Each year, more than 180 million Americans make trillions of dollars in credit card transactions on roughly 610 million credit card accounts. This staggering amount of money has attracted the attention of thousands of corrupt businesses and individuals seeking to make dishonest profits from consumers.
Although laws help protect people from unfair practices by legitimate banks and credit card companies, they remain vulnerable to the many schemes criminals use to steal or compromise their credit cards, credit card histories and other personal information.
Some common fraudulent practices include:
- Theft of a credit card or unauthorized use of data associated with an account.
- Identity theft, in which thieves use fake or stolen documents to open an account in someone else’s name or to take control of an existing account.
- Skimming, which involves stealing credit-card information during legitimate transactions.
- Carding, whereby computer programmers generate a sequence of credit card numbers and then test them online to see which belong to valid accounts.
How to Avoid Credit Card Fraud
The most important thing you can do to protect yourself from credit card fraud is making sure you never lose your card(s). If your card is lost or stolen, contact your card issuer immediately and cancel the account.
Also, check your statement carefully each month for dubious charges and contact your card issuer with any questions.
You will generally not have to pay for charges that were not made by you. Once you determine an account has been compromised in any way, cancel it and arrange for a new account with your card issuer. Get a small office shredder for home use and shred any documents with credit card information on them.
Many Scams Target Consumers
Other deceptive practices are classified as scams — some of which require the unwitting participation of consumers. Some scams use sophisticated technology, while others simply rely upon a compelling pitch to fool a victim.
Here are some of those scams and tips to avoid them:
- Phishing, a technique for acquiring user names, passwords, PIN numbers and other credit-card details by masquerading as someone trustworthy. For example, a consumer may receive an e-mail reporting a suspicious transaction on his account. The consumer may be asked to confirm the account’s card number so that the “bank” can “investigate.” The information gathered can then be used to break into and compromise the user’s account. This scam also can be accomplished over the telephone.
How to avoid phishing: Never give out your account number(s) to anyone, especially over the internet. Always contact your bank first to verify if the problem is real.
- Misleading advertisements in print, on TV and over the internet that attempt to sign up people for new credit-card accounts with offers or “guarantees” of easy credit, lowered rates, no fees, and/or a high credit limit for individuals who, for one reason or another, cannot qualify for accounts with established credit-card companies.
How to avoid misleading statements: Use your head. If the established credit card companies are refusing you credit, you can be pretty sure that the fly-by-night companies are just out to take your money.
- Promises to “repair” a poor credit report. According to the Federal Trade Commission, if a company is promoting its ability to remove negative, but accurate, credit information from someone’s history and actually does so, it is breaking the law.
How to avoid false promises: The only cure for a bad credit score is time and persistence in paying your bills. If there is something legitimately wrong or incorrect on your credit report, you can contact the credit agencies yourself and attempt to address the problem.
- Emergency texts on a cell phone alerting to a “problem” with an account and then asking for the three-digit security number on the card in order to “fix” it.
How to avoid fake alerts: Delete, delete, delete. Never respond to phone texts from unknown sources.
- Web sites that download malicious software — spyware, key-loggers, viruses and/or pop-up ads — that ask for, or steal, passwords or other personal information.
How to avoid spyware: Make sure that you install a good security system on your computer to protect you from malicious software and never open an attachment from an unknown source.
- Ads that ask a consumer to dial a 900 number for information about a credit card. The scammers make money off charges for the call.
How to avoid 1-900 scams: The 900 number is a dead giveaway. A legitimate business will not ask you to pay for the phone call but will provide a free 800 number.
- Trial offers that consumers accept without knowing they must cancel the account if they don’t want their credit cards to be charged after the trial period ends.
How to avoid fake trial offers: Read the fine print. If you do get locked into a trial offer that requires cancellation, do so in writing and over the phone. Threaten to call the Better Business Bureau or say you are calling your lawyer. These companies are usually skirting the law and won’t want any trouble from an irate consumer.
- Credit offers in which the fine print requires some form of security, or where the promise of collateral is otherwise hidden. Defaulting on a secured credit account can cause a consumer to lose property.
How to keep your credit rating: Never sign a secured loan contract. Credit card accounts are non-secured loans.
- Online auction sites that manipulate users into buying items by the use of deceptive bidding schemes.
Hint: Stay away from these sites – period.
- Online shopping sites that offer products that either don’t exist or don’t live up to their claims.
Hint: Stay away from these sites.
More Precautions to Consider
In addition, beware of companies that:
- Ask you to pay up front for credit-repair services before they provide anything.
- Fail to tell you that their services are similar to those you can do yourself for free.
- Try to dissuade you from contacting any of the three major national credit-reporting companies directly.
- Suggest you invent a “new” credit identity by applying for an Employer Identification Number instead of using your Social Security number.
- Advise you to dispute information in your credit report, regardless of its accuracy.
When it comes to credit scams, the old adage is generally accurate: “If it sounds too good to be true, it probably is!” Protect your credit by using your head and learning to recognize the danger signs of deception and deceit.