Welcome to every consumer’s nightmare.
For years, you’ve have used credit cards for everything from gas to groceries to going out on the town and never thought twice about the cashier processing your card.
For years, you’ve been buying (and sometimes selling) goods and services online and, if necessary, gave up whatever personal information (credit card number; address, social security number, bank account number) was needed to complete the deal.
Then one night, you see a news clip about credit card scams and think: “That can’t possibly happen to me … could it?”
- News item: Wells Fargo employees secretly create millions of unauthorized bank and credit card accounts to boost their sales figures and pocket some extra cash.
- News item: Accounts for Spotify, Netflix and Hulu begin showing up on your bill — unnoticed at first — because your credit card number was stolen.
- News item: An official-sounding person claims there’s a warrant for your arrest due to a jury-duty no-show, then asks for personal information (including your credit card number) so the matter can be cleared.
- News item: An e-mail says personal data must be immediately provided before a new chip credit card can be issued.
All these scams actually have occurred. Many similar examples of identity theft are happening right now.
And yes, it could happen to you, if it hasn’t already.
Avoiding Credit Card Fraud
More news. This time, good news.
There are ways to alleviate these modern-day crimes. We can recognize problems and implement solutions. We have the recipe of how to avoid credit card scams and sniff out the most common credit card fraud.
The ingredients include some healthy skepticism, education and vigilance.
To protect yourself from credit card fraud, start by securing your credit cards. 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. If you see a purchase that is questionable, contact your card issuer.
You generally will not have to pay for charges that were not made by you. Once you determine an account has been compromised, cancel it and arrange for a new account with your card issuer. It also helps to get a small office shredder for home use, so you can shred any documents with credit card information on them.
Common Credit Card Scams
Each year, about 174 million Americans make trillions of dollars in credit card transactions on roughly 636 million credit card accounts.
That’s a lot of money getting passed around. And where there is money, there is a scammer who seeks to take away that cash using clever (but nefarious) methods.
There are laws in place to help protect people from unfair practices by legitimate banks and credit card companies, but they don’t address the many schemes criminals use to steal or compromise their credit cards, credit card histories and other personal information.
The most common fraudulent practices include:
- Stealing a credit card or unauthorized use of data associated with an account.
- Identity theft. That’s where thieves use fake or stolen documents to open an account in someone else’s name or take control of an existing account.
- Stealing credit-card information during legitimate transactions. It’s called “skimming’’ and it most often happens at retail stores, ATM machines, gas stations restaurants, bars and call centers.
- Carding, which is a process where computer programmers generate a sequence of credit card numbers, then test them online to see which belong to valid accounts.
Credit Card Fraud vs. Identity Theft
It’s worth differentiating between credit card fraud and identity theft.
Size and Scope — Credit card fraud could simply mean a few extra charges on your account because of stolen information. Identity theft is much broader, usually involving multiple pieces of information (address, social security number, birthdate, etc.) that allow criminals to actually impersonate you.
Financial Liability — Most credit card companies will not hold you liable for charges if your information was stolen (or there might be a small liability limit, such as $50). But since identity theft seeps into so many areas (banks, telephone companies, government records, insurance companies), it’s much more difficult to recover full compensation for all of the potential damage. In fact, the process might take years.
Potential Impact — Credit card fraud can be limited to the stolen account’s information. Identity theft has great repercussions because criminals can impersonate you to open fraudulent financial accounts or take out debt in your name.
Ease of Correction — Credit card fraud can generally be cleared up in a matter of days by contacting the card issuer. Unauthorized charges can be reversed. Cards can be cancelled. Identity theft is not nearly that easy. You will likely be dealing with banks, insurance companies, debt collection agencies and even law enforcement for months, maybe even years before the issue gets resolved.
How to Avoid Credit Card Scams
As you can see, credit card scams range from petty theft to calculated criminal activity. Some deceptive practices require the unwitting participation of consumers. There might be sophisticated technology or there could be a compelling pitch, which is designed to fool a victim.
Here are some credit card scams — and some tips to avoid them:
How Phishing Works: By masquerading as someone trustworthy, it can be an easy way for the scammer to acquire user names, passwords, personal identification numbers (PIN) and other credit card details. How can it happen? Maybe a consumer received an e-mail that reports a suspicious transaction on their account. That consumer might be asked to confirm the account’s card number so the alleged bank can “investigate.’’ Once that information is provided, someone can break into and compromise the account. It can all be easily accomplished over the telephone.
How to Avoid Phishing: Never give your account number(s) to anyone … especially online. If someone calls with a claim of suspicious activity, call your bank or credit card company to verify if the problem is real.
How Misleading Advertisements Work: Whether it’s in print, on television or over the Internet, there are always attempts to sign up people for new credit-card accounts. There are offers (or “guarantees’’) of easy credit, lowered rates, no fees or high credit limits — all very appealing for individuals who can’t qualify for accounts with established credit-card companies.
How to Avoid Misleading Advertisements: Pretty simple, really. Use common sense. If you are refused credit by established companies, it can’t be that easy through other sources. It’s nearly a sure thing that these fly-by-night companies are looking to take your money.
Credit Repair Promises
How Credit Repair Promises Work: You will find companies that promote their ability to remove negative credit information from someone’s history (even if it’s accurate information). According to the Federal Trade Commission, such claims are illegal.
How to Avoid Credit Repair Promises: There’s only one cure for a bad credit score — time, persistence and an honest effort to pay your bills on time. If there is incorrect negative credit information on your credit report, it can be addressed directly by contacting the credit agencies. Be sure to recognize the credit repair scams warning signs.
How Text Alerts Work: You receive an emergency text on your cell phone, alerting you to a “problem’’ with your account. You are asked for the three-digit security number on the card, so the account can be “fixed.’’
How to Avoid Text Alerts: Delete them. Never respond to phone texts from unknown sources.
How Malicious Software Works: Some Web sites download malicious software, such as spyware, key-loggers, viruses and/or pop-up ads. They ask for (or steal) passwords and other personal information.
How to Avoid Malicious Software: Install a good security system on your computer to protect you from malicious software. Meanwhile, never open an attachment from an unknown source.
How 1-900 Numbers Work: Consumers are asked to dial a 1-900 number for information about a credit card. Meanwhile, the scammers make money off charges for the call.
How to Avoid 1-900 Numbers: It’s a dead giveaway. Never dial 900. NEVER! Legitimate businesses will always provide a free 1-800 number and not ask you to pay for the phone call.
Fake Trial Offers
How Fake Trial Offers Work: Trial offers are given to consumers, who usually accept something without knowing they must cancel the account to avoid having their credit cards charged after the trial period ends.
How to Avoid Fake Trial Offers: Read the fine print and know the deal before committing. If you are locked into a trial offer that requires cancellation, get that done in writing and over the phone. If there is pushback, threaten to call the Better Business Bureau or an attorney. These companies already might be skirting the law. They don’t want to deal with an irate consumer.
Online Auction/Shopping Sites
How Online Auction/Shopping Sites Work: These sites often manipulate consumers into buying items through the use of deceptive bidding schemes. Sometimes, they offer products that don’t exist or live up to their claims.
How to Avoid Online Auction/Shopping Sites: Run. Stay away. Avoid these sites at all costs. You may have been born at night, but not last night. Use some common sense and don’t fall into this trap.
More Precautions for Credit Card Scams
There are several sound practices — and warning signs — when you are seeking how to avoid credit card scams.
Keep Credit Cards and Card Information Safe from Thieves — You must keep your cards safe. Always keep them in a purse or wallet, close to your body, so they can’t be snatched away. In high traffic areas, it’s better to carry a smaller purse because it’s a smaller target.
If you know you’ll only be using one or two credit/debit cards that day, consider leaving the other cards at home. Always carry your cards separately from your cash (most people don’t). If your wallet is stolen, your cards will be stolen as well.
Never expose your card any longer than necessary. Remember that thieves can take pictures of your credit card with a camera or cell phone. When the purchase is made, put the card away immediately. And always make sure you have the credit card in your possession before leaving the store or restaurant. It’s easily misplaced and it could be damaging if that information is exposed, even for a short time.
Never lend your credit card to anyone — and know where it is at all times.
It’s also a good practice to shred your credit card billing statements because they might have the full card number printed on them. For another level of security, you can put the shredded pieces in different trash bags (yes, there are actually eager thieves who try to piece together shredded pages).
Check Statements and Receipts Closely — The first sign of credit card fraud is usually seen through unauthorized charges. If you notice a charge you didn’t make (no matter how small), report it immediately to your credit card issuer. The company can tell you whether to close the account and get a new account number.
When you receive your credit card bill, go over it carefully and reconcile the charges, like you would do with a bank account.
Always verify the amount on your credit card receipt before signing it. If there are blank spaces, write $0 in those spaces or draw through them before signing. Be sure to store all receipts in a safe place.
Be Careful When Giving Out Card Information — You must be on guard at all times.
Only give your credit card number (or other sensitive information) on calls you initiate. When calling the credit card issuer’s customer service, only use the number on the back of the credit card. Don’t return calls to a phone number left on your answering machine or sent by e-mail/text message. It could be a scammer who is posing as a credit card issuer.
Never click on e-mail links from any business that uses your personal information, even if it looks legitimate. It’s often a phishing scam that lures you into entering your login information on their fake website. Instead, go directly to the official business website and log in to your account.
When using your credit card online, only use secure websites where you are certain about their legitimacy. How can you be sure? Look for https:// in the address bar and lock in the lower right corner of your Internet browser.
Credit Card Company Fraud
In all of your credit card transactions, beware of any companies that utilize these methods.
- They ask to pay up front for credit-repair services before anything is provided.
- They don’t tell you their services are similar to those you can do for free.
- They suggest you create a “new’’ credit identity by applying for an Employer Identification Number instead of using your Social Security number.
- They discourage you from directly contacting any of the three major national credit-reporting companies.
All of that seems suspect, right? In short, it always pays to use your head and rely on common sense. If something seems to good to be true … it probably is. With skepticism, education and vigilance. you can protect yourself from credit card scams and fraud.