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A Complete Guide to Credit Card Frauds


A Complete Guide to Credit Card Frauds


In the first two quarters of 2024, the Federal Trade Commission (FTC), responsible for monitoring financial crimes nationwide, recorded 40,025 credit card frauds in the United States. This led to an estimated loss of $108 million thus far, placing credit card fraud at the top of the list of fraud reports by payment method.

In this article, we’ll cover the definition and types of credit card fraud, the signs to recognize it, and the steps to take if you become a victim. 

Credit Card Fraud Definition

Credit card fraud occurs when someone uses your credit card or its details without your permission to make unauthorized purchases or access funds. 

Examples of credit card fraud include hackers stealing credit card information to make online purchases or someone physically stealing your card to buy goods. Since fraud is carried out without your knowledge, it’s essential to regularly monitor your statements and accounts to catch any unusual activity early on.

Credit card frauds differ from credit card scams in that a scam involves someone tricking you into willingly giving up your card information or money. In other words, you’re deceived into handing over your information in a scam, while fraud happens without your involvement.

Types of Credit Card Fraud

Credit card fraud has numerous forms. Awareness of the different types of fraud is the first step to protecting your money. Common types include:

  1. Theft of a credit card
  2. Credit card cloning
  3. Account takeover
  4. Card intercepted in the mail fraud
  5. Card-not-present (CNP) transactions
  6. False application fraud

Theft of a Credit Card

Credit card theft occurs when someone physically steals your card. Thieves may not be able to use their cards at point-of-sale (POS) terminals that require a PIN, but they can use them for low-value purchases online.

Here is how someone might steal your card:

  • Pickpocketing—A thief takes your wallet, purse, or card from your pocket or bag in a crowded area where you may not notice the theft immediately
  • Lost card falling into the wrong hands—You might drop or misplace your card, and the person who finds it may decide to use it instead of returning it to your bank
  • Hotel room or car break-ins—Cards left in hotel rooms or unattended vehicles can be stolen by criminals targeting these locations for valuables

Credit Card Cloning

Credit card cloning is a type of fraud where criminals duplicate your credit card by copying its data onto a new, counterfeit card. 

Unlike theft, where the physical card is taken, cloning allows fraudsters to keep your card active while using a copy to make unauthorized transactions.

Cloning takes place via four common methods: 

  1. Skimming devices—A skimmer is a small, hidden device that captures your card’s magnetic stripe data when you swipe it at ATMs, gas stations, or POS terminals. The thief can use this information to create a cloned card
  2. POS terminal tampering—Fraudsters install compromised devices in stores or restaurants on POS terminals. When you swipe your card, these devices capture your data, which is later used to create a clone
  3. Compromised ATMs—Some ATMs are outfitted with skimming devices that read your card information when you insert it. In other cases, scammers use hidden cameras or fake keypads to capture your information
  4. Hacked payment systems—Cybercriminals target businesses with weak security protocols to gain access to their payment databases. Once inside, they can capture card data from transactions and use it to create fake cards

Account Takeover

In this type of credit card fraud, a fraudster gains unauthorized access to a credit card account without the owner’s permission. 

Account takeover is much more invasive than other types of credit card fraud. The thief doesn’t just use your card—they access your account details and change account settings to lock you out.

Cybercriminals can obtain your information through large-scale data breaches targeting weak online platforms. If you use the same password across multiple accounts, fraudsters might exploit this through credential stuffing. They use stolen username and password combinations from one platform to attempt access on others, like your credit card account.

Fraudsters can also hijack your phone number by tricking your mobile carrier into transferring your number to a new SIM card. They do this by using your personal information to impersonate you and provide proof of identity to your mobile carrier, which is needed for a SIM card swap. With control of your phone, they can bypass two-factor authentication and gain access to your account.

Account takeover is extremely damaging for the following reasons: 

  • Once the fraudster successfully gains access to your credit card account, they can view your account balance and transactions and control it as if it were their account
  • The account’s email address, phone number, or mailing address can be changed so that you don’t receive notifications or alerts about suspicious activity
  • Login credentials can be changed to prevent you from regaining access to the account

Card Intercepted in the Mail Fraud

If you have ordered a new or a replacement credit card, a fraudster can intercept it while it is being delivered. This type of credit card fraud happens before you even have the chance to activate or use the card. 

Card interception occurs via calculated and complex methods, including: 

  • Mail theft—Thieves physically steal mail from your mailbox or your bank’s outgoing mail 
  • Address change fraud—Criminals file a change of address with the postal service that reroutes your mail to their location. This way, they receive your new credit card or statements without your knowledge
  • Social engineering—Fraudsters may impersonate postal workers to gather information about when and where to intercept your mail

If you notice that you haven’t received your credit card or bank statements as expected, it could indicate that someone has intercepted your mail.

Card-Not-Present (CNP) Transactions

A thief can use your credit card information to make a purchase without having the physical card in their possession. This is known as a card-not-present (CNP) transaction. 

This type of credit card fraud is common in online shopping and phone transactions, where the seller does not require the buyer to show their card. 

CNP fraud is often executed through e-commerce websites where the fraudster inputs stolen card details to buy goods or services without needing the actual card. Fraudsters may also sign up for subscription services using stolen card information, which leads to recurring charges that can add up quickly.

False Application Fraud

False application fraud occurs when a fraudster uses stolen or fabricated documents to open a credit card account in someone else’s name. 

Criminals may steal your personal information, such as utility bills, bank statements, or identification, to create a convincing profile. These documents serve as proof of identity and address when applying for a credit card. Alternatively, fraudsters can produce counterfeit documents like pay stubs or tax returns that appear authentic to support a credit card application.

Once the fraudster has established an account using stolen or fake documents, they can access the credit card account in the victim’s name. 

Criminals often rack up high charges on newly acquired credit cards. They may buy items with significant resale value, such as electronics or luxury goods, which they can quickly sell for cash.

Signs of Credit Card Fraud

Identifying credit card fraud early minimizes its impact on your finances. Here are some signs that may indicate fraudulent activity on your credit card: 

  • Transactions in foreign currencies
  • Purchases made at unfamiliar locations
  • Recurring charges that you did not authorize
  • An increase in your credit limit that you didn’t request
  • Monthly statements missing or arriving later than usual
  • Devices or locations you don’t recognize logging into your account
  • Credit card unexpectedly declined when you know you have available credit
  • Notifications or alerts from your bank or credit card company about suspicious activity
  • Unusually large transactions or transactions that are out of character for your spending habits
  • Confirmation of changes to your personal information—such as a new address, email address, or phone number—that you did not initiate

What To Do if You’re a Victim of Credit Card Fraud

If you believe you are a victim of fraud on a credit card, you want to initiate prompt action.

Quick action helps prevent further fraud—the sooner you report the fraud, the faster the authorities can take action to prevent additional unauthorized transactions.

It also limits your liability. Federal law protects victims of credit card theft from unauthorized charges as long as they report it to the card company promptly and a decision is made within 90 days under the Fair Credit Billing Act (FCBA).

Here are the steps to take:

  1. Contact your credit card provider immediately
  2. Place a credit freeze
  3. Set up security alerts on your credit reports
  4. Report the crime to the FTC

Contact Your Credit Card Provider Immediately

Reach out to a customer service representative of your credit card provider and clearly explain that you believe your card has been compromised. When you contact your credit card provider, make sure you have the following information ready: 

  • Your full name and account number
  • Any correspondence or notices related to the fraud
  • Information about how you believe the fraud occurred
  • Details of the unauthorized transactions (dates, amounts, and merchant names)

You should also ask for a replacement card to prevent further unauthorized actions. Your provider will cancel your current card and issue a new one with a different number.

Place a Credit Freeze 

A credit card fraud might expose your personal information. A credit freeze ensures the scammer can’t open new credit accounts using your profile. 

You need to place a freeze with each of the three major credit bureaus—Equifax, Experian, and TransUnion. The two fastest ways to place a freeze are by calling the bureaus or using an online form. Here are the contact details:

Credit Bureau Phone NumberWebsite 
Equifax1-800-349-9960Equifax.com
Experian1-888-397-3742Experian.com
TransUnion1-888-909-8872TransUnion.com

Keep in mind that a credit freeze remains in effect until you decide to lift it, making it a good long-term security measure.

Set Up Security Alerts on Your Credit Reports

A security alert is a notification placed on your credit report that prompts lenders and creditors to take extra steps to verify your identity before extending credit in your name. 

When a security alert is in place, creditors must contact you directly to confirm that you are indeed applying for credit. You can choose one of the two types of alerts: 

Type of AlertWho Can Place ItDuration
Initial security alertAnyone who suspects they are victims of fraudOne year 
Extended security alertThose who can provide a police report detailing their fraud case and have filed an identity theft reportSeven years

You can set up a security alert by simply contacting the three major credit reporting agencies.

Report the Crime to the FTC

The FTC is a U.S. government agency with the authority to investigate fraudulent activities. To report credit card fraud to the agency, visit IdentityTheft.gov and fill out the online form with as much detail as possible about the fraud. You can also report the crime over the phone by calling the FTC at 1-877-ID-THEFT (1-877-438-4338).

Once your report is submitted, you will receive a confirmation and a recovery plan tailored to your situation. The confirmation can serve as an official document if you need to dispute fraudulent charges. Store a copy of it and any related documentation in a safe place.

How To Prevent Fraud on Your Credit Card

As bad actors continue to develop new fraud techniques, vigilance is of utmost importance. Here are some safe practices to note for credit card fraud protection

  • Never share your credit card PIN with anyone, and avoid writing it down
  • Enable two-factor authentication for your online banking and shopping accounts
  • Dispose of documents containing personal information, such as credit card applications, bank statements, and receipts, securely
  • Store your cards in a safe place, such as a locked wallet or purse, when they’re not in use
  • Use an anti-skimming card holder/protector that prevents skimming devices from reading your card information
  • Use strong and different passwords for your online accounts
  • Use a virtual private network (VPN) to encrypt your online traffic when using public Wi-Fi
  • Move your savings to a high-security banking platform like FortKnox by Austin Capital Bank. Credit card fraudsters can easily steal funds from your savings account if they gain access to your information. To prevent this from happening, you want to move most of your cash reserves or savings to a high-yield savings account with only one goal—fund security
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