Credit card fraud: how to avoid becoming a victim

Credit card fraud is one of the most common—and costly—forms of fraud in the United States. According to a 2022 Nilson Report, which monitors the global payment card industry, credit card fraud will cost the United States economy about $165.1 billion over the next ten years. 

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Credit card fraud can take many different forms, from skimming (where malicious card readers are inserted into store terminals) to online hacking. In this article, we’ll do a deep dive into these various types of credit card fraud, and tell you how you can protect yourself from it. We’ll also explain what to do if you suspect you may be a victim of credit card fraud. 

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Read on as we describe the ins and outs of credit card fraud. 

What is credit card fraud and how does it work?

Credit card fraud is a term used to describe any unauthorized use of your credit card number. A bad actor may do this to purchase goods, make a payment towards an outstanding balance, or open new accounts.

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If left unchecked, credit card fraud can cause a detrimental impact on your credit score and credit report, in addition to the loss of money.

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The good news is that if you catch it early, you can prevent any long-term damage. You’re also not liable for fraudulent activity, though you may face some challenges in getting fraudulent charges removed from your credit card account.

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Due to its prevalence, credit card fraud has become a central focus in enterprise risk management.

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Types of credit card fraud

Credit card fraud can occur in multiple ways. Some of the most common types of credit card fraud include:

• Phishing: This type of credit card fraud involves bad actors sending emails that look like messages from financial institutions to obtain your account login information and perform account takeovers.
• Skimmers: This is a particularly prevalent form of credit card fraud whereby credit card information is obtained by malicious card readers inserted into pumps at gas stations, store terminals, or ATMs. Every time a card is swiped, the reader logs the data. 
• Phone and mail scams: This type of credit card fraud involves scammers using email and phone schemes to dupe cardholders into handing over their credit card details. 
• Online purchases: In this type of scheme, scammers break into online stores and steal customer card data or simply intercept it as it’s transmitted from the customer’s computer to the company’s server.
• Hacking: If you have credit info saved on your phone or laptop, hackers may be able to access it remotely. A common way this may occur if hacking through public WiFi. VPN’s are a good shield against online info theft.
• Physical credit card theft: Some con artists simply steal a physical credit card (or recover a lost one) and use it before the victim realizes it’s gone.
• Credit card application fraud: Credit card application fraud is a type of identity theft in which fraudsters use stolen or fake personal information to apply for credit cards. This particularly insidious form of credit card fraud that can be difficult and time-consuming to resolve.

How to detect and avoid credit card fraud

Use virtual credit cards

Online purchases are one of the most common ways for scammers to get your data. A virtual card is a great alternative to avoid having your business credit card information stolen.

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Using a virtual credit card gives you the ability to keep your primary account information out of the hands of scammers, as well as the opportunity to quickly shut the card down after you use it for your purchase. You can create a new card any time you need it.

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Some modern options, like Ramp virtual cards with additional features like easy vendor management, complete control over spending including fine-tuned spending limits, and accounting integrations for better expense management.

Avoid unsecured websites

SSL security is one way to help ensure that transactions you make using websites are secure. Before you make any purchase online, look to the left side of the address bar. If you don’t see a locked padlock icon, the website doesn't have an SSL security certificate and is not secure.

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Use tap-to-pay where possible

Most skimmers require the victim to swipe their card in order for the fraudster to get the card information. This means that for the most part, when you use the tap-to-pay features of your card, fraudsters won’t be able to get your information. Although this is a way to reduce your risk, some fraudsters have developed ways to steal information from tap-to-pay cards as well, so this isn’t a 100% effective solution.

Take advantage of mobile wallet services

Mobile wallets utilize the tap-to-pay feature, but with an added level of security. When they transfer your account information to the merchant, they use tokenized data. This means that even if a con artist does intercept the communications, they won’t be able to steal your card data as it’s only a token for the specific transaction you made.

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There’s a wide range of digital wallet options to choose from, such as:

• Apple Pay: Apple’s mobile wallet solution that’s popular among iPhone owners.
• Google Pay: Google’s mobile wallet solution that’s popular among Android users.

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Although the two options above are the most popular, they’re far from the only options available. Do your research to find a mobile wallet option that works well for you.

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Keep in mind that while payments with mobile wallets often add layers of security, there’s no 100% secure electronic payment option. Mobile wallets may be targets for phishing attacks, data breaches, and other forms of credit card fraud.

Keep an eye on your credit card statements

It’s also important to keep an eye on your money. No matter what security measures you take, a fraudster might still find a way to access your account.

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Protect yourself by paying attention to your credit card statements and looking at every transaction. That way, you’ll notice any fraudulent purchases if they occur.

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What to do if you suspect credit card fraud

If you suspect fraudulent activity on your account, don’t panic. You have a clear course of action. Follow these steps to report and respond to the incident:

1. Contact your credit card company. They’ll review the fraud and protect you with zero liability for unauthorized charges under federal law. If the charge was fraudulent, you’ll get your money back. In the meantime, your credit card company will issue you a new card.
2. Check your other accounts to make sure none of them have been compromised as well. If they have, contact the issuers of those accounts.
3. Update the passwords on all of your accounts to ensure fraudsters don’t have access.
4. Notify the relevant credit bureaus (Equifax, Experian, Transunion) to ensure the fraud doesn’t impact your credit report. They share this info with one another, so you will only need to inform one bureau. They will place an alert and anyone trying to open a credit card in your name will be reported.
5. File a police report. Police may be able to investigate and find the culprit.
6. Contact the Federal Trade Commission (FTC). You can file an identity theft report at FTC.gov. Thoroughly explain the fraudulent charges and provide as much detail as you can.
7. Be patient. It may take some time for your credit card issuer to complete the review of the fraudulent transactions. You might also have to put in some work to get the charges removed. Nonetheless, if the transactions are deemed to be fraudulent, you’ll be refunded the amount of the transactions plus any associated interest and fees.

Verify that the transaction was truly fraudulent

It is perfectly normal to panic when you don’t recognize a charge on your account. But before jumping to conclusions, ensure that this is truly fraudulent activity.

1. Is there another authorized user that may have made the purchase? 
2. Is a company appearing under a different name than you may have expected? 

In many cases, wrong charges may just be a matter of a merchant mistake. Try to contact them and sort it out before jumping to file a report. It will likely be quicker to clear up issues with them rather than your credit card provider if that is the case.

How did someone use my credit card without having it?

Using someone's credit card without physically possessing it is a common tactic in credit card fraud. There are several methods by which fraudsters can use your credit card information without the card actually being present, which include making online purchases, placing orders over the phone, creating duplicate cards, and adding your credit card to their digital wallet to make purchases. These card-not-present transactions are pervasive in today’s digital environment.

Can I dispute a credit card charge that I willingly paid for?

Yes, you can dispute a credit card charge that you willingly paid for under certain circumstances, even if you initially authorized the transaction. Common reasons for disputing a charge include:

1. Goods or services not received

• If you paid for an item or service but did not receive it, you can dispute the charge even though you authorized the transaction.

2. Incorrect amount charged

• If you were charged the wrong amount (e.g., overcharged or double-charged), you can dispute the discrepancy.

3. Defective or substandard products

• If the product or service you received was defective, damaged, or not as described, you have grounds to dispute the charge.

4. Billing errors

• Mistakes like incorrect billing dates, unauthorized additional fees, or clerical errors may warrant a dispute.

5. Cancellation of goods or services

• If you canceled an order according to the seller's terms but were still charged, you can dispute the payment.

6. Fraudulent or unauthorized charges

• Even if a charge initially seemed legitimate, if you later discover it was fraudulent or unauthorized, you can file a dispute.

Things to consider before disputing:

• Attempt to resolve with the merchant first: Most credit card issuers require you to try resolving the issue with the merchant before filing a dispute.
• Documentation: Keep records of your purchase, communication with the merchant, and any other evidence to support your claim.
• Time limit: There are usually time limits for disputing charges, typically 60 days from the date of the statement where the charge appears.

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Stop fraud in its tracks with Ramp virtual credit cards

There’s nothing you can do to eliminate the threat of con artists and identity theft. However, there’s plenty you can do to stop fraudsters from being able to attack your company’s financial wellbeing. One of your best courses of action is to use Ramp.

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Ramp is an all-in-one money management and spending platform. You can access as many physical and virtual spending cards as you need, monitor your transactions in real time, and set up alerts to alleviate fraud risk.

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Ramp doesn’t just help you avoid fraud. It also integrates with your accounting software for better bookkeeping and faster closings. You can even empower your employees with spending cards of their own.