Latest Credit Card Scams and Tips To Avoid Them
With online shopping and digital transactions on the rise, credit card use has become an integral part of our financial lives. According to the Government Accountability Office (GAO), nearly 82% of U.S. adults own at least one credit card.
While the convenience of a credit card can’t be denied, using it online comes with the risk of being scammed. Scammers often use various social engineering tactics that are not always easy to recognize.
In this detailed guide, we’ll explore some of those credit card scamming methods and answer the following questions:
- How do credit card scams work?
- What should you do if you become a victim of a credit card scam?
- What steps should you take to avoid credit card scams?
What Is a Credit Card Scam?
Credit card scams involve various techniques designed to persuade you to willingly share your credit card details or to authorize payment for an item or service that the scammer has never intended to provide.
For example, scammers may contact you, posing as representatives of trusted entities, and ask for your credit card number, answers to security questions, or some other personal details. Once you provide those details, they can make fraudulent purchases, initiate unauthorized fund transfers, or attempt to steal your identity.
Unfortunately, many people do not realize their card has been compromised until unauthorized charges appear on their account statements.
Credit Card Frauds vs. Credit Card Scams
While they are often used interchangeably, credit card frauds and scams are two distinct deception techniques that can both result in potential financial losses and emotional distress.
For clearer insights into these practices, take a look at the table below:
Which Laws Protect You From Credit Card Frauds and Scams?
If you fall victim to credit card fraud or scam, you may be protected through the following five laws, depending on your specific case:
- Fair Credit Billing Act (FCBA)
- Truth in Lending Act (TILA)
- Identity Theft and Assumption Deterrence Act
- Telephone Consumer Protection Act (TCPA)
- CAN-SPAM Act
While these laws may not specifically address fraud and scams, they may help you with issues related to fraudulent charges, identity theft, deceptive marketing strategies, and misleading or false email content.
Despite being protected by various laws, understanding different credit card scamming methods can help you detect potential threats before they escalate into fraud.
Types of Credit Card Scams
Some of the most common credit card scams that perpetrators use to gain access to sensitive information include the following:
- Phishing scam
- Imposter scam
- Interest rate deduction scam
- Fraudulent sweepstake and reward scam
- Credit repair scam
- Hot spot scam
Phishing Scam
A phishing scam involves scammers posing as trustworthy entities and trying to obtain sensitive data via emails, texts, calls, or social media messages.
In most cases, the scammer creates an urgent scenario that requires immediate action. For instance, they might send an email stating that your account has been compromised and ask you to click on a link that will direct you to a fake website closely resembling the real one. If you enter your login information, the scammers will gain access to it.
Phishing scams can also include attachments containing different types of malware that can infect your device and steal your data. Some malware may even lock your device. In this example, the scammer might ask for payment before restoring your access.
Imposter Scam
The FTC's 2023 report reveals that imposter scams were one of the biggest types of fraud, costing victims $2.7 billion. In these scams, cybercriminals impersonate individuals you would typically trust, such as government officials, close relatives and friends, financial advisors, or even charity representatives.
They would usually call you, trying to deceive you into helping them or threatening you if you don’t. Their goal is to scam you into sending either money or your credit card information.
Interest Rate Deduction Scam
According to Forbes Advisor's weekly credit card report for 2024, the average interest rate at the time of writing is 27.89%. This high-interest rate not only causes financial strain but also gives scammers a perfect opportunity to draw your attention, especially if you're carrying substantial debt.
Scammers may call or email, falsely claiming to represent your credit card company or a debt relief organization and offer you an unbelievably low interest rate on your existing credit card balance.
Credit card interest scammers may ask you to pay a nominal upfront fee or provide sensitive financial information to process your request. These scams can cause monetary losses through the fee, but they can also lead to identity theft if you disclose your sensitive info.
Fraudulent Sweepstakes and Reward Scam
In this kind of scam, fraudsters might contact you, claiming you've won a large sum, an all-expenses-paid vacation, or high-end electronics in a sweepstakes contest you don't recall entering.
They may request your sensitive banking details to wire you that prize money or an upfront payment to clear taxes and shipping costs before sending you the reward. Once payment is made to the fraudster, they will disappear with your money and without handing over your prize.
Credit Repair Scam
Credit repair scams start with a promise of miraculous fixes to your credit score. To lure you in, they might claim to:
- Remove all negative information from your credit report, regardless of its accuracy
- Guarantee a specific increase in your credit score almost overnight or within a highly unrealistic timeframe
- Suggest using a CPN (Credit Privacy Number) or an EIN (Employer Identification Number) to create a fresh credit identity
- Claim they have an insider relationship with credit bureaus to remove negative information more effectively
They usually require payment before providing alleged services. After you pay, they will disappear or fail to deliver meaningful results, leaving you in a worse financial situation than before.
These scams can have dire consequences, including further credit damage and legal issues—especially if they convince you to use CPNs or EINs for credit applications as that can result in criminal prosecution.
Hot Spot Scam
Cybercriminals may set up fake Wi-Fi networks with names that appear as though they are official Wi-Fi connections provided by coffee shops, hotels, or airports, tricking users into connecting to them. If you connect to the wrong network, the scammers who created it might intercept your data and steal your sensitive credit card information.
Different Ways To Recognize Credit Card Scams
The best way to protect yourself from scams is to avoid them in the first place. Following are five signs that may help you determine potential scams:
- Unusual sense of urgency—Scammers often try to rush you, not giving you time to think about the unusual conversation. If they start asking you for financial information or money, it’s a significant red flag.
- Unrealistic offers—If you receive an email offering a prize that seems too good to be true, it’s most likely a scam. Reputable organizations don’t offer high-value rewards without clear terms and conditions. They will also never ask for upfront payments to claim the prize.
- Wrong domain name—Even if the email looks legitimate at first glance, subtle alterations may exist, like “service@paypa1.com” instead of “service@paypal.com.” Before clicking on any link or downloading any attachment, examine the sender's address carefully and confirm legitimacy through official channels if needed.
- Errors in communication—Typos, grammatical mistakes, and unusual formatting can indicate a phishing attempt rather than correspondence from a professional organization.
- Unusual verification request—If you receive a call asking for your credit card details or personal info for account verification, chances are it's a scam. Financial institutions already have your account information and would not ask you to provide it in this manner.
What Should You Do in Case of Credit Card Scam?
If you suspect that you’ve been a victim of a credit card scam, it’s best to act fast to secure your finances and reduce your liability. Generally, you should take the following steps:
- Contact your credit card issuer and inform them about the fraudulent activity so they can freeze your account, cancel your card, initiate an investigation for a refund, and issue you a new card.
- If you’ve transferred money through your banking app due to a scam, contact your bank and request that they initiate a reversal of the transaction.
- Change your PIN and passwords for your online banking and credit card accounts.
- File a complaint regarding the scam with consumer protection agencies such as the Federal Trade Commission (FTC) at ReportFraud.ftc.gov.
- Notify the three major credit bureaus—Equifax, Experian, and TransUnion—about the scam and request that a fraud alert be placed on your credit reports.
- You can request a free annual credit report from each credit bureau via AnnualCreditReport.com. This report will include information about unauthorized loans, unfamiliar new credit accounts, and payment history, allowing you to detect any signs of scams or fraud.
How To Protect Yourself From Credit Card Scams
To increase your chance of avoiding scams, it's essential to stay vigilant while using your credit card. Here are some effective strategies to keep you one step ahead of fraudsters:
- Enable multifactor authentication (MFA)—When activated, potential scammers have to provide a verification code, answer a secret question, or scan your fingerprint, along with your password to log in to your account.
- Turn on notification alerts—You can set up transaction alerts to get instant notifications about all activities related to your card.
- Avoid public Wi-Fi—While public Wi-Fi is convenient, it's often not secure. To protect your card details from potential interceptors, avoid carrying out credit card transactions over public networks.
- Verify website security—Before entering your credit card details, verify the website's security. Look for “https://” at the start of the web address along with a padlock icon, indicating that your information is being securely transmitted.
- Opt for virtual cards—These cards hide your real credentials, so potential scammers can’t access your real financial information. Although banks such as Capital One® and Citi® offer this virtual card service to their customers, more comprehensive virtual card providers, like Privacy, also employ advanced encryption technologies and many other safety features, ensuring that your personal and financial information remains confidential.
Privacy Virtual Cards—Effective Protection Against Fraudulent Activities
When tied to your bank account or debit card, Privacy Virtual Cards mask your financial information with a 16-digit random card number to protect you against potential fraud and misuse.
Privacy is BBB®-accredited and meets the Payment Card Industry Data Security Standard (PCI-DSS). This means Privacy implements robust safety measures such as 256-bit encryption and Transport Layer Security (TLS) HSTS to protect your financial integrity, just like other esteemed financial institutions.
Privacy Card Types and Features
Privacy offers the following two types of virtual cards to its customers:
Virtual Cards from Privacy can be paused, unpaused, or completely closed as necessary. You can also set a spending limit on each Privacy Card, whether it's $5 or $50. If you have safety concerns about a merchant, setting a spending limit ensures that they can't charge you more than you've agreed on beforehand. If a transaction goes above the preset limit, Privacy will decline it.
Additional Convenience Features
To provide easy access to your virtual cards, Privacy offers a user-friendly mobile application for iOS and Android devices. This intuitive application typically allows you to create virtual cards, adjust settings, and monitor real-time transactions from a single centralized dashboard.
You can also add Privacy Browser Extension to popular browsers such as Safari, Chrome, Firefox, and Edge to enter your details with one click. If you plan on using your Privacy Virtual Card from an iPhone or iPad, you can use Safari for iOS extension for faster checkouts.
How To Register for Privacy Virtual Card
You can start using your Privacy Cards by following the steps below:
- Sign up for Privacy
- Complete the verification process
- Link a funding source—a checking account or a debit card
- Request your first Privacy Virtual Card
With Privacy, you can opt for the following plans:
- Personal (free)—This plan is free for domestic transactions and allows you to generate up to 12 virtual cards per month while providing all card controls and access to the browser extension and app.
- Pro ($10/month)—This plan includes up to 36 virtual cards per month, 1% cashback on all spending (totaling up to $4,500 per month), fee-free international transactions, and priority support.
- Premium ($25/month)—This plan includes up to 60 virtual cards each month and dedicated customer support, along with all other benefits of the Pro plan.
Privacy Virtual Cards are issued by Visa® and Mastercard®, so you can use them to shop online via platforms like eBay, Amazon, Shein, or AliExpress. Privacy Cards are available to all U.S. residents over 18 who have a checking account at a U.S. bank or credit union.
