Photo by Chris Barbalis via Unsplash

According to the FTC, in 2019 alone there were close to 1.7 million reports of fraud in the United States, with losses totaling $1.9 billion.  

From imposter scams to identity theft, scammers and thieves are constantly adapting to make sure they’re one step ahead of consumers. If you’ve fallen victim to credit fraud, or you want to ensure you don’t, you’ve come to the right place. 

Credit Card Fraud

Credit card fraud generally happens in one of two ways: Someone obtains your physical credit card or they obtain the information pertaining to that card and they proceed to make purchases in your name. 

How Does Credit Card Theft Happen?

Here’s a staggering statistic: Reports of credit card fraud in the form of fraudulent accounts opened in someone else’s name rose 88% in 2019. In other words, this isn’t a phenomenon that’s slowing down. 

So how does someone else get ahold of your credit card information, especially if the card is still in your possession? 

  • Card skimmers
    Before swiping your card at an ATM or gas station, check the card reader. If it appears loose, or sticks out more than normal, a scammer could have attached a card skimming device. This might successfully capture your information when your card is swiped.
  • Public wi-fi
    Public wi-fi is convenient, but far from safe. Unencrypted and unsecure, this is where hackers can intercept sensitive information like passwords and account numbers. Or, they may set up a hotspot with a name similar to a legitimate hotspot, luring unsuspecting users in to steal their information.
  • Data breach
    According to HelpNetSecurity, before the end of 2019, data breaches were already up over 33% at 5,183 incidences in total and 7.9 billion records exposed. With credit card information being one piece of consumer information some entities keep on file, this is a plausible way theft can occur.

What to Do About Credit Card Theft

If your credit card is stolen, or you have reason to believe someone else made charges using information from your card, following these steps can help remedy the situation: 

  • Alert the credit card issuer.
    Request the original card be closed immediately and replaced with a new card and number.
  • Check the purchases made and note which ones were made fraudulently.
    Go through recent purchases (and less-recent purchases, depending on when you noticed the fraud), and note which ones were not made by you.
  • Dispute the charges with the issuer.
    Credit card companies generally have protocol they follow should fraud occur. Follow the steps they outline.
  • Go to IdentityTheft.gov if you believe your identity was stolen.
    IdentityTheft.gov can help you report the theft and create an action plan.

[Learn more about what to do after your credit card is stolen.]

How to Prevent Credit Card Theft

Credit card theft can be a complicated problem to unravel. Luckily there are a few ways to lessen the chance it’ll happen to you: 

  • Be careful with public wi-fi.
    If you must use public wi-fi, follow a few guidelines:

    • Use networks you know are from reputable sources (like Starbucks, for instance), not random networks that pop up around you.
    • Access secure sites only (those that start with HTTPS, not HTTP).
    • Don’t access apps. Instead, go to the website and confirm it’s secure (see point above).
    • Use a VPN (Virtual Private Network) to make all public wi-fi connections private.
  • Set secure passwords and keep them safe.
    If you’re accessing any of your financial accounts online, creating different, strong passwords for each site is essential. (Stay tuned, we’ll cover how to set strong passwords later on.)
  • Protect your credit card security code.
    Your credit card security code, the three-to-four digit number either on the front or back of your card depending on the issuer, is the identifying information used when making a purchase without physically presenting your card. Keep this number secure and you’ll make it harder for someone else to make charges. [Learn more about the importance of credit card security codes.]
  • Don’t click on suspicious links.
    There’s an abundance of spam emails circulating online and several contain links to sites intended to steal your information or download malware onto your computer. Be very cautious with what you receive and do your research before sharing anything.
  • Use a virtual credit card.
    Some card issuers take credit card protection to another level by offering virtual credit cards – a temporary set of numbers you can use to make transactions online or over the phone. The purchase will still be connected to your credit card, but the numbers can’t be reused by hackers after they expire. [Find out how virtual credit cards work and how you can get one.]

[Get more tips for protecting yourself from credit card theft.]

Identity Theft 

Identity theft can take many forms, but the general idea is someone obtains personal, identifying information to act in someone else’s name. This can include opening accounts, making fraudulent charges, filing taxes and collecting the return, and more.

[Learn more about identity theft and the most common types.]

What to Do If Your Identity is Stolen

Dealing with identity theft is overwhelming to say the least. If you find yourself the victim, follow these steps: 

  1. Contact the entities where the fraud occurred — this may be the IRS, financial companies, utility companies, etc. Tell them you want to close or freeze the account(s). 
  2. Get a free credit report from each of the three credit reporting agencies at AnnualCreditReport.com. Check each report for any activity you didn’t initiate. 
  3. Place a credit freeze. (More on that later.)
  4. Report the theft to the FTC at IdentityTheft.gov. 
  5. File a police report, if necessary. According to the FTC, filing with them is generally enough, unless: 
    • You know the person that stole your identity, or you have other information that could help. 
    • The identity thief used your information in a situation with law enforcement (giving your name to a police officer, for instance).
    • A third party is asking for a police report as proof of identity theft (a debt collector, etc.).
  6. Follow next steps as outlined by the FTC, depending on the type of identity theft you experience. 

Credit Scams 

Unfortunately there are a number of credit-related scams and more popping up all the time. Here are just a few to be aware of. 

Call regarding credit fraud

You receive a call from someone reporting to be from your credit card’s fraud department, stating they believe your account has been compromised. However, to confirm, they need you to give them important information — like the security code from your credit card (they may already have the rest of your card information). 

If you receive a call like this, you can always hang up and call your card issuer directly using the number on the back of your card.

Tax scams

You receive a call regarding tax debt owed to the IRS. The scammer says you must pay immediately or there will be severe consequences — like the police coming to arrest you. They say payment must be made over the phone immediately via a credit or debit card.

Know the IRS will not call to demand payment immediately, especially by a specific type of payment method, and they will not send the police to your door. They will generally mail a bill first and they are required to allow you the opportunity to “question or appeal what you owe.”

Coronavirus scams

Scams run rampant during times when people are particularly vulnerable, as is the case with the coronavirus pandemic. Some of the reported scams include:  

  • A caller identifies themselves as being a part of the Center for Disease Control and says you can reserve a coronavirus vaccine in exchange for a Social Security or credit card number. 
  • “Vaccine kits” and other products that are falsely marketed as preventing or curing coronavirus. The FDA has outlined several of them here.
  • Calls and texts from fraudsters claiming to be from government organizations, asking for banking and other personal information to deposit stimulus checks.  
  • An email that appears to be from the World Health Organization instructing recipients to download information about how to protect themselves from coronavirus. Once clicked, a hidden installer is downloaded to track keystrokes and steal information. Other email-based scams have also been reported.  

If you receive a suspicious call, text, or email, make sure to do your due diligence and check the source first before clicking or sharing personal information.

How to Protect Your Credit 

If you’ve already been the victim of identity theft or credit fraud, it’s important to take steps to protect your credit. But it also can be a positive proactive measure if you’ve lost important documents, such as a Social Security card. 

Alerts, Freezes, and Locks

Three commonly recommended ways you can protect your credit include: a credit fraud alert, a credit freeze, or a credit lock. Let’s take a look at each of them. 

Credit fraud alert

When a fraud alert is placed on your credit report, potential creditors must confirm your identity before opening new accounts in your name. Essentially it raises a red flag indicating you have been or may be the victim of theft or fraud. 

To have a free fraud alert placed on your credit report, you only have to contact one of the three credit reporting agencies; that agency is then required to inform the other two CRAs on your behalf. When you initiate the process, all three CRAs are also required to give you a copy of your credit report at no charge. Fraud alerts are lifted automatically after one year, but can be extended at your request. 

Credit freeze

A credit freeze, on the other hand, goes a few steps farther than a fraud alert by restricting access to your credit report altogether. By not allowing new creditors access to your report, identity thieves have a much harder time opening an account in your name. Here are a few things to know about a credit freeze: 

  • Unlike a credit alert, a credit freeze must be requested of each CRA separately.
  • A credit freeze only prevents new accounts from being opened in your name – it won’t prevent fraud if someone obtains existing account information.
  • You must lift your credit freeze to obtain new credit which can take an hour or more. 

[Get more information about what a credit freeze does and how to freeze your credit for free.]

Credit lock

While federal law allows all consumers to freeze their credit for free, a credit lock is a service offered directly by each of the three CRAs. Here are a few other key differences:

  • They’re not free. Experian charges $4.99 for the first month and $24.99 for each month after. TransUnion and Equifax bundle their services, offering a credit lock on both reports for $24.99.
  • A credit lock can be quickly and easily lifted (from your phone or computer).
  • They usually come with extra benefits, like credit monitoring and identity theft insurance. 

Other Ways to Protect Your Credit 

In addition to freezing, locking, and alerting, there are a few other ways to ensure your credit isn’t compromised. 

Create strong passwords 

For many of us, our financial lives are online and secured primarily by a password. Here are a few tips for creating stronger passwords for better protection. 

  • Set different passwords for each account that are not too similar to each other. 
  • Create long passwords (experts suggest 12-16 characters).
  • Don’t use information in your password that can be easily found elsewhere (your birthday, pet’s name, etc.).
  • Intersperse special characters throughout your password (as opposed to bunching them together).
  • Avoid using common sequences (like “123”).

[Get more helpful tips for creating strong passwords.]

Use a virtual private network (VPN)

A VPN provides an additional layer of security for anything you do online by creating an encrypted connection between your computer and a private server. This can be particularly important while on an unsecure network (like public wi-fi), but it can be used anytime to ensure sensitive information doesn’t get into the hands of hackers.

[Learn more about VPNs.

Check your credit reports regularly

By staying on top of your credit reports, you can potentially spot signs of credit fraud and identity theft before they snowball into a larger issue. You can request one free credit report each year from each of the three CRAs (Experian, TransUnion, Equifax) at AnnualCreditReport.com

[Learn how to stay on top of your credit reports and scores and find out how Upturn can help you spot and dispute credit report errors for FREE.]

The Bottom Line

Our lives are becoming increasingly digital and scammers are becoming increasingly savvy at stealing information. But by taking the right precautions and knowing how to handle credit fraud if it occurs, you can better keep your credit — and your bank account — protected.