Protect Yourself from Credit Card Fraud: A Guide for Consumers

The 2020 global pandemic locked up economies and limited the use of cash. As the circumstances forced more people to use plastic, fraudsters found more opportunities to steal identities and commit credit card fraud.

Key Points:

• Credit card fraud has exploded in recent years.
• Fraudulent transactions and new lines of credit can hurt your credit score.
• Monitor your credit report regularly for signs of suspicious activity, and contact your credit card issuer at the first sign of fraud.
• Prevent credit card fraud through common-sense measures such as monitoring your credit card statements, using strong passwords, and safeguarding your personal information.

Credit card fraud and identity theft have been booming in the US over the last few years. The parabolic rise of these crimes seems set to continue. Credit card fraud statistics are dire, but they make perfect sense against the backdrop of ever more widespread credit card use.

Credit Card Fraud Statistics Showcase a Worrying Trend

Looking at credit card fraud statistics makes more sense in the context of identity theft statistics, given that the former are a subcategory of the latter.

(Source: FTC)

Here are some statistics that show the scope of the issue:

• In 2019, out of 650,572 reported instances of identity theft, over 270,000 resulted from credit card fraud.
• In 2020, out of 1,387,615 cases of identity theft, according to the FTC, 393,207 involved credit card fraud.
• Credit card fraud has been the second most popular application of stolen identity data after Government documents and benefits fraud.
• In 2020, of the 393,207 credit card fraud cases, only 33,852 occurred on existing accounts, representing a 9% increase over the previous year.
• The remaining 365,597 instances of credit card fraud occurred on new accounts, representing an 85% increase over the previous year.

These numbers make it clear that identity thieves are very active and like to target credit accounts. They prefer to open new accounts in their victim’s names rather than fraudulently transfer money off their existing accounts. Fraudsters probably feel that their victims are less likely to quickly spot new accounts than to notice suspicious transactions on their existing accounts.

Credit Card Fraud and Your Credit Score

Credit card fraud distorts your overall credit picture. It can affect various components of your credit score, potentially dealing it a significant blow. In most cases, you can fix your score relatively quickly. In some instances, however, the damage might take longer to correct.

Credit card fraud will likely not cause you lasting financial damage, nor will it affect your credit score for several years. Most credit card issuers are quick to act on fraudulent transfers, and the law limits the liability of credit card users for fraud to $50. Many issuers observe zero liability policies in this respect.

Credit card fraud impacts almost every component of your credit score.

• Credit card fraud affects your payment history. Fraudsters run up debts on your accounts and leave them unpaid. Missing payments can bite into your credit score significantly. Such incidents tell your creditors and the credit bureaus that you can’t handle debt responsibly.
• Fraudulent transfers upend your credit utilization. When identity thieves open a new credit account in your name, they do it to max it out. Thus, they increase your credit utilization ratio well above the recommended 30%. They may even use up available credit on your existing accounts.
• New lines of credit inflict multiple hard inquiries on your credit report. Unlike the soft inquiries you make when you request a credit report, such hard inquiries harm your credit score.
• When a credit card fraudster opens multiple new credit accounts in your name, the average age of your accounts suffers. Such a development tells the credit bureaus that you can’t handle debt consistently.

Protect Yourself from Credit Card Fraud

Is there anything you can do to eliminate the threat of credit card fraud? While it’s impossible to eradicate this threat, you can do plenty to prevent problems and turn yourself into a less attractive target for fraudsters.

Prevention is always better than a cure.

• Make it a habit to check your credit reports regularly. Whatever the fraudsters do to your accounts, your credit reports record the activity and let you see it.
• Don’t use your credit/debit cards in sketchy locations, where thieves may install “skimmers” over the card readers.
• Create strong passwords for your online accounts, and do not give out your personal information to anyone.
• Only shop through secure websites. Make sure that there is an “HTTPS” in the URL of the page.
• Whenever you use sensitive information online, double-check the page you use for the operation. Scammers often create copies of popular pages to dupe users into handing them their personal information.
• Refrain from sharing sensitive information through social media.
• Do not carry your Social Security card and birth certificate with you.
• Be aware that some identity thieves can intercept your mail.
• Be wary of too-good-to-be-true offers, especially if you find yourself in a vulnerable position. Thieves love to prey on the vulnerable, like those struggling with credit card debt. If you need credit card help, do your research and draw your conclusions based on valid data. Only accept credit card help from a trusted entity.
• Never let anyone pressure you into giving up your personal information through lofty promises, threats, or coercion.
• Never give anyone sensitive information over the phone.
• Always review the notices you get from your creditors, healthcare and insurance providers, tax authority, etc.
• Opt for a credit card with zero liability on unauthorized transfers.

With due caution, you can avoid becoming one of the 1.4 million victims of identity theft.

How Do You Know That You Are a Victim of Credit Card Fraud?

The problem with credit card fraud is that if you don’t pay attention, you won’t notice the fraudulent transfers for some time. Such criminal activity leaves plenty of traces and clues, however. All you have to know is where to look.

Keep your eyes on your credit report.

• Your credit report is your best bet to identify credit card fraud quickly. Check it often. If you notice suspicious transactions, withdrawals, and new lines of credit popping up, you will know that someone has gained access to your accounts. An inexplicable number of hard inquiries should also raise a red flag.
• You may get notifications, bills, and statements for accounts you don’t know. Consider that a huge red flag.
• While it does not contain traces of unauthorized transactions, your credit report features errors in your personal information.
• Out of the blue, you find yourself unable to get more credit.
• You start receiving authorization requests for accounts you have not opened.
• You receive calls from creditors you didn’t know you had.
• You find yourself unable to access your accounts.

Identity theft can produce clues exceeding the scope of credit card fraud. If you find that someone has filed your tax return for you, consider your identity compromised, even if your credit report is clean.

With your personal information in criminal hands, it’s only a matter of time untill your credit accounts start suffering.

Paying for an anti-fraud service seldom makes sense, though it is an option. Such services merely alert you when they notice a problem. By paying them, you pay for something you can accomplish on your own with minimal effort.

Steps to Take if You Find Yourself a Victim of Credit Card Fraud

You just reviewed your credit report and found unequivocal proof of fraud. What do you do if you are a credit card fraud victim?

• Your first step is to notify your credit card issuer. As a result of your notification, your credit card issuer should close your cards and issue new ones. React as quickly as possible to deny the criminals the chance to do more damage.
• Change the PINS and passwords on your other accounts and credit cards. Someone who controls your personal information can compromise your financial instruments at will.
• Use a fraud alert. It is a free option, and it will prompt creditors to verify your identity before granting you a new line of credit.
• Report the identity theft to the FTC, credit bureaus, and the police. Involving the authorities may help you sort out the consequences of the fraud more quickly and efficiently.
• Monitor your credit card statements and sign up for transaction alerts. You can set such alerts to notify you of transactions exceeding a set limit, international transactions, and other actions. Review your credit report and dispute all suspicious activity on it.
• Consider setting a security freeze on your credit reports. Such a freeze prevents creditors from seeing your reports. Thus, they won’t extend new lines of credit to you for the duration of the measure.
• Do not relent in your efforts to clean up your credit report and rehabilitate your credit score. Don’t leave anything to chance. Pursue actions to set the record straight.

Although credit card fraud does not hurt you financially over the long term, it can have other, more subtle implications.

• Some victims may experience anxiety and depression as a result of credit card fraud.
• Victims of identity theft experience lasting emotional and mental trauma.
• Feelings of fear and helplessness may prevail after the resolution of credit card fraud.

Get Out of Debt and Lower the Chances of Credit Card Fraud

The more you use credit cards and the more credit cards you have, the more your chances of becoming a credit card fraud victim increase. If you are currently in credit card debt and you are looking for a way out, ClearOne Advantage can help. Call 866-481-1597 to discuss the credit card debt relief options available to you with a Certified Debt Specialist, and get a free savings estimate.

The data and statistics referenced come from multiple credible resources that are cited throughout. ClearOne makes no representations or warranties regarding the accuracy of the information from these various resources and is soley providing the content for informational purposes only.