How To Secure Your Finances—A Guide To Credit Card Fraud Protection
Credit card fraud has been steadily increasing over the years. Security.org’s 2023 survey shows that over 65% of credit card users have been fraud victims at least once in their lives—an increase compared to last year’s 58%. The Nilson Report predicts that the total cost of losses due to card fraud will amount to more than $165 billion over the next decade.
If you don’t want to become a part of these alarming statistics, you should familiarize yourself with credit card fraud and ways to prevent it from happening to you.
In this article, you’ll learn:
- What credit card fraud is and what types exist
- How to act in case you become a victim of credit card fraud
- What the best practices are when it comes to credit card fraud protection
What Is Credit Card Fraud?
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Credit card fraud is defined as the unauthorized use of an individual’s credit card and financial or personal information, typically for financial gain. It may involve various types of illegal activities, from stealing to hacking, and typically comes with a slew of consequences for the victim.
Fraudsters that gain access to a person’s credit card may make unauthorized charges, open new accounts, and apply for credit in the victim’s name. That can lead to significant financial losses, damaged credit scores, and a lengthy and stressful dispute process.
Credit card fraud continues to evolve and has become fairly sophisticated and widespread. As technology advances, perpetrators continuously find new ways to exploit vulnerabilities in payment systems. This is why it is essential to learn about the various methods fraudsters employ to steal credit card data.
Types of Credit Card Fraud
Source: Tim Samuel
The most common scams perpetrators use to deceive unsuspecting individuals and steal their credit card details are:
- Phishing
- Pagejacking
- Account takeover
- Card-never-arrived fraud
- Skimming
- Card-not-present fraud
Phishing
Phishing involves the use of social engineering to manipulate the victim into revealing their personal details. The fraudsters typically impersonate legitimate people and businesses and send fake emails or messages to targets. Victims are usually prompted to click on a malicious link leading them to a fake sign up page or open an attachment containing malware. Once they do, fraudsters log into the victim’s accounts or install malware into their systems to steal even more personal details.
Phishing can lead to significant consequences for the victim, including identity theft.
Once fraudsters acquire the victim’s personal information, such as their name, address, Social Security number, and credit card details, they may use it to open new accounts, apply for loans, or commit financial fraud in the victim’s name.
Pagejacking
Similar to a phishing attack, pagejacking is a fraud tactic in which the fraudster mimics a real business by creating a duplicate version of their website or payment page. The unsuspecting victim gives away their card information thinking they’re making a legitimate purchase.
Account Takeover
An account takeover happens when the fraudster accesses the victim’s credit card account through hacking, phishing, or a data breach. After entering the account, the fraudster can change the card settings and make unauthorized transactions in the victim’s name.
Card-Never-Arrived Fraud
When a user requests a new card, it gets sent to them via mail. In card-never-arrived fraud, the fraudster manages to steal the card before the victim has had a chance to take it or notice that it’s missing. The perpetrator might steal it right from the victim’s mailbox or by exploiting vulnerabilities in the delivery system.
Skimming
Skimming happens when the fraudster swipes the victim’s magnetic stripe or chip information through a skimming device placed on a PoS terminal or ATM. They may also install a secret camera or a keypad overlay to capture the PIN.
Once the fraudster obtains the credit card data, they often perform credit card forgery—the act of creating a duplicate card using the information acquired through skimming. The perpetrator encodes the victim's stolen information onto blank cards with the help of an encoding device or software.
Card-Not-Present Fraud
Card-not-present fraud occurs when an individual makes a payment online or via phone, revealing their name, card number, and security code in the process. The perpetrator manages to steal the information by exploiting the weaknesses in verification systems or intercepting online transactions (a man-in-the-middle attack), among other methods.
Consequences of Credit Card Fraud
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The most obvious consequence of credit card fraud is monetary loss. According to AARP and Javelin, users lost around $52 billion in 2021 as a result of identity theft and $9.3 billion from credit card fraud alone. Each victim suffered a loss of around $1,500 on average due to identity theft, a shocking figure compared to the prior year’s average of $200 per victim.
Besides the obvious financial impact, victims often experience the following consequences:
What To Do if You Fall Victim To Credit Card Fraud
Once you suspect you’ve fallen victim to credit card fraud, it is crucial to act fast. The exact steps and their order will depend on your specific situation, but in general, you should do the following:
- Check your credit card statements—Review the recent activity on all your accounts to confirm the fraud happened, understand the scope of the issue, and check for any new developments. Confirm that the charges weren’t made by a family member or a member of your household, since most issuers won’t approve chargeback for the so-called 'friendly fraud.’
- Contact your credit card company—Report the problem to your credit card issuer right away. As credit card fraud is a common occurrence, most issuers have developed resolution systems. For smaller losses, they will cancel your card and issue a replacement, as well as refund the stolen amount. For more considerable losses, the credit card issuer will likely involve the authorities and have them investigate the case.
- Contact the credit bureaus—Get in touch with the three major credit bureaus: Experian, Equifax, and TransUnion. Place a fraud alert on your credit report in case the fraudster attempts to open new accounts or collect credit in your name.
- Update your security information and settings—Create new passwords for all your accounts and enable two-factor authentication and transaction notifications.
- Keep monitoring your accounts—Even after the issue has been resolved, stay on the lookout for any fraudulent activity.
How To Protect Yourself From Credit Card Fraud
Source: mohamed_hassan
To reduce the chances of becoming a victim of a credit card fraud, consider taking the following credit card fraud protection measures:
Enhance Your Online Security With Privacy
Privacy Virtual Cards provide an extra layer of security to your transactions. A virtual card has a 16-digit card number with its own expiration date and CVV. While connected to your real debit card or bank account, a virtual card masks that information from the merchant. If a data breach occurs on the merchant’s servers, a hacker will only have access to your virtual card details while your actual card and bank data remain protected.
Privacy allows you to choose between two types of virtual cards—Single-Use Cards or Merchant-Locked Cards. A Single-Use Card closes after a single transaction, rendering it useless afterward. These cards are ideal for shopping on new or suspicious websites as a potential hacker wouldn’t be able to use the stolen virtual card details at all.
A Merchant-Locked Card can be used multiple times but only with a specific merchant. This means if a hacker gets hold of it, they won’t be able to use it at any other store. This type of card is convenient for recurring purchases and subscriptions.
With a Privacy Virtual Card, you can set a spending limit on your purchases. Privacy automatically declines all transactions that go over the preset limit, which helps prevent overcharges and hidden fees. You can instantly pause or close the card if you notice any suspicious activity without affecting your real card or bank information. This feature is especially beneficial when blocking unwanted subscription charges—keep in mind that while Privacy will block the charges, you still have to cancel the subscription personally.
Additional Benefits of Using Privacy
Privacy also allows you to:
- Get the browser extension that auto-fills card details at checkout—That saves you time and effort as you don’t need to enter card details manually or look for your wallet every time you want to make a purchase.
- Generate virtual cards on the go with the mobile app—The app lets you generate cards on the go, monitor your virtual card activity, and receive real-time notifications every time a card is used or declined.
- Manage all your sensitive info with the 1Password integration—You can manage your passwords and virtual card numbers from a single, centralized dashboard.
- Share the card with family—You can send card details to close family members as you retain full control of the card’s settings and spend limits at all times.
Privacy is BBB-accredited and has rigorous security policies and measures in place to protect your online transactions, such as split-key encryption and Transport Layer Security (TLS) HSTS. In case of fraudulent activity, Privacy conducts a thorough investigation of the claim in a manner similar to that of a bank or other financial services provider.
Sign Up for Privacy and Enjoy Safer Shopping
To start using Privacy, here’s what you should do:
- Create an account
- Enter the required KYC information
- Connect your debit card or bank account
- Request and generate your first Privacy Card
With the base tier, you can create up to 12 virtual cards a month. You can also set spending limits, pause or close the cards, as well as access the Privacy browser extension and mobile app.
Besides the base plan, you can opt for Pro ($10/month) or Premium ($25/month) paid plans, which unlock features such as:
- Additional cards
- 1% cashback on eligible purchases, totaling up to $4,500 a month
- Priority support
- Dedicated account management (Premium plan)
