How to Detect Credit Card Fraud

Nov 11, 2016 | Be First to Comment!

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Nothing sends me into a panic quite like finding a charge on my credit card statement that I know I didn’t put there. When this happened to me, a tornado of thoughts immediately whipped up in my mind:

A $100 charge to WalMart in New Mexico? I live in Massachusetts! I’ve never even been to New Mexico! I didn’t spend that money - how am I going to get this resolved? What if no one believes me that I didn’t sneak across the country to buy $100 worth of stuff at a WalMart?

I panicked. I wasn’t sure what to do. And I spent days wondering how on earth this happened in the first place.

The situation felt strange, especially since this particular card got cut up into pieces years ago. I don’t even use it, and there’s no way anyone else could use it either. How did they manage to go on a quick shopping spree with my card thousands of miles away?

Not understanding exactly how is what stopped me from contacting my credit card company right away. I was afraid I’d have to somehow prove that I was a victim (which is not the right way to respond). At first, I assumed the company would see me as guilty of trying to get out of a charge I didn’t want to pay until I proved my innocence.

I still don’t know what happened, but I finally contacted my credit card company and tried to give them as much detail as possible - which basically amounted to, “I have no idea how this happened!”

The credit card company responded and quickly resolved the issue. They didn’t question me or require me to submit any kind of proof. Submitting a dispute with my credit card issuer, in this case, was enough to solve the problem.

Even though it was an easy fix, it was undoubtedly scary at first. Thankfully, if this happens to you, you can do something about it just like I did. Most credit card companies offer fraud protection for cardholders.

But first, you need to know how to detect fraud when it happens so you aren’t held responsible for the activity. Here’s what to look out for with your credit cards.

What Counts as Credit Card Fraud?

Credit card fraud happens when someone uses your card information to make transactions you didn’t authorize. It can also happen when someone steals your information or your card itself.

This can include what happened in my situation, where somehow some other person not authorized to use my card got my information and used it to make purchases. But that’s not the only activity that counts as fraud.

It can also happen if someone steals your physical card and uses it. Or they could take the card or information and try to get a cash advance (via convenience checks). People can even make fake cards from your card information.

The end result could be transactions not authorized by you that appear on your statement. It could also be new accounts that you didn’t open, or hard inquiries on your credit report that you didn’t generate.

Credit card fraud is closely related to identity theft, too. If someone obtains your personal information, that’s classified as identity theft - and credit card numbers count as personal information. Thieves can use this information to commit fraud or other crimes.

How Credit Card Fraud Happens

So how does this stuff happen, anyway? Like I said, I spent days trying to puzzle out my case. The card wasn’t stolen and I hadn’t used it in ages. What happened?

Other than what I already ruled out, plenty of options still existed. Someone could have skimmed the card information when it was in use. (Skimmers are devices that read and store credit card information when you swipe your card somewhere, like at a store or gas station pump.) Or someone could have stolen my mail, which sometimes contains blank cash advance checks sent to me by my card issuer. Finally, someone could have stolen my data from an online site that wasn't secure.

My best guess is that a skimmer captured the card’s information at some point or someone stole mail containing cash advance checks. But here’s a list of ways credit card fraud can happen:

  • You lose your card and someone finds and uses it.
  • Someone steals your card.
  • Someone steals your information from a variety of sources: unsecured online areas, your mail, your trash, or via a skimmer that reads and stores card data.
  • Someone hacks servers or records storing your information.
  • You give out your information to an unverified source (for example, if someone calls claiming to be from a company or service you use and requests your credit card information and you provide it to them).

While all this sounds scary (and is, especially if it’s happened to you), there is some good news. If this does happen to you, it can be rectified if you act fast.

What to Look for to Detect Fraudulent Activity on Your Card

Now that you know how credit card fraud can happen, let's talk about how you detect this type of activity on your card.

Here’s where paying close attention to your personal finances as a whole comes in very handy. Fraudulent activity leaves traces that you can find. You just need to know where to look.

You can monitor your information monthly to make sure you take action if you become a victim of credit card fraud. Start by reviewing your credit card statements each time you receive them. (You could also sign up for a credit monitoring app to help.)

If your credit card statements arrive in the mail, this is a little easier. Simply open and review them as you get them and make sure all the charges that appear came from you (or someone you authorized to access and use your card).

If you opt into paperless billing, you need to make sure you review your statements online when available. Set up alerts on your phone or email so you get a notification when you can access your latest statement. You can detect credit card fraud by identifying charges you didn’t make or authorize.

Another sign can come through the mail with your statements, and that’s bills for products or services you didn’t buy. You could even get a bill for a credit card statement on a card you didn’t open. If you see something like this in your mailbox, don’t ignore it.

Getting calls from collections agencies claiming you owe money indicates credit card fraud. If you don’t have debt and didn’t default on any balances, you shouldn’t get these calls.

Monitoring your credit report can help you detect credit card fraud, too. You can get your credit report for free every year at AnnualCreditReport.com. Request a copy from each of the three credit reporting bureaus and review them carefully. If you spot loans or lines of credit you didn't open, then that's something to dig deeper on.

Finally, look for mistakes and errors on your credit card statement and your credit reports - but also check for inquiries that you didn’t generate or accounts that you didn’t open. These all suggest fraudulent activity.

What to Do If You Suspect Fraudulent Activity on Your Card

First, don’t panic. One of the biggest benefits of using credit cards is that they come with protections for users. Thankfully, your credit card is not directly tied to accounts where your cash lives. Someone can put a fraudulent charge on the account, but they can’t directly access your cash via your credit card.

This is a good thing that protects you and your money. Credit card companies extend cardholder protection to you and that includes not holding you liable for fraud. But you need to act fast and report fraudulent charges immediately in order for your credit card issuer to help you. Your next step will depend on how you detected the fraud and what happened.

For example, if your personal information (like your social security number) was stolen and used to open new accounts in your name, you need to call the Federal Trade Commission (1-877-438-4338).

But if you find mistakes on your credit report, then you should contact the credit bureau who reported the wrong information. Here’s where you can go online to open a dispute with each company:

If you believe someone stole your mail and committed fraud with the information it contained, you can report the issue to the US Postal Service. You can use their online form here.

If you find fraudulent charges on your credit card, reach out to your credit card companies. You can call your company’s customer service line or search for an online form to report fraud.

Stay Calm and Act Fast

Regardless of the circumstances or the channel you use to report credit card fraud, the key to successfully resolving these issues is to act fast and follow up until you receive a confirmation that the issue is settled.

Monitoring your information via credit card statements, credit reports, and what you receive in your mail can help you respond quickly and reach a resolution as fast as possible.

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