Credit card fraud occurs when unauthorized users make purchases or obtain cash advances in your name. This can occur with an existing account, via theft of your physical credit card, account numbers or PINs, or by opening new credit accounts in your name. Once in, these thieves can run up charges and stick you and your credit card company with the bill.
While the Fair Credit Billing Act protects consumers from liability over $50 for unauthorized charges (many issuers offer $0 liability), dealing with credit card fraud has other unexpected costs. It can take months for credit card issuers to investigate fraud, and lingering issues can result in damage to your credit, which also takes time to remedy.
Common types of credit card fraud
Fraudsters use a variety of scams to illicitly obtain card information or open new accounts in victims’ names. Some current card fraud methods include:
- Card theft: The act of snatching a physical credit card, typically from a restaurant table or grabbing an entire wallet or purse. Some criminals try to steal newly issued cards from mailboxes. If your card goes missing, or if you’re notified you should have received a card that never arrived, inform the issuer immediately.
- Account takeover: A criminal contacts your card issuer and uses your personal information to change access PINs, passwords, mailing addresses and other details so they can control your account (and lock you out). Depending on how often you use your account, this can take a while to notice and resolve.
- Cloned cards: Devices called “skimmers” that fit over card readers on gas pumps and retail sales terminals can allow thieves to secretly steal your card number when you swipe, then make a duplicate for their illicit use. EMV (which stands for Europay, Mastercard, and Visa) chip-equipped cards have made this process much more difficult.
- Card-not-present theft: This is the fraudulent use of a credit card account without possession of a physical card. Fraudsters might obtain your information through phishing or hacking. The thief doesn’t need the physical card since online purchases only require that they know your name, account number and security code.
Steps to take if you’re the victim of credit card fraud
If you’ve discovered fraudulent activity on your credit card account, here’s how to resolve the situation. Note that the steps don’t have to necessarily be in this order.
1. Notify your credit card issuer
Immediately contact your credit card issuer with any fraudulent transactions. You may need to call the number on the back of your card, though some issuers allow for fraud reporting in their app or on their website. If fraud is confirmed, the issuer will likely cancel that card and issue you a new one with different numbers.
2. Contact the credit bureaus and place an alert
This requires potential new lenders to verify your identity before issuing any new accounts in your name. You can cancel the alert at any time. When credit card fraud goes undetected, thieves have a chance to run up charges in your name that they never intend to pay. Once you’ve discovered the situation and proved you didn’t authorize the charges, creditors and credit bureaus can help you erase any damage.
3. Report the credit card fraud to law enforcement
If you’ve confirmed that you’re a fraud victim, you may want to report the crime to law enforcement. Visit the Federal Trade Commission’s IdentityTheft.gov website, where you can file an identity theft report. This is used by law enforcement agencies in their investigation, and you can then follow up with local law enforcement, if desired.
Not every case of identity theft necessitates getting the police involved, but it can assist in investigations and might help you recover other belongings that may have been stolen along with your credit cards.
Reviewing your credit report is a good way to monitor for fraud. Look out for fraudulent credit card accounts, missed payments or increased balances that may appear as a result of the crime. Fraud can harm your credit score in a few ways:
- Late or missed payments: If a fraudster opens a credit card account in your name and it goes unnoticed, any missed or late payments could be reported to the credit bureaus in your name. Your credit score could suffer since payment history is the most important factor, accounting for 35% of your FICO® Score*.
- High credit utilization: If a fraudulent credit card, or one of your own cards, is being used to run up bogus charges, your credit utilization rate—the percentage of your borrowing limit represented by your outstanding balances—could skyrocket. Credit utilization is nearly as important as payment history in determining your credit score. The higher your utilization rate, the more your score could suffer.
If this happens to you, contact the creditor who reported the fraudulent information to the credit bureaus and they should be able to clear it up. If they are unable to help, consider disputing the information with the credit bureaus.
For more information about credit card fraud and security, see the following articles:
- 5 signs that your credit card has been hacked
- Ways to avoid credit card fraud
- 5 common credit card scams and how to avoid them
*FICO® is a registered trademark of Fair Isaac Corporation in the United States and other countries. Barclays and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Barclays and Fair Isaac do not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating. FICO and “The score lenders use” are registered trademarks of Fair Isaac Corporation in the United States and other countries.
A credit score is a 3-digit number calculated using information on a credit report that serves as a numerical representation of a person’s creditworthiness. A credit report is a summary of your credit activity such as the payment history and status of your credit accounts which potential lenders use to offer you credit and on what terms. Your FICO® Credit Score and key factors are based on data from third-party providers who are not affiliated with Barclays. Barclays does not guarantee the accuracy of any credit information that is provided to you by these third parties.