How to Prevent Credit Card Fraud

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Credit card fraud has never been more rampant, as the Federal Trade Commission points out that today’s digital age makes it easier for scammers to get access to your information. In a report published by Security.org, it was revealed that 150 million Americans were victims of credit card fraud in 2023 alone. To avoid becoming a part of this growing statistic, you’ll need to understand the different types of credit card fraud and what steps you can be taking to protect your accounts.

What is Credit Card Fraud?

According to Cornell Law School, credit card fraud is actually a form of identity theft, as it occurs when someone uses the card’s information without permission. This may be to make purchases, either in person or online, or to withdraw money.

Thanks to advancements in technology, a thief doesn’t even need to physically steal your credit card to gain access to your funds. They can also retrieve the card’s information digitally.

What Are the Different Types of Credit Card Fraud?

Before you can take proactive measures to protect your credit card accounts, you’ll need to understand the different types of credit card fraud and how they occur.

Card Theft

When an individual takes your physical credit card without your knowledge, they can then turn around and use that card at any store to make purchases. They can also use the information on the card, such as your name, account number, expiration date, and CVV to buy goods and services online.

Skimming

Skimming occurs when a thief attaches a device called a “skimmer” to a payment terminal. The skimmer is able to capture all the information about any credit card that comes in contact with it. Unsuspecting individuals swipe their card to make a payment, unknowingly giving the criminal their card data. That data is then used fraudulently to either make purchases or withdraw cash.

While skimming is most often associated with ATMs and gas pumps, it can also happen in restaurants and retail stores.

Phishing

Another method of credit card fraud is phishing. This is when a thief contacts an individual, either by phone, text, or email, and phishes for personal information. The thief typically pretends to be a legitimate well-known company, such as PayPal or Amazon. They try to get the individual to click on a link and input sensitive information, like a birthdate, credit card number, or Social Security number. They may even pose as the credit card company and ask for your login credentials.

The information gathered is then used to make fraudulent purchases, or to open a new credit card account in the individual’s name.

It’s important to note that phishing also includes the danger of introducing viruses and spyware to your electronic devices when you click on the fraudulent link.

Online Scams

Fraudsters are also known for setting up fake websites or ads that offer products for sale. An individual who is interested in the item will then give their credit card information in order to make a purchase. The item will never arrive; however, as the listing was only set up to capture your sensitive information. The product was never really for sale.

Once the thieves have your credit card information, they can begin using it to make their own purchases, racking up a debt on your card.

Data Breach

A data breach occurs when a hacker is able to access a company’s stored electronic files. If you’ve done business with the company, the hackers may have gained access to your credit card information. Some of the largest known data breaches include Hotel Marriott International, Experian, Adobe, First American Financial Corporation, eBay, and Canva.

Hackers may use your credit card information to make fraudulent purchases, but they may also sell your personal information to others.

Account Takeover

Hackers may also gain direct access to your credit card account online. Once they are able to login to your account, they can completely take it over. They can change the mailing address, so you don’t receive statements, as well as transfer funds. Additionally, it’s possible that they order a new card to be issued to their address, which the hackers then promptly use to make purchases.

Red Flags You Should be Watching For

In order to prevent credit card fraud and protect your accounts, you’ll need to be vigilant. There are a few red flags that you should always be on the lookout for. These include:

  • A card reader that looks loose or out of place. This is a sign of a skimmer.
  • Transactions on your bank account that you didn’t make. This is a sign of fraud.
  • An email that your account information has been changed, such as a password or address. This is a sign that someone is attempting to hack your account.
  • An institution declining your credit card when you try to make a purchase. This is a sign that either the bank shut down the card due to suspected fraud, or that a thief maxed out your card.
  • Unsolicited calls, texts, or emails where the individual is trying to get you to divulge personal information. This is a sign of phishing.
  • Websites or ads that look off or have a strange URL. This is a sign of an online scam.

Top Tips for Protecting Your Accounts

While it’s not possible to completely prevent credit card fraud, there are some practical measures you can implement to safeguard your credit cards and personal information. By following these credit card safety tips, you’ll drastically reduce your chances of becoming a victim of fraud.

Sign Up for Purchase Alerts

Sign in to your online credit card account and locate the settings for purchase alerts. Turn this setting on, so that anytime a purchase is being made, you are notified. You may also be able to set a purchase limit, such as $100. This would require you to approve any purchase over that amount. Should you get an alert for a purchase you aren’t trying to make, you can decline the purchase and immediately notify your credit card company.

Add Extra Verification for Your Accounts

To make it harder for hackers to enter your credit card account, opt for two-factor authentication. In addition to your username and password, a second piece of information is needed to access the account. This may be a code sent to your phone or the addition of a thumbprint. You can also use an authenticator app, like Google Authenticator.

Review Your Monthly Statements and Credit Reports

Keep an eye on your monthly credit card statements, as well as your credit reports. This is the best way to catch fraud early, so you can take quick action. Look for any suspicious transactions, as well as any hits to your credit score.

Check for Skimmers

Before you swipe your card at the pump or grocery store, check for skimmers. Try jiggling or pulling on the card reader before you use it. Skimmers will detach, while legit readers stay put. Look for any strange stickers, scratches, or logos. If you spot anything out of the ordinary, bring it to the attention of the clerk on duty.

Shred Credit Card Statements

Always shred any statements that contain your personal information before you toss them in the trash. In addition to your credit card statements, it’s good practice to shred bank statements, Social Security correspondence, and medical records.

Change Your Passwords Often

Get into the habit of changing your passwords regularly. You’ll also want to make sure the passwords are considered strong, including a combination of letters, numbers, and special symbols.

Stick to Reputable Websites

While it may be tempting to shop at a new website that is offering a unique item at a great deal, it’s just not worth it. Stick to reputable sites and make sure they are secure before giving them your credit card information.

Choose a Card With Full Fraud Protection

Thanks to the Fair Credit Billing Act, all cardholders now have protection against fraud. The most a cardholder would be liable for is $50, assuming the fraud is reported immediately after it is discovered. Some financial institutions now offer credit cards with $0 fraud liability, so if you’re in the market for a new card, this is something you want to look for.

Never Use Public Wi-Fi

When making online purchases, never use public Wi-Fi. It’s too easy for hackers to gain access to your personal information. Instead, buy your favorite items when you’re back home on a secure network.

Stay Informed About Potential Threats

Part of fraud protection is staying informed about any new threats to your account. The best way to do this is to subscribe to newsletters from trusted government agencies, as well as the financial institution that issued your credit card. This will keep you apprised of the latest scams, fraudulent schemes, and data breaches.

Don’t let fraudsters ruin your financial health. Protect your financial security today by implementing these proactive measures to safeguard your credit cards and personal information. Stay informed, stay vigilant, and stay protected against credit card fraud.

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About: Alicia Bodine
Alicia Bodine

Alicia Bodine is a New Jersey-based writer specializing in finance. With more than 13 years of experience, you'll find her work on popular websites, such as GoBankingRates, LendingTree, Sapling, Pocket Sense and Zacks. Alicia is also a certified Ramsey Solutions Master Financial Coach.

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