Credit card fraud is one of the most pervasive crimes faced by individuals and financial institutions today. With millions of credit card numbers stolen yearly, it represents a financial threat to individuals and a significant challenge for banks and companies that strive to protect their customers. In this blog, we will discuss what credit card fraud is, how it happens, and how to protect yourself from falling victim to it.

What Is Credit Card Fraud?

Credit card fraud is the unlawful usage of an individual's credit card or card information for personal gain. It often involves stolen card details to make unauthorized transactions like purchases or cash withdrawals. According to the Federal Trade Commission (FTC), it is one of the most common forms of identity theft in the U.S., with over 426,000 complaints in 2023 alone. Despite ongoing efforts to combat fraud, criminals continue evolving tactics, making detecting and preventing it increasingly difficult.

Types of Credit Card Fraud

Credit card fraud can take many forms. Broadly, it falls into two main categories: new account fraud and existing account fraud.

New Account Fraud
This type of fraud involves a criminal using stolen personal data to open a new credit card account in the victim's name. The fraudster will then rack up charges on the new account, leaving the victim responsible for paying it back. As this type of fraud usually happens without the victim's knowledge, it is more difficult to detect and often requires the victim to regularly monitor their credit reports.

Existing Account Fraud
Credit card fraud happens when a criminal takes a physical card or uses stolen account details, such as the card number or personal information, to access an existing account. Fraudsters may make online or in-person purchases, withdraw cash from ATMs, or engage in account takeover, using stolen login information to change account details like passwords or addresses, locking the victim out.

How Does Credit Card Fraud Happen?

Here are some of the most common methods of credit card fraud:

Phishing
Phishing is a common tactic where fraudsters impersonate legitimate organizations via emails, texts, or phone calls to steal delicate data like credit card numbers, Social Security numbers, or bank details. These communications are often from trusted sources such as banks or government agencies. Once victims click on a malicious link or provide their information, criminals use it to commit fraud.

Skimming
Skimming entails using a small device called a skimmer to capture card details. These devices can be placed on card readers at ATMs, gas station pumps, or even inside retail stores. When a person swipes their card, the skimmer records the card details. Criminals then use this information to make fraudulent purchases or clone the card.

Data Breaches
Hackers often target large organizations to steal huge amounts of personal data, including credit card information. This data can then be sold on the dark web to criminals, who use it to open fraudulent accounts or make unauthorized transactions. Data breaches often affect individuals unknowingly, as they may not even be aware that their data has been compromised until fraudulent activity is discovered.

Account Takeover
Account takeover happens when a fraudster uses stolen personal information, like your birth date or social security number, to gain control of an existing credit card account. They may change your account details, such as the password or address, lock you out, and make unauthorized transactions. This type of fraud is often combined with tactics like phishing or data breaches.

Card Not Present (CNP) Fraud
As online shopping has grown in popularity, CNP fraud has become increasingly prevalent. This type of fraud happens when an offender gets your credit card details and uses them to purchase online, over the phone, or through non-face-to-face transactions. The thief does not need the physical card but only the card information (number, expiration date, and CVV code).

Card Present Fraud
Card-present fraud occurs when a fraudster physically steals your card and uses it to make in-person purchases or withdraw cash from an ATM. While this type of fraud has decreased due to chip-and-pin technology, it remains a concern, especially in locations with less secure transaction methods.

How to Identify Credit Card Fraud

The best method to capture credit card fraud early is by regularly monitoring your financial activity. Here are some key signs of fraud to look out for:

• Suspicious Transactions on Your Statement: Always review your credit card statements carefully. Look for any transactions you don't recognize. Fraudsters sometimes test stolen information by making small charges to see if the card works before committing larger fraudulent transactions.
• New Accounts or Credit Applications: Check your credit report regularly for any new accounts or credit inquiries you didn't authorize. These could be signs that someone has opened a new credit card account in your name.
• Debt Collection Notices: If you receive letters or calls from debt collectors regarding unpaid bills or credit accounts you don't recognize, it could indicate that someone has used your information to open a fraudulent account.
• Unexplained Charges: Be alert if your credit card's available credit or cash withdrawal limit suddenly drops. This could be a sign that a fraudster has been using your account.

Zero Liability Protection and Legal Protections

Many credit card companies offer zero liability protection, meaning you're not responsible for unauthorized charges if your card is stolen, as long as you report it promptly. Under federal law, you're liable for no more than $50 of unauthorized charges if reported within 60 days. Both federal and state laws, including those in California, protect consumers by limiting their liability for fraudulent transactions, with severe penalties, including fines and imprisonment, for those convicted of credit card fraud.

How to Prevent Credit Card Fraud

While it's impossible to eliminate the risk of credit card fraud entirely, there are steps you can take to protect yourself:

1. Keep Your Cards Secure: Never leave your credit cards unattended or in an insecure location. Avoid sharing your card details or personal information over unsecured networks or with untrusted individuals.
2. Use Contactless Payment Methods: Whenever possible, use contactless payment systems including mobile wallets or tap-to-pay cards. These systems are more secure and harder for criminals to exploit than traditional methods.
3. Monitor Your Accounts Regularly: Check your credit card statements and credit reports regularly. Create alerts for unusual transactions, and review your reports for signs of fraud.
4. Shred Sensitive Documents: Make sure to shred old credit card statements, receipts, or any documents that contain personal financial information.
5. Use Strong Passwords: If you store your credit card information online, use strong, unique passwords for each account. Enable multi-factor authentication wherever possible.
6. Be Cautious with Online Purchases: Only shop on trusted websites with secure, encrypted payment methods. Be wary of saving your credit card information on unfamiliar sites.

What to Do If You Are a Victim of Credit Card Fraud

If you suspect that you have fallen victim to credit card fraud, take immediate action:

1. Notify Your Credit Card Issuer: Contact your bank or credit card provider to report any questionable transactions and request a new card.
2. Lock Your Account: Some card issuers allow you to lock your card to prevent further transactions while the fraud is being investigated.
3. File a Fraud Alert or Security Freeze: Place a fraud alert on your credit report to warn potential creditors that your identity may have been stolen. You can also place a security freeze to prevent new accounts from being opened in your name.
4. File a Police Report: In cases of significant fraud or identity theft, consider filing a police report to document the crime and help track down the perpetrators.

If you face charges related to credit card fraud or other financial crimes, seeking legal guidance is essential. A criminal defense lawyer expert in credit card fraud laws in California will help you understand the legal intricacies and protect your rights. With its expertise in criminal defense, Bulldog Law is here to assist if you or a loved one needs legal counsel in the face of credit card fraud allegations. Stay vigilant, protect your personal data, and consult with a legal professional if needed.