Credit Card Fraud - Definition, Types, Detection, Prevention

Credit Card Fraud - Definition, Types, Detection, Prevention
2 min read
22 May 2023

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

Identity Theft


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.

Key Target

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.

Legal Consequences

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.
  • Hacking
    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.
  • Phishing
    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.
Over the years, the cases of data breaches have increased drastically. With technological advancement, cyber criminals seek new ways to scam individuals and businesses. Theft can be of different kinds; thus, credit card users must actively protect their sensitive information. Being cautious can reduce your chances of any credit card fraud.

Frequently asked questions

How credit card frauds are done?

Credit card frauds are typically perpetrated through various methods, including card skimming, phishing, data breaches, and social engineering. Card skimming involves thieves attaching small devices to card readers to collect card data. Phishing involves tricking victims into revealing their card information via fake websites or emails. Data breaches occur when hackers gain unauthorised access to a company's databases and steal customer data. These methods enable fraudsters to make unauthorised transactions or create counterfeit cards, causing financial loss to cardholders.

What type of fraud is credit card?

Credit card fraud is a type of financial fraud. It involves the unauthorised use of someone's credit card information to make fraudulent transactions, leading to financial losses for the cardholder. It is a form of identity theft because it often requires stolen personal information to perpetrate the fraud.

What is credit card fraud in cyber crime?

Credit card fraud in cybercrime refers to the use of technology and the internet to commit fraudulent activities using stolen credit card information. This can include online purchases, data breaches, phishing scams, and more. Cybercriminals exploit vulnerabilities in digital payment systems and leverage stolen card details to conduct unauthorised transactions, often leading to financial losses and potential legal consequences.

Can credit card fraud be traced?

Yes, credit card fraud can be traced and investigated. Financial institutions, law enforcement agencies, and specialised anti-fraud units use various methods to trace the origin of fraudulent transactions. These methods may include tracking IP addresses, reviewing security footage, and analysing transaction records. Successful tracing can lead to identifying and apprehending the perpetrators, as well as potential recovery of funds for victims.

Who pays for credit card frauds?

In most cases, credit card fraud liability is limited for the cardholder. Credit card companies and banks typically have policies in place to protect cardholders from financial losses due to fraud. Cardholders are often not held responsible for unauthorised charges as long as they report the fraud promptly. The financial institution or credit card company usually covers the losses, making it crucial for cardholders to report any suspicious or unauthorised transactions promptly.

How did fraudsters get my card details?

Fraudsters obtain card details through various means, including card skimming at ATMs or gas pumps, hacking into online databases during data breaches, engaging in phishing schemes where victims unwittingly share their information, and using social engineering tactics to trick individuals into revealing card details over the phone or via email. Additionally, criminals may purchase stolen card information on the dark web. Protecting personal information and staying vigilant against such tactics is essential to prevent card details from falling into the wrong hands.

How are credit card frauds detected?

Credit card frauds are detected through various methods, including transaction monitoring, fraud analytics, machine learning algorithms, real-time alerts for unusual activity, and additional customer verification steps like OTPs or biometric authentication.

What techniques are used to detect credit card frauds?

Techniques to detect credit card frauds include:

  • Sophisticated algorithms for transaction monitoring.
  • Analysis of transaction data using fraud analytics tools.
  • Machine learning models trained on historical data.
  • Real-time alerts for suspicious transactions.
  • Additional customer verification measures to ensure the cardholder's identity.

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