Credit cards wield enormous power in our lives, making them an appealing target for hackers. You can use them for nearly every purchase, from a visit to a local store to lifelong investments. As such, scammers skilled at the game of identity theft have discovered a new way to profit from different types of credit card fraud.
- Credit cards are instrumental in the modern world, but you should be wary of frauds.
- There are various types of credit card fraud and each has unique characteristics.
- Preventing credit fraud is critical in avoiding financial loss.
- You must focus on minimizing fraud risk by employing security measures.
What is Credit Card Fraud?
Credit card fraud is an unscrupulous use of credit card information to make purchases or take out loans. With the invention of upgraded eCommerce sites and devices, credit card fraudsters have a field day pinching card details.
The process can range from superficial skimming to more complex methods that use hidden cameras on ATMs or checkout counters. A dishonest person will use a small device known as a skimmer to steal data from the magnetic strip on the back of your card in a process known as credit card skimming.
The devices can also photocopy receipts or bank statements for later use. Due to increasing online transactions, credit card fraudsters can use phishing and other cyberattacks to access bank accounts and credit card information. In a nutshell, credit card fraud can occur anywhere, from online to a physical store.
On that account, what are the common types of credit card fraud? The list below will guide you on the most popular credit frauds and how to avoid them.
Once fraudsters have your information, the next step is to create fake cards for easier access to your funds. Account takeover fraud occurs when someone steals your credit card information and uses it for fraudulent transactions.
Scammers can change your login credentials for both online accounts and physical cards. Until you report the fraud, you are liable for any transaction made using your information.
Card-Not-Present (CNP) Fraud
In contrast to other frauds, scammers have no physical cards to hack into during a CNP fraud. Instead, this illegal activity can happen through online transactions, phone calls, or email. Phishing scams are the most common type of CNP fraud because they trick people into giving up their personal information and passwords.
A phishing scam is an identity theft involving emails or calls to trick people into providing credit card information. Fraudsters send out emails that appear to be from legitimate companies, asking you to update your information, such as your password or billing address.
If you click on the link provided in these emails and enter your login credentials, they manage to access everything needed for credit card fraud. It is difficult for card owners to detect CNP fraud because individuals cannot verify the scammer's identity.
Lost and Stolen Credit Card Fraud
Another common type of credit card fraud is stolen cards. In other words, you might forget your credit card at a restaurant or on the bus. If hackers come across it, they may use it to make purchases.
Scammers with experience may also intercept credit cards in the mail before they reach the cardholder. Since a physical card is lost before it gets to the rightful account owner, experts refer to this type of credit card theft as card-never-arrived fraud.
Credit Card Application Fraud
Scammers steal credit card information to open new accounts in the victim's name. Some apply for multiple credit cards with forged identification and then run you into debts before fleeing town.
Counterfeit and Skimming Fraud
During a counterfeit or skimming fraud, scammers use fake credit cards to make purchases. As mentioned above, a special device scans and records the information on your card's magnetic strip. The scammer will then use this information to create a counterfeit credit card that enables them to pay for illegal transactions.
Data Breach Fraud
Data breaches occur when hackers access a company's database, exposing customers' personal information. Scammers will then use this information to open new credit card accounts or make purchases. As we continue relying on technology and storing sensitive data online, this fraud is becoming more common.
Credit Card Skimming
Fraudsters will steal your credit card details at an ATM, gas station, or restaurant by placing a skimmer device over the card reader. The skimmer records your PIN as well as other important information. They then use this information to make online purchases or create fake credit card numbers for unauthorized transactions.
False Application Fraud
An imposter uses a stolen ID to commit credit card fraud in the process of legitimate transactions. They then apply for a loan in a bank account with no plans of paying it back. The fraudster may continue to create genuine-looking credit and debit cards that look exactly like an actual credit card. Unfortunately, this may happen without the knowledge of an account holder.
How payment fraud occurs? Hackers commit fraud by stealing a credit card number or payment information to make unauthorized purchases online.
How to Prevent Credit Card Fraud
With the ascent of technology that covers scammers' steps, detecting or preventing credit card fraud is never easy. As a result, victims rarely notice any fraudulent activity until they receive a credit card statement.
Yet, many credit card companies provide no liability for unauthorized transactions. Thus, a credit card company will not charge you for fraudulent transactions under your cards. On the other hand, a credit card provider may limit the fraud liability in the case of debit card fraud for various reasons. Based on verified sources, if a cardholder reports a stolen credit card within two hours, the credit card issuer may limit the liability to around $50.
The best way to protect yourself from credit card fraud is to remain vigilant. If you notice any suspicious transactions, report them to the credit card company immediately. While you cannot prevent credit card fraud completely, here are tips to minimize the risk.
- Withdraw cash from reliable avenues and shield your account number or PIN from bystanders while at it.
- Avoid weird card readers, especially those with sticky pads or located in dingy places.
- Consult dependable investment professionals based on their reputation and competency in giving much-needed advice. Reliable investment advice should be accurate, current, and not from a spoofed site. These illegal platforms mislead account holders to expose their card details through suspicious links.
- Avoid giving financial data in response to calls, texts, and emails from unfamiliar sources.
- Pick your mail as soon as it arrives. Fraudsters also steal financial statements or other data likely to give them a head start in fraud.
- Consider paperless statements to reduce the cases of stolen documents and card not present scams.
- Check your credit report and monthly statements regularly for any suspicious activity.
- Activate transaction alerts to track any changes in your credit accounts.
Do debit cards have the same protection as credit cards?
No. Unlike debit cards, credit cards have enhanced consumer protection against various frauds. In addition, most credit companies do not charge annual fees on credit cards.
Can I sue in case of a data breach?
Yes. No personal data should be misused, lost, or disclosed by credit card providers. If you suspect any data breach, hire a lawyer for rightful compensation. You can also file a complaint at the IC3 (Internet Crime Center) for swift justice.
Can banks track lost debit cards?
No. Unfortunately, banks cannot track lost debit or credit cards. However, most banks have smart chips that help protect your personal information and prevent fraud.
Can a debit card be hacked?
Yes. Professional hackers can crack even the most well-protected financial details. Still, there are noticeable advancements in how the industry uses secure techniques to store data lately.