Protecting Against Credit Card Fraud

With credit cards quickly becoming the most popular form of payment around the globe, it’s no wonder that credit card fraud is on the rise. According to the Department of Justice, as much as 10% of the adult population in the U.S. has been a victim of credit card fraud as of 2013.

Still, credit card fraud and its consequences aren’t just an American problem – it’s a global threat. Worldwide, credit card fraud is valued at more than $5.5 billion. With so much money at stake, criminals are using increasingly more sophisticated tactics to reach into your pocket and snag your credit identity.

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In this article

    How Thieves Commit Credit Card Fraud

    Perpetrators of credit card fraud once used simple strategies to gather and disseminate our information, but improvements in technology have forced them to switch gears and improve their own processes over time. With technology taking the place of paper receipts and records in most places, modern crooks now turn to the internet for their bounty.

    And it could get worse before it gets better. During the last few years, huge security breaches have taken place at retailers such as Target, Michael’s, P.F. Chang’s, and many more. During the Target data breach alone, as many as 70 million customers had their data exposed, often with drastic consequences.

    According to expert interviews in the Washington Post, the Target data breach allowed crooks to access the names, addresses, and credit card numbers of millions of customers. They could then turn around and use that data to either steal the victim’s identity or trick them into giving up even more sensitive information.

    How Fraudsters Get Your Information

    Targeting retailers is only one way Internet thieves can get access to your personal information. The truth is, they generally will stop at nothing to hijack your identity — it’s just that valuable.

    In order to get your name, address, Social Security number, and financial account information, they might steal your purse, wallet, and mail. Some rummage through your trash for account statements or other identifying information — one man’s trash is another man’s stolen credit card. Others might stalk you on social media and send phishing emails. Attaching a “skimming” device to an ATM card reader to lift your information is also common, and some hackers have access to electronic databases containing online purchase information.

    PO Box left unlocked
    Credit card fraud is all too commonplace, and identity thieves’ methods can range from high-tech data breaches and Internet scams to old-fashioned stolen mail. Photo: Rob Stinnett

    How Thieves Use Your Information

    Once they have your most personal financial information in hand, the sky’s the limit. They can call your creditors and change your mailing address, apply for and open new credit card accounts, and go on lavish spending sprees without you even knowing it.

    And if you don’t know what’s happening, you could be in for a rude awakening when you discover the extent of the damage. Not only can thieves steal your identity, but with the right information, they can even file taxes and secure a huge refund in your name. The IRS lists dozens of cases like this on their website and, in every case, the perpetrator used stolen information to impersonate their victim.

    How to Protect Yourself from Credit Card Fraud

    Considering how sophisticated these criminals are, you may feel defenseless. However, there are several things you can do to minimize your chances of falling victim to credit card fraud, as well as measures to help you recover from identity theft if you have been victimized.

    Take Advantage of Federal Liability Protection

    The Fair Credit Billing Act limits your liability to $50 in the event of credit card theft. Some banks will even waive this amount when you provide additional documentation regarding the theft.

    If you see unknown transactions on your credit card statement, but still have the card, it may have been cloned. You have 60 days to report such transactions. The Federal Trade Commission has additional information, including a sample notification letter.

    Protect Your Privacy

    Shred pre-approved credit card offers and documents containing personal information. Keep your purse or wallet in a safe place when you’re at work, at the gym, and in your car. Use passwords on every account accessed by a computer or smartphone, and use a password keeper program or app; never keep passwords written down where they can be found. By keeping your information as private as possible, you avoid standing out as an easy target.

    Use ‘Zero-Liability’ Credit Cards Whenever Possible

    It’s becoming more and more common for credit card issuers to provide “fraud protection” or cards that offer “zero liability” for unauthorized purchases. Make sure your credit cards have this feature. With this type of coverage, you won’t suffer any loss at all as long as you report any bogus charges or phony activity right away.

    Many of the best credit cards have this feature.

    Monitor Your Accounts Daily

    If you want to take advantage of federal liability protection, you need to report any fraudulent charges within 60 days. Bogus transactions can mount rapidly, and you’ll have to verify and report each one.

    In the meantime, your credit score could also be suffering. If you want to minimize any damage that could take place, watch your accounts closely and check in with them at least every few days. If fraudsters strike, you want to be watching.

    Check Your Credit Report Regularly

    The Fair Credit Reporting Act (FCRA) entitles you to a free credit report from each of the credit reporting agencies once per year. You can order all three reports at once, or rotate your requests to receive a new credit report every four months.

    The only official site for obtaining free records is AnnualCreditReport.com. You can also call (877) 322-8228 to order a free report if you would rather not do it online.

    Use Common Sense When Shopping Online

    If you enjoy shopping online, as most people do, make sure your computer is safe. Install reliable and automatically updated virus software on your computer and be sure to use a secure wireless network.

    When paying online, make sure the website is secure by looking for “https:” at the beginning of the web address, and use passwords that are at least 10 characters long.

    Choose Credit, Not Debit

    Using credit cards instead of debit cards whenever possible is the best way to ensure you are protecting yourself properly. According to the FTC, your maximum loss due to debit card fraud is $50 within two days after you learn of the loss or theft, or $500 if you report the fraud between two and 60 days after you notice it.

    If you don’t report it within 60 days, however, the FTC reports that you could feasibly lose “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.” Using credit cards instead of debit protects you from the prospect of such huge losses.

    Protect Your Mail

    If you’re leaving town, have a friend, trusted neighbor, or family member pick up your mail daily – or have it held at the post office until you return. Also, refrain from posting those vacation selfies on social media sites like Facebook. Doing so could alert a thief to the fact that you’re not home – and increase the likelihood of this type of theft.

    Watch Out for Suspicious Activity

    Look for signs of possible identity theft such as missing credit card bills, being denied credit for no reason, collections calls for accounts you don’t recognize, and new accounts or unfamiliar balances you don’t recognize on your credit report. If anything looks strange, investigate right away. The sooner you begin working towards a resolution, the better.

    Credit Fraud Alert: What to Do When You’re a Victim of Credit Card Fraud

    In some ways, the Target data breach and others like it were disastrous. But it wasn’t all bad news. Because of those events, businesses everywhere have bolstered their network security, added new safeguards and procedures, and hired experts whose sole purpose is to keep data safe.

    These additional safeguards, and others that will surely follow in years to come, should leave you feeling more secure than you were last year at the very least.

    With that being said, new and increased security can’t prevent all cases of credit card fraud. Although using credit is safer than carrying cash in a lot of ways, the complicated ways banks and retailers collect and store our information make it susceptible to theft. And no matter how hard we try, it is simply impossible to avoid every situation where our credit information could be seized.

    If you become a victim, there are several steps you can take to minimize damage and protect your identity going forward. These tips can help:

    • Contact all of your credit card providers. The faster you alert them, the easier it will be to limit the damage.
    • Place a credit fraud alert on your credit report. You do this by contacting Experian, Equifax, or Transunion and requesting that a credit fraud alert be added to your credit file. These companies will pass the notice onto the other two agencies, and creditors will know to be on the lookout for suspicious activity.
    • Freeze fraudulent accounts. You will have to call all of your credit card providers and shut each one down to avoid further charges.
    • File a police report. Making local authorities aware of an instance of credit card fraud can help prevent more occurrences. You will also want a copy of the report to use when filing notices with credit agencies and credit card providers.
    • Notify the Federal Trade Commission. While the FTC doesn’t address individual cases, your circumstances may aid law enforcement agencies when investigating other cases.

    Editorial Note: Compensation does not influence our recommendations. However, we may earn a commission on sales from the companies featured in this post. To view our disclosures, click here. Opinions expressed here are the author’s alone, and have not been reviewed, approved or otherwise endorsed by our advertisers. Reasonable efforts are made to present accurate info, however all information is presented without warranty. Consult our advertiser’s page for terms & conditions.

    Holly Johnson

    Contributing Writer

    Holly Johnson is a frugality expert and award-winning writer who is obsessed with personal finance and getting the most out of life. A lifelong resident of Indiana, she enjoys gardening, reading, and traveling the world with her husband and two children. In addition to The Simple Dollar, Holly writes for well-known publications such as U.S. News & World Report Travel, PolicyGenius, Travel Pulse, and Frugal Travel Guy. Holly also owns Club Thrifty.