How to prevent KYC Fraud: 3 simple yet powerful tips

Credit card fraud refers to the unauthorized use of a credit card or its details to make purchases or withdraw funds without the cardholder's consent. It is a type of identity theft that can result in significant financial loss, inconvenience, and emotional distress for the victim. This fraudulent activity can occur through physical theft of the card, data breaches, skimming devices, phishing schemes, or online scams.

Fraudsters may use stolen information to make online purchases, create counterfeit cards, or access the victim's account to transfer funds. As digital transactions become more widespread, the methods used by cybercriminals have also evolved, making fraud detection more complex. Banks and credit card issuers continuously update their security protocols to combat such threats, but individual vigilance remains essential. Understanding how credit card fraud works and staying informed about current scam tactics are vital steps in protecting one's financial identity.

Scam TypeDescriptionPhishingCriminals send fraudulent emails or text messages pretending to be from a trusted bank or service provider. These messages often include links to fake websites that prompt users to enter their card details, leading to data theft.SkimmingSkimming devices are attached to ATMs or card payment terminals to capture the card’s magnetic stripe information during a genuine transaction. The stolen data is then used to create duplicate cards.CardingThis scam involves testing stolen card numbers by making small online transactions. Once verified, the card is used for larger purchases or sold on the dark web.Account TakeoverIn this type of fraud, scammers gain access to a user’s online banking or credit card account. They change the login details and conduct unauthorised transactions.Fake WebsitesFraudsters create websites that look like legitimate shopping platforms. When customers enter their card details at checkout, the data is stolen.Phone ScamsScammers pose as bank employees or customer service agents. They call victims and convince them to share their OTPs or card details under false pretences.Social EngineeringManipulative tactics are used to gain trust and extract personal or financial information. This can occur over phone, email, or even in person.Lost/Stolen CardsA misplaced or stolen card can be used for unauthorised transactions, especially if the PIN is easily guessed or written down.Public Wi-Fi AttacksHackers exploit unsecured public Wi-Fi networks to intercept data being transmitted during online purchases, capturing sensitive card details.

Credit card fraud can occur through multiple channels, both digital and physical. One of the most straightforward methods is through the physical theft of the credit card. If a thief gains possession of your card, they may be able to make purchases, especially if the card isn’t protected with a PIN or if the merchant doesn’t verify identity.

Another common route is online fraud. This typically involves phishing emails that trick the user into entering their card details on fake websites. Similarly, smishing (SMS phishing) and vishing (voice phishing) are techniques where fraudsters impersonate bank officials to extract sensitive information. Skimming is another technique that involves placing hidden devices on ATMs or POS terminals to capture the card's magnetic stripe data.

Advanced fraud involves data breaches where thousands of card details are stolen from insecure databases of online platforms or merchants. Once acquired, the information is sold on the dark web or used directly for transactions. Another sophisticated method is account takeover, where fraudsters access your online banking profile and change credentials to lock you out.

With the rise in contactless payments and mobile banking, fraudsters also target users through malware or spyware installed on compromised devices. These malicious programs track keystrokes or capture screen data, making it easier to steal card information during online transactions. Understanding these methods is crucial for users to stay alert and proactive in defending against fraud.

Unexpected or unfamiliar charges appear on your credit card statement

SMS or email alerts for transactions you never made

Your card is declined despite having sufficient balance

OTPs received for transactions you didn’t initiate

Notifications of login from unrecognised devices or locations

Changes in account settings such as billing address or phone number

Receipt of a credit card bill for an account you didn’t open

Banks or financial institutions contact you about suspicious activity

Physical credit card is missing and presumed lost or stolen

Your credit score suddenly drops without any reason

Receiving collection calls for purchases you never made

Difficulty logging into your bank or credit card account

Seeing new credit inquiries on your credit report

Transactions from overseas locations when you haven’t travelled

Unauthorised changes to auto-debit settings or subscriptions

Alerts about password changes or failed login attempts

Being notified of a data breach involving a platform you use

Inability to access mobile banking or finance-related apps

Being locked out of your credit card portal without initiating it

Discovering a new account on your credit profile that you didn’t open

Store your credit card securely and never leave it unattended in public places

Do not share your card number, CVV, or expiry date with unknown individuals

Always verify the authenticity of websites before making online purchases

Regularly monitor your bank and credit card statements for unauthorised transactions

Enable transaction notifications via SMS and email to detect misuse instantly

Avoid using public Wi-Fi for accessing sensitive banking or payment apps

Install a reputable antivirus and firewall on your devices to prevent malware

Keep your operating system and banking apps up to date with the latest security patches

Use strong, unique passwords for all online banking accounts

Activate two-factor authentication (2FA) wherever possible for added protection

Immediately report any lost or stolen card to the issuing bank

Use virtual or prepaid cards for online shopping when available

Be cautious of phishing emails or calls requesting sensitive information

Shred old statements and documents that contain financial details before disposal

Do not allow others to use your credit card even for one-time transactions

Use credit cards from banks that offer fraud detection and zero liability protection

Be wary of saving card details on e-commerce sites or browsers

Check if the payment gateway is secure (look for "https" and padlock icon)

Conduct periodic reviews of your credit report for inaccuracies

Educate yourself and family members about the risks and red flags of fraud

Contact your bank immediately: Notify your card issuer or bank of the unauthorised activity. They may block the card or account to prevent further misuse.

Block the card: Request a temporary or permanent block on your card and apply for a replacement.

Change passwords and PINs: Reset passwords for online banking, email, and linked accounts to prevent further access.

Review recent transactions: Go through your recent statements to identify and list all fraudulent transactions.

File a complaint with the police: Register a formal FIR at your local police station or cybercrime unit.

Report to cybercrime portal: In India, you can lodge a complaint at cybercrime.gov.in.

Inform credit bureaus: Contact agencies like CIBIL or Experian to flag your account and prevent misuse of your credit report.

Submit a dispute form to the bank: Fill and submit the bank’s fraud dispute form to claim reversal of fraudulent charges.

Track your complaint: Follow up regularly with your bank and ensure that your complaint is being handled promptly.

Consult a legal expert: If the fraud is large or unresolved, seek advice from a legal professional for appropriate action.

Request for zero liability protection: Ask the bank to provide you relief under RBI's zero liability norms if conditions are met.

Monitor future activity: Continue checking your accounts for irregular activity for several months.

Setting up a credit card fraud alert is a crucial step to protect your financial identity from potential threats. A fraud alert is essentially a notification placed on your credit report that warns lenders and creditors to take additional verification steps before approving any credit request in your name. This extra layer of security makes it harder for identity thieves to open accounts or obtain loans using your credentials.

To initiate a fraud alert in India, you can begin by contacting one of the three major credit bureaus—CIBIL, Equifax, or Experian. Provide them with a written request or fill out the online form, along with proof of identity and documentation related to the suspected fraud, if available. Upon verification, the bureau will place the fraud alert on your credit report, typically for a period of 90 days. This can be renewed if necessary.

Simultaneously, notify your bank or card issuer about the suspected fraud. Most banks offer features like real-time monitoring, transaction alerts, and temporary card blocking through mobile apps. Activate all such features to enhance the security of your card.

Additionally, consider enrolling in a credit monitoring service offered by many banks and credit agencies. These services continuously track your credit activity and alert you to suspicious behaviour.

A fraud alert doesn't affect your credit score but ensures that any future credit inquiries undergo stricter scrutiny. This small yet effective step can go a long way in safeguarding your financial well-being.

Tool NameDescriptionEMV Chip TechnologyA microprocessor chip embedded in the card that encrypts data and prevents cloning, replacing traditional magnetic stripes.OTP AuthenticationA one-time password sent to the cardholder’s registered mobile number or email for transaction approval, adding a dynamic security layer.Transaction Monitoring SystemsAI-driven systems that monitor user behaviour and transaction patterns in real-time to identify irregular activity.TokenizationReplaces actual card details with a unique token during digital transactions, reducing exposure of sensitive data.Virtual CardsTemporary card numbers linked to your main account, used for online transactions to minimise the risk of data breaches.Mobile Banking AlertsSMS or app notifications sent instantly for every transaction, enabling quick detection of unauthorised activity.Geo-Location TrackingMatches the device’s current location with the location of the transaction to detect potential anomalies.Behavioural AnalyticsTracks users’ typical behaviour such as time of purchase, location, and amount to flag any deviation.Fraud Detection SoftwareEnterprise-level software used by banks to monitor and block suspicious transactions automatically.
 

These tools collectively strengthen the ecosystem of credit card security, allowing both financial institutions and users to combat fraud more effectively.

Banks hold a pivotal responsibility in safeguarding customers against credit card fraud. They employ a multi-layered approach combining technology, policy, and customer awareness to create a secure transaction environment. One of the first lines of defence is the implementation of fraud detection systems powered by machine learning and artificial intelligence. These systems continuously analyse transaction patterns to identify unusual or suspicious activity.

Banks also facilitate secure payment infrastructures by using EMV chip-enabled cards, secure PIN entry systems, and end-to-end encryption during transactions. Additional measures such as two-factor authentication (2FA), biometric verification, and mobile OTPs are standard practices to validate user identity and prevent unauthorised access.

Moreover, banks empower customers by offering tools such as transaction alerts, virtual credit cards for online shopping, and options to temporarily block cards via mobile apps. They regularly update their systems to keep up with evolving fraud tactics and collaborate with cybersecurity experts and law enforcement agencies for intelligence sharing.

Banks also educate users through awareness campaigns, SMS alerts, and email newsletters. They inform customers about phishing scams, risky online behaviours, and the importance of strong passwords. In case of fraud, banks provide dispute resolution services, and under the RBI's guidelines, customers are often protected by zero liability policies when fraud is reported promptly.

Ultimately, banks play a critical and proactive role in fraud prevention, detection, and resolution.

Credit card fraud can have a significant negative impact on your credit score, particularly if it is not identified and resolved in a timely manner. One of the most common ways it affects your score is through unauthorised purchases that increase your credit utilisation ratio. A high credit utilisation ratio indicates to credit bureaus that you may be over-reliant on borrowed money, leading to a potential drop in your credit rating.

Additionally, if the fraud involves missed payments due to bills you didn’t know about or changes to your payment details, your payment history could be negatively affected. Payment history is a key factor in determining your credit score, and even one missed payment can have lasting consequences.

In some cases, fraudsters may open new accounts in your name. These unauthorised accounts add to your credit report and could lower your average account age, another important factor in scoring algorithms. Multiple credit inquiries and new accounts can suggest financial instability.

However, if reported quickly, most credit bureaus will remove fraudulent transactions and accounts from your report, allowing your score to recover. That’s why regular credit report monitoring and quick action are essential to maintaining your financial credibility.

In India, credit card fraud victims are entitled to several legal protections under the Information Technology Act, 2000 and the guidelines laid down by the Reserve Bank of India (RBI). According to the RBI, if a cardholder reports unauthorised transactions within three working days of being notified, the customer has zero liability. This means they are not responsible for losses incurred due to fraud, provided they did not act negligently.

The law mandates that banks must resolve complaints related to fraudulent transactions within 90 days. If the customer does not receive satisfactory redressal, they have the right to escalate the issue to the Banking Ombudsman. Furthermore, the Consumer Protection Act, 2019 empowers individuals to claim compensation for any financial loss or distress caused by the bank's failure to provide safe services.

Victims can also lodge a complaint with the local police or register a cybercrime report on the official portal (cybercrime.gov.in). It is advisable to document all communications with the bank and preserve evidence like SMS alerts, emails, and bank statements.

If a data breach or unauthorised access occurred due to a third-party entity, legal action can be taken under Section 43 and 66 of the IT Act, which deal with penalties and cybercrime offences.

Being aware of these rights and acting swiftly can ensure not only financial recovery but also legal accountability.

In an era where digital transactions have become the norm, credit card fraud remains a persistent and growing threat. However, by staying informed and taking proactive security measures, you can effectively reduce your risk. Recognising suspicious activity, protecting your sensitive information, and using secure banking tools are essential steps.

It is equally important to act quickly when fraud is suspected. Prompt reporting, blocking cards, and updating passwords can prevent greater damage. Leveraging fraud alerts, monitoring your credit report, and understanding your legal rights further reinforce your defences.

Ultimately, maintaining financial safety requires a combination of vigilance, education, and technology. Stay cautious, stay aware, and always priorities your digital security.