Credit Card Scams – What They Are & How to Avoid Them

Stephanie Faris

Writer

Dolores Bernal

Editor

December 4, 2023

Credit: Pixabay

When a man approached an Ontario woman for directions, she thought nothing of it.

He was looking for directions to the hospital emergency department. She didn’t realize until later that while she was distracted, she’d fallen victim to a pickpocket.

It took her a few minutes to realize her wallet and credit cards had been stolen. By then, the thief had charged $7,100 in purchases.

What Are Credit Card Scams?

Cash is no longer king.

Consumers used credit and debit cards for 57 percent of all payments in 2021, and that number has been steadily increasing. Cash was already declining before COVID-19, but the drive toward contactless payments during the pandemic pushed it further.

As with all payment methods, though, cards can be stolen. Whether it’s the number or the card itself, merchants and credit card issuers can lose serious money in the wrong hands.

Over the years, card issuers have put protections in place to keep your card safer.

First, there’s the Card Verification Code on the back of your card. That’s the three-letter digit we often have to enter when making online purchases.

Yes, thieves can steal that number, too. It just throws another hurdle in front of scammers.

Second, today’s cards are much harder to clone. That’s thanks to something called EMV.

What Is EMV?

Short for Europay, Mastercard, and Visa, EMV is now the standard for payment cards in the U.S. It’s that small, square chip you see on all your credit and debit cards.

There’s a notable difference between the magnetic stripe on the back of cards and that EMV chip. The chip generates a unique code for every transaction, while the strip doesn’t. A counterfeit card will more likely be flagged as fake, while the magnetic strip makes it easy to get around security features.

But as with any security measures, these steps have simply forced criminals to be more creative.

But the good news is, we typically aren’t responsible for the charges a scammer makes on our stolen cards. Federal law protects you against that, shifting liability to the card issuers, who can then hold responsible the merchants who accepted the stolen card in the first place.

This is called zero-liability protection, and here’s what you need to know about that:

You aren’t liable if you report a card stolen before it’s used.
If you report it within two days, your maximum liability is $50.
If you report it within 60 days, your maximum liability is $500.
You could face total liability if you don’t report it within 60 days.

That said, many card issuers won’t hold you responsible at all as long as you report it within a reasonable timeframe.

For instance, I’ve had my card compromised several times over my lifetime. I’ve never once been liable, and I’ve never caught it before at least one charge was made.

In most cases, my bank has been the one who alerted me to the fraud. Even though I check my account every morning, these criminals work fast.

Also, as thieves test the waters, the initial charges are usually so small that they don’t jump out in all that bank activity. Two charges for 58 cents aren’t as noticeable as one charge for hundreds or thousands of dollars.

But while we may not be liable for any charges, it’s still a pain. I have recurring charges coming through constantly, and a new credit card number has to be updated with all those merchants. So whatever I can do to reduce my risk, I’m in.

First, it’s important to know the types of scams that exist. From there, we can look at how to avoid them.

Credit: Karolina Grabowska

1. Card-Not-Present Fraud

What is it? With card-not-present fraud, a merchant doesn’t have the opportunity to inspect the card visually. This includes any situation where we give our card number, expiration date, and CVV to make a purchase. It could be by phone, online order, or even writing your number on a bill so that a creditor can charge you. With card-not-present fraud, a scammer uses stolen numbers to make a purchase.

How to spot it: Card-not-present fraud exists in the shadows. You usually don’t even know your card information was stolen until you see the charges on your credit card statement or get a fraud alert. Typically, it’s tough to even pinpoint when and where the card was stolen since it could have happened months ago.

How to avoid it: Avoiding credit card number theft can be a challenge, but there are some things you can do to protect that number. Use a payment app like PayPal or Apple Pay to make payments rather than giving your card number to multiple merchants. Use antivirus software and avoid using public Wi-Fi to prevent a hacker from accessing the card number through your devices.

2. Stolen Physical Card

What is it? This scam starts when you lose your physical card. You might have misplaced it, or someone may have taken it from you. Either way, it ends up in the wrong hands. That person either duplicates the card, sells the number, or uses it to make purchases until the card is canceled.

How to spot it: Unlike card-not-present fraud, you’ll usually know when your card is missing. But it is possible to miss a card if it’s not one you use daily. In that case, you may not know until you try to use the card or get a bill for the charges.

How to avoid it: If your card issuer lets you lock your card through the app, do that as soon as you notice the card is missing. If you can’t find the card quickly, report it as lost to your credit card issuer to prevent further damage. Avoid carrying cards you rarely use. Instead, leave them in a secure place at home.

3. Skimming Scams

What is it? Skimming scams serve as a prime example of how clever criminals can be. With this scam, a fraudster tampers with an existing card reader to install a device that captures card information. Doing this at an in-store point-of-sale system is more challenging, so fuel pumps and ATMs are commonly targeted.

How to spot it: Skimmers are often placed on top of an existing card reader, so you can sometimes spot it with a quick inspection. Look for it to jut out more than it should or misalign with the equipment beneath it. Some gas pumps now feature a seal over the area where the card reader is installed, and if it’s been tampered with, that seal will break.

How to avoid it: Criminals are likely to target less visible fuel pumps. Go for the closest pumps to the building. When choosing ATMs, look for one attached to a bank’s facility rather than freestanding in a parking lot.

4. Phishing Scams

What is it? Phishing scams have become popular partly because they’re so easy to execute. A crafty developer merely has to create an email and website that looks identical to the real thing, then trick you into clicking. With a credit card phishing scam, you receive an email with a link that directs you to a page that requests your credit card number. It could be a fake bill, a “problem with your account,” or a supposed message from the IRS. Phishing scams can also come by phone. Whatever the case, you provide your card number, and it goes to a scammer, not the intended source.

How to spot it: Although phishing emails look deceptively realistic, there are some telltale signs of fraud. Often there are misspellings, and the grammar will be iffy. The language will also be unnecessarily urgent to prompt you to click without stopping to think.

How to avoid it: Never click links on emails or in texts. If the message concerns an issue with one of your accounts, contact the company directly or go to the website in your browser to resolve it.

5. Interest Rate Reduction Scams

What is it? With this scam, someone contacts you, usually by phone, to tell you that you’re eligible for a reduction in your interest rate. You’ll need to act quickly. (Remember the urgent language I mentioned above?) You just need to provide your credit card information to claim your lower interest rate.

How to spot it: If you’re a cardholder in good standing, sometimes your credit card issuer will reward you, usually with an increased credit line. When that happens, the notification will probably arrive by postal mail. Regardless, there’s no reason someone should need your credit card information to change your account. The issuer would have that information, and no third party would have access to lower your interest rate.

How to avoid it: Never provide your credit card information to someone who contacts you. Contact your credit card issuer directly if you have questions about an offer.

6. Fraud Alert Scams

What is it? If there’s a problem with your credit card, the fraud department might reach out to alert you. With this scam, though, the caller claims to need your full account number, expiration date, and CVV to remove the unauthorized charges. When you provide the information, the scammer takes the data and runs.

How to spot it: While your credit card issuer may have a fraud department, which might reach out to you, they shouldn’t need you to provide your full card number to verify your account. If you’re asked for that information by anyone who contacts you out of the blue, chances are, it’s a scam.

How to avoid it: Never provide your card number to anyone who contacts you out of the blue. If you get such a call, hang up the phone and call the number on the back of your card. A representative should be able to look at your account and determine if there’s an issue.

7. Charity Scams

What is it? After our home was damaged in the 2010 Nashville flood, our neighborhood was covered by people eager to help. There were more than a few scammers among them as well. Unfortunately, some people will turn tragedies into moneymakers. With a charity scam, someone reaches out to you, asking for a donation. They might claim to be from a reputable organization like the Red Cross or the Salvation Army. To donate, you must provide your credit card number for payment.

How to spot it: One telltale sign of a charity scam is that the phone number shows up as an “Unknown caller” or “Scam possible.” Even if the number shows up as legitimate, those can be spoofed.

How to avoid it: There’s no reason to donate to a charity based on a phone call. If you want to help after a natural disaster, contact the organization. You can probably donate directly on their website, using a payment method that masks your credit card number, such as PayPal or Venmo.

Hispanic buyer with plastic card purchasing online on smartphone outdoors

Credit: Anete Lusina

8. Credit Card Application Fraud

What is it? With this type of fraud, your credit card number is not stolen. Instead, someone has used your name and Social Security number to apply for a credit card. It then becomes your responsibility to convince the credit card issuer that you aren’t the person using the card.

How to spot it: Often, you won’t know your information has been used to apply for a credit card until it’s been circulating for a while. One way to identify it is to monitor your credit report. You can also sign up for a service that alerts you to changes to your credit score. This might help you catch a new application before too much damage is done.

How to avoid it: Safeguard your Social Security number by limiting who has it. Shred all documents containing your Social Security number before disposing of them.

✎ Related: How To Avoid Credit Score Scams ➔

9. Overpayment Scam

What is it? You get a call that you’ve overpaid for a purchase. The overage can be refunded. All you’ll need to do is provide a credit card number for the refund. You provide the information, but no funds are ever remitted.

How to spot it: One hallmark of overpayment scams is that the scammer wants a refund to go to a payment method separate from the original. If you used that credit card to make the purchase, the seller should be able to reverse the transaction. There’s no reason to provide a credit card number for a refund.

How to avoid it: If you’re concerned about overpaying for a recent purchase, disconnect from the person who contacted you and go to the source. If you did overpay, that merchant should be able to refund the overage without requesting compromising information.

✎ Related Article: What to Do If a Family Member Opened a Credit Card in Your Name. ➔

How to Avoid Credit Card Scams

Credit card fraud is an ongoing issue, but there are some things you can do to protect your cards.

1. Use Credit, Not Debit

Both credit and debit cards can be stolen and used for fraud. But there’s a big difference between the two.

With a debit card, no signature is required. Once a scammer has your PIN, the criminal only has to worry about the merchant asking to see a form of identification such as a driver’s license or passport.

But that’s not the worst of it.

If a scammer charges thousands of dollars, your card issuer can take a while to remove the charges. With a credit card, that simply means your balance will be high for a while. My card issuer said I didn’t have to pay that part of the balance during the 30 days they investigated.

If that had been my debit card, thousands of dollars would have come straight out of my checking account. If I had to wait even a week or two to get that money back, that could have been a problem.

We all have bills to pay, after all.

That’s why I always use a credit card – not a debit card I scan as credit, but an actual credit card.

Bonus: I also get points for every purchase when I use my credit card. I use those points to treat myself now and then.

2. Tap and Pay

Remember the card skimming scam I mentioned above? It is hard to detect whether a skimmer has been installed.

But I’ve gotten addicted to a new way of paying now. Tap and Pay.

If you see the Tap and Pay icon, which looks like a volume icon without the speaker, simply put the chip near it, and your payment will be processed—no insertion required.

3. Monitor Your Bank Accounts

No matter how careful we are, our credit cards will be compromised from time to time. When that happens, it’s best to catch it as soon as possible.

Make a habit of checking all your card-related accounts every day. Scan all the latest transactions and look for anything suspicious. No matter how low the dollar amount, if you know you didn’t make the purchase, reach out to your card issuer.

Better yet, set up notifications for every purchase through your account. This can be a nuisance, but it’s the best way to stay on top of things.

4. Use Payment Apps

I love to order things on Amazon. I know I can return it if it’s not up to par, and I can order from unfamiliar sellers without giving away my credit card.

Every few months, though, I want to order something unavailable on Amazon. When that happens, the first thing I do is look for that PayPal option.

Whatever your payment app of choice, you can protect your credit card number by using that app with unfamiliar sites. Maybe it’s Apple Pay or Google Wallet. Perhaps you found some sites that accept Venmo or Zelle. Whatever the case, the fewer sites with your credit card number, the better.

Credit: energepic.com

Your Card’s Been Compromised, What Now?

Once your card is compromised, it’s time to go into cleanup mode. Here are some steps to take.

1. Block Your Card

My bank now lets me pause things if I think (but am not sure) that my card has been compromised.

But that is only a temporary measure.

Once you’re sure your card number is in the wrong hands, it’s time to reach out to your credit card issuer. The contact information should be on the back if you have the card in hand. Otherwise, you can go into the app where you manage the account and get contact information.

2. Consider Identity Theft Protection

Identity theft is no joke.

That’s why you can now buy identity theft protection.

Identity theft providers like Aura, IdentityForce, and LifeLock can not only help cover any costs you’ll incur, but they can also alert you to possible fraud. This can help you take action to stop fraudsters from doing further damage.

3. Monitor Your Accounts

When your card’s been compromised, it’s important to keep an eye on things for a while.

Watch all your accounts in case the fraudster decides to try to hack into something else. Change all your passwords and make sure two-factor authentication is active.

Also, watch your credit report for a while. You’re entitled to one free credit report a year through AnnualCreditReport.com, but there are instances where you can qualify for more than one.

4. File a Police Report

If you have enough information for law enforcement to follow up, consider filing a police report.

The report needs to detail when and where you believe the theft occurred, as well as the unauthorized purchases that were made with the stolen card. This can create a document trail that will come in handy if credit card theft leads to identity theft activity.

5. Get Identity Theft Protection

Your credit card information can be used for more than theft. When combined with other personal data, it can be used to steal your identity.

Services like Aura, LifeLock, and IdentityForce can keep an eye on things and alert you to suspicious activity.

Best of all, if your identity is stolen, these services cover the costs of repairing things.

Conclusion

While credit cards are often compromised, they can be tough to deal with when it happens to you.

By knowing the risks and taking measures to protect your card, you’ll reduce your risks and be better prepared to act if it happens.

✎ Related: Home Title Theft: Everything You Need To Know ➔