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.
Credit card fraud is frequent and the most common form of identity theft reported in 2023, according to the Federal Trade Commission. However, strong federal laws protect credit card users from the effects of fraud.Learn how to report credit card fraud to the authorities and what types of crime to be aware of.
What Is Credit Card Fraud?
Credit card fraud occurs when a credit card is used for a transaction without the cardholder’s knowledge or consent. The goal of credit card fraud is often to make a purchase with another person’s card, or to open up new accounts in the name of another person, for the purpose of making new purchases.
Types of Credit Card Fraud
Because criminals can be very creative, there are many types of credit card scams out there. Here are the most common types of credit card fraud:
Card-Not-Present (CNP) Fraud
This type of fraud is attractive to criminals, as it can be done online or over the phone. When a criminal obtains a credit card user’s account information, making fraudulent purchases online can be the easiest and safest way to get away with this crime.
Credit Card Application Fraud
Another way that criminals can commit credit card fraud is to apply for a credit card in the name of another person. The criminal either has the card sent to his or her address, or can even intercept mail that contains the new credit card. Once activated, the credit card is then used to make fraudulent purchases. And because victims may not even know that these fraudulent cards have been opened in their name, they may not be aware of the fraud for some time.
Credit Card Skimming
Credit card skimmers are fraudulent credit card terminals that are put in the place of legitimate ones, for the purpose of intercepting the credit card data in order to make fraudulent purchases.
Stolen Credit Cards
This is the most traditional form of credit card fraud, which simply involves stealing the card itself. Cards can be stolen from vehicles, pickpocketed from people’s wallets, or intercepted in the mail. The card is then used to make fraudulent purchases.
Phishing
Phishing is a term used for fraudulent emails that attempt to direct unsuspecting credit card users to enter their information into the criminal’s website. The fraudulent email may look much like a legitimate one from a card issuer or another merchant, and the website address may be a slightly misspelled version. After a successful phishing attempt, the criminal will now have the account number and credit card security code needed for a card-not-present attack, credit card application fraud, or other forms of identity theft.
Identifying and Detecting Credit Card Fraud
The easiest way to identify and detect credit card fraud is to go over your credit card statements every month and look for anything out of the ordinary. It can also help to use a credit card monitoring service, which will help you to identify new account fraud.
Guide to Reporting Credit Card Fraud
Once you appear to be a victim of fraud, the next step is to report it. Here’s how to report credit card fraud.
Contact Your Card Issuer
Contacting the card issuer is the easiest and perhaps the most important way to report fraud. That’s because the Fair Credit Billing Act protects credit card users from being held liable for more than $50 in the event of fraud. Yet, in practice, all of the major credit card networks, including Visa, MasterCard, American Express, and Discover, have a zero-dollar liability policy that prevents cardholders from having any liability for fraudulent charges. The only catch is that you have to notify the credit card issuer of the fraudulent charge. Recommended: Guide to Disputing a Credit Card Charge
Contact the Credit Bureaus
If the credit card fraud has affected your credit score, such as with credit card application fraud, then you’ll also want to contact the three major consumer credit bureaus: Equifax, Experian, and TransUnion. Each has a form that you can fill out that can enable them to correct your credit history. At this time, you may also wish to request a credit freeze, which will prevent criminals from continuing to apply for new accounts in your name.
Notifying the Authorities
After being the victim of credit card fraud and/or identity theft, you can fill out a report with the Federal Trade Commission (FTC) at IdentityTheft.gov. Filing a report with the FTC means that you don't have to file a report with your local police. But if you do wish to file a police report, you can bring a copy of your FTC Identity Theft Report.
How Credit Card Fraud Can Impact Your Credit
There are several ways that credit card fraud can impact your credit. If you have been the victim of new account fraud, then the new, unpaid accounts can seriously impact your credit reports and credit score. Fraudulent purchases can also affect your credit utilization ratio, hurting your credit score.
Protecting Yourself From Credit Card Fraud
There are several ways that you can help to protect yourself from credit card fraud. First, you should always review your credit card statements and check your credit reports at least once a year. It’s also important to protect your personal information, including shredding documents with personally identifiable information. Be aware of different methods of fraud and be on the lookout for things like skimmers and phishing attempts. You may also wish to prevent your mail from staying in your mailbox for a long period of time, which makes it more vulnerable to theft. Alternatively, you can invest in a locking mailbox.
The Takeaway
Credit card fraud is widespread, but we’re lucky to have strong laws that protect us from losses. Nevertheless, you’ll want to report credit card fraud when you find it. And if you’re looking for a new credit card, compare credit cards on our marketplace, where you can see all of the latest offers.
Frequently Asked Questions
How can I report credit card scams?
How can I protect my identity from credit card fraud?
What steps can I take to protect myself from credit card fraud?
What is the first step in reporting credit card fraud?
Photo credit: iStock/martin-dm
LNTCC-Q424-005
About the Author
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.
