How to Prevent Credit Card Fraud
It’s often said prevention is the best medicine. When it comes to your financial life, that adage certainly rings true.
It’s much easier to prevent financial problems and issues than it is to fix them once they’ve happened.
By saving in an emergency fund, you can prevent the need to charge unexpected or emergency expenses onto your credit card and go into debt. By creating a budget and sticking to it, you can prevent overspending and avoid going into the red each month. By paying yourself first, you can prevent missing the mark on your goals and actually save money.
These are all pieces of your financial life that you influence and control. But what happens when something happens to you? Is there anything you can do to prevent that from happening?
It may not feel like it, especially when it comes to something like credit card fraud. How can you prevent thieves and people using your information fraudulently? Isn’t that something you just hope doesn’t happen to you?
This is something in your financial life that actually falls under your control, too. While you may not completely eliminate the possibility of fraud ever happening, you can take several steps to reduce the likelihood of it making an impact on your financial life.
What Is Credit Card Fraud?
Credit card fraud describes a few different events that can occur. If someone steals your information or your credit card itself, that’s fraud. Using your information to make transactions you didn’t authorize or to open accounts in your name counts as fraud, too.
The most common way you might see credit card fraud happens when you find charges on your credit card bill that you didn’t make -- and neither did anyone else you approved and authorized to use your card. This indicates that someone stole your information or your card and used it to make a purchase.
You may also find bills in your mailbox for purchases or products you didn’t buy. You might receive credit card statements to accounts you didn’t open. You could also see information that looks like an error on your credit report if someone took your information and used it elsewhere.
If you ever see signs of credit card fraud like this, it’s important that you act immediately. In these cases, the fraud already happened. Now, you need to report it and file disputes and claims.
Most credit card companies don’t hold you liable for fraudulent activity, but you must report it as soon as you detect it. Only by doing this can they work with you to resolve the problem and remove charges due to fraud from your account.
But again, the better course is to prevent fraud before it even happens.
What Causes Credit Card Fraud?
Again, fraud happens when someone steals your information or your card and uses it to gain access to your account in a way that you did not authorize. They may make charges or access funds via your line of credit.
As to how others can get your information in the first place -- well, that’s a little more complicated. There are several ways people can get what they need to commit fraudulent activity with your credit card.
Fraud happens if you lose your card and someone uses it or someone steals your card in order to make transactions. That’s simple and straightforward enough. But fraud can also happen even if people don’t have your card in hand.
One way to get your information is by skimmer. A skimmer is a piece of technology that thieves can install at points where you already swipe your credit card, like at a gas station pump.
When you slide your card through the card reader, you inadvertently swipe it through the skimmer at the same time. The device can read and store your card’s information. Later, thieves can make counterfeit versions of your card to use.
Another way to access your information is directly through you. If you fall victim to a phishing scheme, you actually give people your info -- you just don’t realize that you gave it straight to a criminal.
Phishing involves deceptive phone calls or emails that trick people into providing their personal or financial information. The thieves then take and use this to gain access to accounts or make transactions on your line of credit.
Someone could also hack into places where your data lives online. They could hack into your computer, or another server that holds personal information about you. Some hackers can even access your information through unsecured wireless networks, or set up fake networks that record your data if you use them.
What Can You Do to Prevent Credit Card Fraud
There’s no getting around it: credit card fraud sucks and all the ways it can happen seem overwhelming. It’s not something you want to have happen to you, and it’s not a fun situation to deal with if it does.
But there’s some good news here. You can take steps to prevent credit card fraud so it doesn’t become an issue in your life.
Start with some basic steps that everyone can -- and should -- do to protect sensitive information. If you can keep your data (and your physical cards) safe, then you take a big step toward stopping fraud before it ever happens.
If you’re still concerned about how safe you are, you can take additional steps to safeguard your credit from fraud.
Let’s walk through the basic preventative measures we should all take first. Then, we’ll dive into more extreme measures that you can take, but remain optional.
Always Take These 6 Steps to Keep Your Credit Cards Safe
These basic measures can prevent credit card fraud and keep your information safe, both in the real world and online.
- When in doubt, be skeptical. Trust your gut. If you get a weird phone call from someone claiming to be a legitimate company, service, or other entity that you need to do business with and you’re not sure about it, hang up.
Then directly call the company the person claimed to represent. You can ask about the state of your account then and if you actually need to take any action. If it turns out the original call was a scam, report the activity to the actual company’s fraud department.
- Remember that banks don’t ask for your information via email. If you get emails from banks, payment processors, or other financial institutions asking you to send private and personal information via email, mark it as spam and delete it.
Legitimate companies will not ask that you send this kind of data via email. You can log into a secure portal in order to exchange information. Again, if you have any doubt, call the company directly.
- Shred critical documents. Never throw out statements, checks, or other paperwork that contains any of your financial information. Always shred these documents first, so no one can root through your trash to steal data about your credit or finances. (It may sound extreme, but it happens!)
- Only use secured networks. When you’re online, don’t use open and unsecured networks to send sensitive information. Make sure you use private wireless networks and use caution when using credit card information (like when you go to make online purchases).
Look in your browser bar before you share any kind of card information. Secured, safe sites will show an https:// in their URL. If you don’t see that “S” -- which stands for secured -- don’t submit your credit card information via the site.
- Keep your online information safe. Don’t submit personal information via computers in shared workspaces, and always clear your logins and passwords. You might want to avoid saving your credit card information in your web browser, too. If your computer is stolen, thieves won’t be able to use saved information to commit credit card fraud.
And of course, choose strong passwords for all your accounts and remember to periodically change them.
- Keep your personal belongings safe. It may sound obvious, but keep your wallet, purse, or backpack secure. Don’t leave your belongings unattended, and don’t keep all your financial information (or cards) in one place.
You probably only need to carry one or two cards at a time. If you have more, don’t risk something happening to them: keep cards you don’t plan to use at home.
Extra Cautious? Here’s How You Can Go a Step Further
If you feel you want additional protection against fraud, you can go above and beyond remaining diligent and following best practices to keep yourself safe.
Many companies offer services promising identity theft protection. These services include monitoring all your accounts and responding immediately if they detect evidence of fraud.
Some will place fraud alerts on your credit for you, which alerts financial institutions and credit reporting agencies that you may be a victim. This causes banks and creditors to use caution if they see requests for new accounts or lines of credit come through.
Other services include credit freezes if your credit shows signs of fraudulent activity. This prevents anyone from accessing your credit (think: pulling your credit or running an credit check), which will stop any new accounts from being opened.
This is an extreme measure, as it also means you can’t get access to new accounts or lines of credit while the freeze is in place. Using this measure -- and removing a freeze -- can come with a fee charged by credit bureaus in addition to the fee you pay an identity protection company.
Don’t forget that many banks now offer some sort of fraud prevention and alert system. This can take the place of a separate, paid service for most people (especially if you’re already using the steps outlined above).
Note that monitoring your accounts, setting fraud alerts, and requesting credit freezes are all things you can do yourself. It just takes time and effort. If you’re willing to commit to doing it, you don’t need to pay another company.
But if you prefer someone else keep an eye on your accounts and find value in not having to worry about it (or do any of the legwork), paying an annual fee for a little added protection may be well worth it for you.