How to prevent credit card fraud

Maybe this sounds familiar: You open your credit card statement and start skimming the list of charges. About halfway down, you notice a charge you don't recognize. Maybe it's the merchant, the amount or both.

Not only is it frustrating to stop everything and dispute the charge with your credit card company, it's also a threat to your financial security. It could result in additional unauthorized transactions or late payments if you don't detect the fraud immediately and report it to the card issuer. Ultimately, it could impact your credit score.

According to a report from the Federal Trade Commission, nearly 450,000 people reported credit card related identity theft in 2024.‍ ‍ ^{See note 1}

With credit card fraud on the rise, it's important to understand that scammers often adapt to exploit major crises or widespread events. This also holds true during the holiday season, a period that typically sees increased fraud due to extra spending, travel and altered financial routines. Vigilance remains key: Early detection and prompt action are crucial for minimizing the impact of credit card fraud.

How does credit card fraud happen?

Credit card fraud involves unauthorized transactions using your credit card information. It can occur in various ways:

• Your physical card is stolen. This is the scenario most people imagine when they think about credit card fraud. Maybe you accidentally leave your credit card at a restaurant, or maybe your wallet or purse is stolen. Other times, thieves steal newly issued cards from people's mailboxes.
• A thief steals the information on your card. This can happen when you use your card at a retailer or when you get gas. Fraudsters put a device called a "skimmer" over the card reader and wait for you to swipe your card. When you do, they get a copy of the information on your card. Consider using safer alternatives on your preferred device, including features like a chip, tap-to-pay or a digital wallet.
• A criminal takes control of your account. Once someone has your personal information, such as your birth date and Social Security number, they can use that information to change your PIN, mailing address and password so they control your account.
• Your information is obtained through a data breach. If a cybercriminal hacks the database of a company that has your personal information on file, they can gain access to data ranging from your name and account number to your card's security code. This can all happen while your credit card is safely tucked away in your wallet.

There also are a variety of scams to guard against:

• AI-powered scams: Scammers are using artificial intelligence to create very convincing phishing emails and text messages and even mimicking voices to commit fraud. Be wary of unsolicited communications asking for personal information.
• QR code scams: Scammers are increasingly using QR codes to trick people into visiting malicious websites or initiating fraudulent payments. Always check the URL before entering information and be wary of QR codes in unexpected places.
• Mobile payments and digital wallets scams: Be aware of scams involving fake payment requests or compromised accounts. Monitor your mobile payment apps regularly and enable security features.
• Social media scams: Watch out for fake ads, imposter accounts and scams targeting users through direct messages. Verify the identity of contacts and be wary of get-rich-quick schemes.

Don't let credit card fraud lead to identity theft.

They aren't the same, but credit card fraud can lead to identity theft. Once someone has your credit card information, they can use it with other personal information and assume your identity.

That means they can withdraw money from your bank account, open new credit cards, apply for loans or even apply for employment with your information.

There are several red flags of identity theft. Here are a few to watch out for.

• You stop receiving bills or other mail.
• There are unusual charges on your accounts.
• You get bills or statements for accounts you didn't open.
• You're unexpectedly denied credit.
  • You have online accounts that become locked unexpectedly.
  • You receive requests for personal information from unusual sources.
  • There’s unusual activity on your Social Security accounts.
• You receive notice from the IRS that more than one tax return was filed in your name, or you have income from an employer you didn't work for.

Take precaution to protect your Social Security number, the most valuable piece of information for identity thieves. Don't store your Social Security card in your wallet or purse where it can be stolen or lost. Once a thief has your Social Security number, they can use it to set up new accounts or receive benefits in your name.

It's important to remember that institutions should not ask you for personal information, like your account numbers or password, via email, text message, or unsolicited phone calls. Be extremely cautious of any unsolicited communication. Never click on links in unsolicited emails or text messages claiming to be from a financial institution.

Be aware that thieves can use technology to spoof phone numbers, making it appear that your bank is calling, or even use AI to replicate the voices of your loved ones in distress, claiming they need immediate financial assistance. If you receive a an unusual call from someone claiming to be a banking representative who requests credit card account information or security credential information, hang up. Additionally, if the caller is aggressive in trying to keep you on the line after you attempt to verbally end the conversation, this is also a clue to hang up.

For secure communication, utilize the bank or credit card company’s trusted app, and or do not respond to any communication that asks you to update your personal information online or by dialing a telephone number. Only use the customer service numbers listed on your financial institution's website, or call the main number and follow the prompts.

Many banks offer further protection of your account by offering several enhanced methods for secure and fast login.

Tips for guarding against fraud

• Set up mobile alerts. For example, you may be able to sign up for text messaging, which sends a notification anytime there's a suspected incident of financial or identity fraud on a your bank account.
• Use strong, unique passwords. Create complex passwords with a mix of letters, numbers and symbols, and avoid reusing passwords across multiple sites. Consider using a password manager.
• Enable Multi-Factor Authentication or MFA. Whenever available, enable MFA to add an extra layer of security to your accounts. This often involves using a code sent to your phone or email in addition to your password.
• Install security software. Use reputable anti-virus and anti-malware software on your computers and mobile devices, and keep them updated.
• Be careful about clicking links or downloading attachments, especially from unknown sources.
• Consider using credit monitoring services, which can alert you to unusual activity on your credit reports.
• Routinely check for signs of fraud.
• Make it a habit to review your credit card statement, whether you receive the statement by mail or online. You want to look for unfamiliar transactions. If you notice anything unusual, immediately call your card issuer. The card issuer will help you verify whether you've been the victim of fraud. If so, they'll remove those charges, close your account and issue a new account number.
• Check your credit reports at annualcreditreport.com Opens in a New Window.‍ ‍ ^{See note 1} It's free to download reports from all three national credit bureaus: Experian®, TransUnion® and Equifax®. Look for anything unfamiliar, such as credit card accounts you didn't open, loans you didn't apply for and incorrect employers or other personal information, such as addresses. If you see any inaccurate information, you can file a credit report dispute.

If you have concerns about credit card security, you can notify the creditor via the contact information listed in the credit report.

Finally, when you request a new or re-issued credit card, be sure to ask when you should expect it to arrive. If you don't receive it or discover that it's lost or stolen, immediately file a report with the credit card issuer.

These tips can help you protect your accounts.

Are payment apps safer than credit cards?

Mobile "peer-to-peer" payment apps have become incredibly popular in recent years, offering a convenient way to transfer money quickly and easily. However, it's crucial to understand both the benefits and risks associated with these platforms.

While payment apps can offer enhanced security features, such as tokenization, where your actual card number isn't shared with the merchant, they are also targets for scams and fraud. Be cautious of:

• Sending money to strangers. Only send money to people you know and trust. Be wary of requests for payment from unfamiliar individuals, even if they claim to represent a legitimate organization.
• Scams involving fake goods or services. Be cautious when using payment apps to pay for goods or services online, especially from unfamiliar sellers.
• Compromised accounts. Secure your payment app accounts with strong, unique passwords and enable multifactor authentication whenever possible. Monitor your account activity regularly for any unauthorized transactions.
• Peer-to-peer transfer scams. Even when sending money to someone you know, be sure to verify their identity and the purpose of the transfer. Scammers may impersonate friends or family members to trick you into sending money. Double-check all requests before sending any funds.

Many companies offer a secure alternative by allowing cardholders to add their credit card to their digital device. This allows you to make both in-store purchases and peer-to-peer transfers using your digital wallet. When you use a digital wallet to make a purchase, your actual credit card number is never exposed, providing an extra layer of protection against data breaches. If a merchant or retailer is hacked, your account number remains private.

Financial security is important. Help is available to ensure you feel safe and confident while using your credit cards. It's important to understand how you and your credit card company can work together to help protect your accounts.