the phone unless you made the call and you trust the bank or retailer on the other end.
- Don’t believe your caller ID — scammers frequently use familiar-looking phone numbers. “If someone is asking for money or personal information, hang up,” the FTC advises.
- Never answer an email that asks for personal information, even if it appears to be from the bank or a reputable organization
- Use paperless statements and make payments online to remove sensitive information from snail-mail.
- Be sure the computer you use to shop online has security software.
- Monitor accounts and credit reports closely.
The more the cyber world evolves, the more personal finances are at risk. The best tools for not being a victim are to use common sense, be vigilant and be aware of your finances.
Being in a crisis situation can make it easier to fall for a scam. If you’re concerned about debt, but also wary of online risks, finding a credible credit counseling agency is a good place to turn. Credible agencies are nonprofits that provide counseling, help manage credit card debt and reduce the debt load.
NA, ND Protecting against credit card fraud. Retrieved from https://www.consumer.ftc.gov/articles/0216-protecting-against-credit-card-fraud
Witt, P. (2019 February 28) The top frauds of 2018. Retrieved from https://www.consumer.ftc.gov/blog/2019/02/top-frauds-2018
NA, ND Credit Card Fraud. Retrieved from https://www.fbi.gov/scams-and-safety/common-fraud-schemes/credit-card-fraud
NA, (2018, November 15) State of Card Fraud: 2018. Retrieved from https://www.aba.com/member-tools/industry-solutions/insights/state-card-fraud-2018
NA, ND Credit Card Fraud.Retrieved from https://www.justia.com/consumer/deceptive-practices-and-fraud/credit-card-fraud/