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Avoid These 6 Credit Card Scams [Updated for 2021]

Avoid These 6 Credit Card Scams
Jason Steele

Jason Steele

Updated December 3, 2021
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Unfortunately, credit card scams are all too common. In fact, there were over 390,000 reports of credit card fraud in 2020, according to data published by the Federal Trade Commission (FTC), marking a significant uptick from the previous year. With credit card fraud on the rise, it’s important to understand how credit card scams work and what some of the most common types of scams are, from credit card reader scams to gas station credit card scams. We’ll also cover what steps you can take to keep your credit secure.

What Is a Credit Card Scam?

Credit card fraud or a credit card scam is an unauthorized use of a credit card, debit card or other payment tool to fraudulently obtain money or property.  While the terms fraud and scam are often used interchangeably, scams are actually a type of fraud.

How Do Credit Card Scams Work?

Credit card scammers can get your credit card account information by theft or through a scam. Theft involves the physical stealing of a credit card, bills or other documents that contain your credit card’s account information. Scams, on the other hand, may not involve stealing anything physically, but the scammer still gets your credit card information through a variety of types of credit card scams. Identity theft is another common type of credit card fraud. The thief may use your personal information to open credit cards under your name that are sent to the scammer’s address.

How Does a Credit Card Scam Affect My Credit?

Credit card scams can affect your credit score if the fraudulent activity is reported in your credit report. For example, if debt is accumulated or additional credit lines are opened that you aren’t aware of and therefore fail to make payments on, your credit score will be negatively affected. However, it’s possible to remove fraudulent information from your credit report, so it will not affect your credit score long term. It may take several weeks for your score to reflect the removal though. Additionally, it’s important to note that placing a fraud alert on your credit reports won’t affect your credit score.

Types of Credit Cards Scams

Credit card scams can occur many different ways. They can happen by phone, over email, online or in person. It’s important to stay aware of the types of credit card scams so that you can be diligent about identification and prevention.

Credit Card Reader Scams

Credit card skimming is when credit card information is taken during a credit card transaction, directly from a fraudulently installed credit card reader called a skimmer. Skimmers are electronic devices that record credit card information from the magnetic strip on the credit card, during what appears to be a legitimate transaction. Skimmers are attached to credit card reader machines in locations like ATMs, retail stores and gas stations, and they are hard to detect visually, as they look like a part of the card reader machine. The victim does not know that this is occurring until it is too late. The prevalence of EMV smart chips in credit cards has helped to prevent some of these credit card reader scams, but they can still occur.

Gas Station Credit Card Scams

Payment methods at gas stations can be ideal for credit card scammers because they are heavily used but unattended. In fact, gas stations are some of the most common locations for skimmers. Make sure to inspect the credit card device at gas stations, especially if they look worn or tampered with. 

Credit Card Processing Scams

Not all credit card processing companies are legitimate. When making purchases online, be especially aware of what company is processing the transaction. Make sure that the company is secure and legitimate. 

Credit Card Scams by Phone

Credit card scam attempts by phone are fairly common. These scams involve a phone call to try to get the target to use their credit card, often to “pay off” some alleged debt, fine or taxes. The caller typically claims to be from a government entity like the IRS or FBI, and usually threatens the caller with a legal action or arrest to scare them into providing the credit card information.

Prepaid Credit Card Scams

Prepaid card scams are often done with gift cards. If someone asks you to pay for something by putting money on a gift card or buying a gift card, and then provide them with the numbers on the back of the card, this is likely a scam. The scammer may pretend to be a friend, coworker, company tech support or the government, and ask you to purchase a gift card immediately, often for an emergency reason. Prepaid cards, like gift cards, are enticing for scammers because they have few protections or security measures. These monetary instruments aren’t subject to the Fair Credit Billing Act, which offers credit card users robust protections against fraudulent transactions. 

Credit Card Scanner Scams

One way how credit cards function is to transmit account information wirelessly through RFID (radio frequency identification) chips, which can be an extra security measure in some credit cards. However, they are not immune to transactional scams.Devices sold online can read credit card information by scanning the electromagnetic signal from the credit card, even from a distance. That being said, the reader devices cannot get personal identification numbers or the CVV codes on the backs of cards, which can limit the extent of the damage that they can do.

How to Report Credit Card Scams

The FTC is the main agency that collects scam reports. Report your scam online with the FTC complaint assistant, or by phone at 1-877-382-4357 between the hours of 9:00 a.m. and 8:00 p.m. ET.  You should also report the scam to the company’s fraud department, if the scam was related to an online seller, a payment transfer system or used the company’s name or information falsely. If your credit card, debit card or bank account was involved in the scam, you should also report the incident to your credit card issuer or bank.Remember to place a fraud alert on your credit report to prevent future credit card scams from occurring. You should also report the incident to the credit bureaus.

Tips for Avoiding Credit Card Scams

To avoid credit card scams, consider these tips from the FBI:
  • Always review your credit card statement to look for unauthorized charges. 
  • Verify that a website is secure and reputable before providing your credit card number. Also check out the security/encryption software that the website uses, and verify that the actual individual or company is legitimate.
  • Obtain a phone number and email to contact the seller directly to verify identification and information.
  • Check with the Better Business Bureau and look at other websites regarding the person or company if you have any doubts or suspicions.
  • Be cautious when responding to special investment offers, especially through unsolicited e-mail.
  • If possible, purchase items online using your credit card, rather than a debit card, bank account or third party. Credit cards often offer additional purchase protections.
  • Make sure the transaction is secure when you electronically send your credit card number.
  • If anything looks suspicious or if you lose your credit card(s), contact the issuer of the credit card immediately.
  • Check your transactions and credit report frequently for any suspicious activity.

What Is the Most Secure Credit Card?

No credit card is completely secure. When you select a credit card, you can keep your eye out for features like the ability to freeze your account, purchase protections, fraud monitoring and credit score monitoring if you’re concerned about security. You can also look at the bank that is issuing the credit card to find out its security measures. 

Things to Consider When Applying for a Secure Credit Card

Secured credit cards can offer a secure and convenient method of payment, while also having the added bonus of potentially increasing a credit score (if used responsibly). Secured credit cards are usually available to applicants with bad credit, making them a worthwhile option compared to the unsecured credit card options for bad credit, which can come with high fees. Secured cards require the cardholder to make a refundable security deposit, which typically becomes the amount of the card’s credit limit. Other than the security deposit and credit limit, secured credit cards work essentially the same as any other credit card. Issuers of secured cards usually report your balance and payment history to the three major consumer credit bureaus, which can help build credit with responsible use.

Compare Credit Card Offers From Lantern

While credit cards are one of the most secure methods of payment available, they are still vulnerable to scams. By understanding what credit card scams are and how to avoid them, you can ensure that you have the upper hand in the struggle against scammers and other criminals. As you search for a credit card, it’s important to take a look at available security features. Lantern offers a selection of top credit cards for every type of use. For more information, check out our credit card comparison.
Photo credit: iStock/jabejon
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC112191

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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