Whether you’re dining out, shopping or paying bills, credit cards offer the convenience of quick transactions. They also make you a target for scammers whose tactics aren't always easy to spot. A little knowledge can go a long way in protecting your credit card data.
What are credit card scams?
Consumer credit card scams involve fraudulent or unauthorized activities aimed at gaining access to your credit card information, usually with the intent of making unauthorized purchases or selling your information to other criminals. Some scammers may also obtain your information to take over your credit card account. Because scammers are continually thinking up more sophisticated schemes, credit card scams remain a costly problem for consumers and businesses alike.
How does credit card scamming work?
Credit card scams work in several ways, which makes spotting them tricky. Scammers no longer need your physical credit card to make fraudulent purchases. They simply need your name and credit card information. Scams can vary in complexity, from large-scale hacking attacks to simple deceit tactics that trick you into giving your card information to a scammer. However, many fraudsters use similar tactics. Learning how these tactics work and what to watch for can help protect you from being victimized.
The 10 most common credit card scams
These are the most common ways credit card scammers obtain your card or other identifying information. Knowing how to recognize the most common scams may also help you spot other potential card scams that fraudsters devise.
1. Stolen credit cards
Physical credit card theft is probably the original credit card scam. A scammer may steal your card from your home or wallet or simply find a card you've lost. The thief can make quick purchases or sell your card information before you realize it's gone.
2. Phishing scams
A phishing scammer poses as your credit card company, utility company, the IRS or some other trustworthy entity to obtain your credit card number or account login information. They may use electronic communications, such as text messages or emails, or have you call a fake phone number to correct some error or issue with your account. Scammers will tell you that you must provide your card information to fix some problem or, sometimes, gain some financial advantage. You may be told you can claim a refund or interest rate reduction, for example — but only if you provide your information first. Sometimes, the scammer will direct you to a fake website that will capture any information you enter.
3. Credit card skimming
A credit card skimmer is a small device that collects data from your credit card's magnetic stripe without your knowing. The thief places the skimmer over or near the legitimate card reader at busy locations such as ATMs, gas pumps or point-of-sale terminals. When you swipe your card and complete your transaction, the skimmer records the information, which the scammer uses to create a fake card or use your information in other fraudulent ways. You usually don't discover the fraud until unauthorized charges appear on your account.
Credit card chip scams work similarly to skimming but target chip card terminals, often considered a safer point-of-sale device than magnetic stripe terminals. A device called a shimmer, once attached to a chip card reader, can capture and clone transmitted chip data during transaction processing.
4. Interest rate deduction scams
If you receive a call from a debt relief company claiming it can negotiate a lower credit card rate for you, possibly saving you thousands in interest, it may be someone running an interest rate reduction scam. The initial call may be a recording stating that it is a limited-time offer if you "act now." You connect to a live operator who will ask for your credit card information. The scammer may even ask for payment for the service and promise a money-back guarantee.
5. Card-not-present fraud
With card-not-present (CNP) fraud, a scammer illegally obtains your name, credit card number and card security code to conduct unauthorized transactions without the physical card. CNP fraud is common in transactions without face-to-face interaction that don't require proof of identity, such as online shopping. CNP fraud may also occur when you provide your card information via phone.
While many businesses have enhanced their fraud prevention policies and instituted stronger identity verification tactics, CNP fraud still represents a significant risk.
6. Public Wi-Fi scams
If you connect your laptop or mobile device to public Wi-Fi networks, such as at your local coffee shop or a hotel while on vacation, it’s best to be wary. Your information could be susceptible to scammers. Public Wi-Fi networks may be less secure than private networks, making them a popular target for scammers, who can monitor and record your credit card information and other sensitive data you may transmit while connected. Scammers may also set up a fake "paid" Wi-Fi network in a public location and capture your card data when you pay to log on.
7. Social Security benefits scams
If you receive Social Security benefits, be cautious of scammers posing as employees of the Social Security Administration. They may claim you've been overpaid benefits and must pay back the overage immediately by credit card. A scammer may go so far as to threaten to suspend your benefits or take legal action against you in hopes of scaring you into providing your credit card information to correct the problem.
8. Charity donation scams
With charity donation scams, a fraudster contacts you by phone, asking for a donation to a charitable organization or cause. They hope you'll make a donation using your credit card before looking too closely at the organization. You could also receive an email or text or see a social media post with a link to a phishing site disguised as a charity website.
9. Fake sweepstakes and competition scams
Have you ever received an email or letter claiming you've won a prize and only need to provide your credit card information to pay taxes, shipping and handling to receive it? It was probably a scam. The scammer may also present an option to pay a small fee to increase your chances of winning a prize. Any type of drawing or contest from an unknown entity that requires your credit card information should be extremely suspect.
10. Overcharge scams
The overcharge scam involves a scammer contacting you, posing as a representative from some service provider. The individual claims you've overpaid for the service and just needs your credit card information to process the refund. As with other credit card scams, the scammer could also try to direct you to a phishing website to process your refund.
Tips for avoiding credit card scams
Knowing how to protect your credit cards from scammers is crucial in today's digital world. Here are some tips for safeguarding your credit card information to reduce your risk of fraud.
Verify the legitimacy of websites, emails and messages
Some scammers excel at creating fake websites, emails and text messages that look like the real thing. If you receive an email or message from your bank or another trusted entity asking for personal or financial information or claiming a problem with your account, the safest thing to do is to contact the financial institution or company directly. Do not use the contact information or follow any links in the email or message. Also, be cautious of any unsolicited messages you receive, especially those that pressure you to act urgently on deals that seem too good to be true.
If a message directs you to a website, make sure the site is legitimate and secure before entering your credit card information. A secure website features a padlock symbol in the address bar. Misspellings, poor site design and a lack of contact information may be clues a site is fake. Take advantage of such platforms as Google’s Safe Browsing Site Status Tool. If you’re in doubt about a website, you can plug the URL into a platform to confirm the site's legitimacy.
Safeguard your personal information
Never share your credit card details or other personal information through unsecured communication channels like email, text messages or social media. If you receive paper credit card statements, shred them before throwing them away. A more secure option is to receive statements electronically. Also, enable multi-factor authentication (MFA) on your credit card accounts whenever possible. MFA is an extra layer of security that requires you to provide information beyond your password before gaining access to your account, such as answering a secret question or entering an authorization code sent to your phone or email.
Beware of public Wi-Fi networks
Avoid accessing sensitive accounts — like your bank or credit card accounts — when using a public Wi-Fi network. Shopping online may also expose your credit card information. If public Wi-Fi network use is unavoidable, use a virtual private network (VPN) to encrypt your data, making it harder for scammers to intercept your information.
Use strong passwords
Multi-factor authentication can help protect your credit card account if a scammer discovers your login information. Still, you should use upper- and lowercase letters, numbers and special characters to create a strong password. The more complicated your password, the harder it is to crack. Experts recommend that you don't duplicate passwords across accounts and that you regularly change your passwords to further secure them. If that task sounds too onerous — most of us have multiple passwords — you may want to invest in a password manager. Password managers generate complex passwords for all of your accounts and allow you to access them with one master password.
Enable transaction alerts
The earlier you detect you've fallen victim to a credit card scam, the easier it is to correct. Many credit card companies allow you to set up transaction alerts on your credit card activity. If you're alerted to an unfamiliar transaction, you can immediately contact your card provider to report the occurrence.
You may also decide to place a fraud alert on your credit report to prevent more exposure and damage to your credit. It’s free to set up a fraud alert, but it does involve contacting all three major credit bureaus. Placing a fraud alert on your credit report obligates creditors to take extra steps to verify your identity before processing a transaction or issuing you new credit.
Regularly monitor your credit card accounts
Keeping a close watch on your credit card accounts and statements can help you quickly identify unauthorized charges. Make it a habit to log in to your credit card accounts often to ensure you recognize all transactions. Then double check by carefully reviewing your monthly statements. Alert your credit card company if you discover any suspicious activity.
How to report credit card scams
Reporting credit card scams is critical in minimizing the damage to your finances if you do get scammed. If you notice an unauthorized transaction on your account or fear you've given your card information to a scammer, the first thing you should do is contact your credit card issuer through your card app, online or by phone. Your card issuer will typically cancel the card in question, issue you a new card and initiate the investigation of your claim.
Next, contact one of the three major credit bureaus, either Experian, Equifax or TransUnion, and request a fraud alert for your credit report to make it difficult for the scammer to open additional accounts in your name. The other two credit bureaus will automatically receive notification of the alert. With a fraud alert in place, creditors must get proof of your identity before approving an account in your name.
Finally, report the fraud to the Federal Trade Commission (FTC) at FraudReport.ftc.gov. If you think you're also the victim of identity theft, you can report it to IdentityTheft.gov.
How do scammers get your credit card number?
Credit card scammers have several ways to get your credit card number, including:
- Stealing your physical credit card
- Hacking your credit card account or a database that contains your credit card information
- Skimming your credit card information from a location that requires you to swipe or insert your credit card
- Tricking you into providing your card information through phishing websites, emails and text messages or directly over the phone
- Capturing card information sent over an unsecured network
Is credit card scamming a felony?
Credit card scamming is illegal in every state, but it isn't always a felony. When it comes to penalties for credit card fraud scams, jail time and fines vary by state and the severity of the fraud. For instance, credit card scamming jail time in California might be a year for a misdemeanor or up to three years for a felony. Prosecutors determine which to charge on a case-by-case basis. In Florida, the fraud must be valued at more than $100 to be considered a felony. Credit card fraud at the federal level has its own penalties.
Summary of Money's 10 credit card scams and how to avoid them
Scammers will continue to find new ways to get your credit card information, but many simply find a new twist on a current scam. Staying up-to-date on phishing scam variations can help protect you from some risk. You may be unable to prevent other types of credit scams as efficiently, however. There is no foolproof credit card scam protection, but you can minimize damage by enabling transaction alerts and regularly monitoring your credit card accounts. If you've fallen victim to a credit card scam, contact your card issuer immediately, place a fraud alert on your credit and file a report with the FTC.