A credit card is a convenient tool for making purchases, transferring money, and withdrawing money. But alongside such benefits, there are also potential risk factors involved.
One potential issue is credit card fraud. With more than 1 billion credit cards in the United States, it's one of the most widespread types of theft.
Read on to learn more about what credit card fraud is, how it can occur, the steps you can take to prevent it, and tips to follow when you believe you are a victim of credit card fraud.
What is credit card fraud?
According to data gathered by the Federal Trade Commission, in 2020, almost 400,000 people reported credit card fraud, a significant jump from 2019.
Credit card fraud is a type of identity theft where another person uses your credit account to make purchases. Criminals can do this by stealing your actual card, your PIN, or your account number. They can also open up a brand new account using your personal information.
Most credit companies offer various forms of fraud protection since credit card fraud, unfortunately, is not uncommon. Usually, you won’t have to pay much in liability fees, but amending your file and making any investigations can take time.
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Additionally, there are no interest rates, all cardholders receive car rental and phone insurance, and, most importantly, Point Card provides fraud protection with zero liability.
Remember, credit card fraud can severely impact your credit score, especially if it goes unaddressed. So it’s crucial that you closely monitor your accounts for any suspicious activity and take action by reporting it to your credit card company immediately.
How can someone fraud your credit card?
Credit card fraud can occur in multiple ways, described in detail below.
One: Lost or stolen cards. Although this method is self-explanatory, if a thief does not have your PIN, there is a chance they won't be able to make use of the card.
Two: Card-not-present fraud. You don't necessarily need a physical credit card to commit fraud. As long as someone can gain access to your personal information and account number, they can make purchases online. Data leaks and cyber security breaches are two ways that this type of fraud can occur.
Three: Faked cards. Known as skimmers, these machines download information from the magnetic stripe on the back of your card. This data can help generate fake cards or alter preexisting cards. Skimmers are usually attached to ATMs, so always be on the lookout.
Four: Application fraud. This is when a criminal applies for new credit with your name.
Five: Account takeover. This occurs when someone steals your personal information to lock you out of your accounts. As a result, they can change your PIN, email and mailing addresses, and any other account authorization information.
Six: Intercepting cards in the mail. This is especially serious if the bank or a credit company sends you a new or replacement card in the mail. Envelopes containing credit cards are purposefully unmarked for this reason.
Seven: Phishing. This refers to suspicious messages, whether text messages or emails. Once you click on the message, malware will be installed on your device and download your information.
Eight: Looking over your shoulder at the checkout or paying your tab at an eatery. A simple but effective method to avoid this is to make sure to maintain a healthy distance between you and other customers, just in case someone is on the lookout for your credit card number while you happen to be paying.
3 ways to prevent credit card fraud
While it isn’t entirely preventable, there are steps you can take to minimize the risk of becoming a victim of credit card fraud.
One: Reviewing your monthly credit card statements in detail. This is one of the easiest and most effective things you can do to protect yourself from credit card fraud. Regularly checking your account activity for any suspicious charges is very important. Doing so will allow you to know if an unauthorized person has accessed your account. If so, alert your bank or credit card company immediately.
Two: Regularly checking your credit report. Experian, Equifax, and TransUnion — the three major credit bureaus — will provide you with a free credit report every year. Like with your monthly bill statement, review this report for any unfamiliar charges. Be sure to dispute any fraudulent activity.
Three: Reviewing your bills and invoices. Doing this will help you identify whether you’re receiving any correspondence or payment statements sent from an unfamiliar or suspicious sender.
5 steps to follow in case you become a victim of credit card fraud
Step 1: Contact your credit card company immediately. The sooner you notify the issuing company, the quicker they can remove any fraudulent transactions.
Step 2: Update your account's security information, including your PIN, website, and other account login passwords.
Step 3: Get in touch with a credit bureau. You can set up security alerts through Experian, Equifax, and TransUnion if someone attempts to steal your information.
Step 4: Check your bank statement. Again, regularly reviewing your report is a simple way to stay knowledgeable about your finances should any fraudulent activity take place.
Step 5: Contact the police. Through the Federal Trade Commission's website, IdentityTheft.gov, you can submit a report to law enforcement describing your situation, and they will open an investigation.
How can credit card fraud impact my credit?
Remember, unsupervised and reckless activity committed with your credit card can be detrimental to your credit score. Unless banks and other lenders know of the situation, they may hold you responsible and deem you financially untrustworthy.
Often, credit thieves will spend your money and leave you with the bill. Late or missed payments are reported to the credit bureaus and will lower your credit score. Don’t forget, your payment history is the most significant factor in determining your overall score, accounting for 35 percent.
High credit utilization
Thieves can make enough charges with your card that they exceed your credit limit, which is also detrimental to your credit score. How you use your credit is the second most significant factor influencing your score, at 30 percent.
The bottom line
Thanks to the ever-increasing prevalence of and demand for credit cards, you always want to make sure that you take measures to minimize credit card fraud as best as you can.
Guarding your wallet or purse when you leave the house, refusing to disclose your card’s information (be it over the phone, in an email, or on social media), and shopping on secure websites are just a few things you can do to keep your accounts safe.
Even though fraud is not entirely preventable, being aware of it and understanding how it happens can only benefit you and your financial health both now and in the future.
Made to spend.