Back in the day, people needed cash or bank balance in accounts to purchase a product or a service. Over the years, credit cards have changed how people pay for products or services. Credit cards let you spend on anything, borrow a limit, and clear the outstanding conveniently. Banks and financial institutions offer various types of credit cards to cater to different spending habits. While there are endless benefits to using credit cards, the unfortunate reality is that payment fraud has also been rising significantly. Credit card fraud can happen online (via e-mail or text) or in person. The main aim of scammers is to purchase goods or services with stolen cards or copied details. Apart from this, they can also transfer withdraw or transfer cash.
These cybercriminals and scammers have plenty of ways to deceive cardholders. That is why you must protect yourself from falling into a trap. An important aspect to be able to protect oneself from such acts is to understand the most common types of credit card scams.
Credit Card Fraud Definition
The illegal act of using someone else's credit card to perpetrate fraud on them is known as credit card fraud. For instance, the intent could be to pay for products and services or send payments to a third-party account without the cardholder's consent.
How Credit Card Fraud Happens?
When an unauthorised person accesses your information and uses it to make transactions, credit card fraud has taken place. Here are a few methods scammers use to obtain your information:
- Credit cards that have been misplaced or stolen
- Credit card skimming, such as at a petrol pump
- Phishing attempts, such as sending phoney emails or calling about phoney rewards or money transfers
- Snooping around you at the cash register during checkout
- Stealing your mail
Types of credit card fraud
From credit card cloning to identity theft, credit card fraud can take different forms. Most of the time, it is incredibly overwhelming to recognise them at once. So, you must know about the possible scams in some detail to protect yourself from becoming a victim.
Some of the most common types of credit card fraud include -
How to detect credit card fraud
The following are some methods for spotting credit card fraud:
- To identify fraud as soon as possible, it is important to constantly monitor bank statements and mobile texts.
- In order to confirm that the transaction has been completed, cardholders should review the bills and invoices they receive.
- If a person regularly uses credit cards, monitoring credit ratings is crucial.
- Calls requesting a one-time password (OTP), card details, account information, etc. should not be answered by the cardholder. Never will a bank or credit card business request such information.
- Before paying for phoney rewards and money transfers, account holders should confirm the details.
How to Prevent Credit Card Fraud
Card fraud can be avoided in a number of different ways. These are what they are:
- Security of login information - People should never write down or expose their login information anywhere that is visible to others.
- Do not rush when making a payment. It is advisable to proceed slowly and carefully when sending money online.
- Utilise mobile wallets. Using a mobile wallet is a smart move since it enables the storage of a small amount for quick access. Therefore, even if fraud occurs, the loss is minimal.
- It is a good idea to use alternative cards or different accounts when making separate payments or sending money online.
- It is preferable to choose a transfer limit in the account so that it will be blocked if fraudsters attempt to move a sizable sum.
- Aware of bogus links and messages, cardholders should always exercise caution when clicking on them.
- Avoid being taken advantage of by tempting offers. Scammers entice victims with tempting deals before demanding payment.
- Report the loss of the card right away. Cardholders should notify their bank of any credit card fraud, whether it involves a lost card or an online scam that doesn't involve a lost card.
Credit Card Fraud vs Identity Theft
Credit Card Fraud
Unauthorised use of someone's credit card to make purchases or withdraw funds.
Unauthorised use of someone's personal information, such as name, Aadhar number, or financial accounts, to commit various fraudulent activities.
Primarily targets credit card accounts and transactions.
Involves stealing a person's entire identity, including financial accounts, personal information, and more.
Credit card information, including card number, expiration date, and CVV.
Personal information, including name, bank accounts, and other sensitive data.
Limited to fraudulent credit card transactions and charges.
Extends to a wide range of fraudulent activities, such as opening new accounts, applying for loans, and committing crimes in the victim's name.
Financial loss to the cardholder, typically limited to the extent of unauthorized charges.
Financial loss, potential damage to credit history, and legal consequences.
|Reporting and Recovery
Easier to report, and credit card companies often have fraud protection policies in place. Cardholders are generally not liable for fraudulent charges.
More complex to report and recover from since it involves multiple aspects of a person's identity. Victims may need to contact various authorities, agencies, and institutions to resolve issues.
Use of secure, unique passwords and monitoring credit card statements for unauthorized charges.
Stronger identity protection measures, including monitoring credit reports and using identity theft protection services.
Fraudulent card usage may lead to criminal charges against the perpetrator.
Identity theft can lead to criminal charges against the perpetrator and civil lawsuits for damages by the victim.
- Lost or stolen cards
One of the most basic credit card frauds happens when your card gets lost or stolen. The thieves can use the card until it is cancelled or has hit the credit limit. Thus, you must cancel or freeze your card as soon as possible by calling the bank. Also, if you decide to stop using a credit card, cancel it, cut it up, and discard it to avoid the risk of fraud.
- Credit card application fraud
Application fraud is when someone uses stolen documents to get a credit card under your name. If they are able to achieve this task, they can perform monetary scams. Plus, they can run up a bunch of debt, burdening you with the repayments. This type of fraud will go undetected until you check your credit report or apply for credit. Therefore, you must always shred copies of your IDs and documents before dumping them.
It is probably the most common and oldest method of stealing personal information. As technology advances, hackers are developing new ways to hack your devices or bank databases to steal your personal information. Since it is difficult to notice when you are hacked, you must be careful while providing personal details to unknown websites or while clicking on unknown links.
- Card-not-present (CNP) Fraud
In this type of fraud, the criminals do not need your credit card personally to access it. For instance, if they find your name and credit card number through unethical means, they can use this information to make purchases online. In such cases, you might only be able to notice these charges once your bank statement is sent.
- Credit Card Skimming
skimming is when a device (called a skimmer) steals your credit card details. Scammers usually attach these skimmers to the credit card reader machines in retail stores, ATMs, gas stations, etc. Swiping your card through the skimmer stores all the data, which can be duplicated on another card. This kind of fraud is also known as credit card cloning. Therefore, you must only swipe your credit card through genuine machines at trusted merchants.
This occurs when cyber criminals send e-mails that look similar to legitimate e-mails from your bank or financial organisation. When you click on the unauthorised link, you are routed to a strange website and are fooled into exposing your personal and payment information. The defrauders can then use your credit card info for monetary transactions. So, you must pay attention to all the e-mails and check their authenticity. If you ever receive any such SMS or e-mail, inform your credit card issuer immediately.
- Account Takeover
After stealing your personal information via any means, the scammers can contact the credit card companies and ask them to change PINs and passwords, pretending to be you. If this happens, they will become in charge of your credit card. You can only detect this fraud when you try to log in to your account online.