Credit card scams: What are they and how do you avoid them?

Last updated: January 1

Credit card fraud is the act of fraudulently obtaining money using someone else's credit or debit card, or a similar payment system, says the FBI. On top of bank account information, fraudsters may try getting as much personal information from their victims as possible, adds the Federal Communications Commission (FCC). The goal is to run up charges on the victim's account and sometimes even to sell their information to other fraudsters.

get a personalized insurance quote today

A great rate is just a few clicks away.

Common credit card scams

Understanding how credit card scams work is a first step toward protecting yourself against this type of fraud. Scams may involve stealing card numbers from fake or unsecured sites or identity theft schemes, according to the FBI. Here are some common examples, so that you know what to look out for.

Understanding how credit card scams work is a first step toward protecting yourself against this type of fraud. Scams may involve stealing card numbers from fake or unsecured sites or identity theft schemes, according to the FBI. Here are some common examples, so that you know what to look out for.

Synthetic identity scams

A synthetic identity is a combination of real and fake information, says the National Credit Union Administration (NCUA). A common example is when a scammer uses a stolen Social Security Number (SSN) alongside a fake address, birth date or name. Together these create an entirely fake identity. The reason fraudsters use real and fake information is so they can apply for credit and create financial history that appears legitimate.

Synthetic identity can harm a victim's credit, according to the NCUA. Say a scammer takes out a loan using a real SSN then doesn't make payments on the loan. Missed payments can affect the real owner of the SSN even if the name attached to their SSN is fake.

Credit card interest rate reduction scams

Telemarketers promising lower interest rates for a fee are often scams, warns the Federal Trade Commission (FTC). Scammers may also attempt to convince victims that they have special connections with major banks, and that the savings will help pay off debt faster. They may even promise money-back guarantees.

However, the FTC's Telemarketing Sales Rule (TSR) prohibits companies from collecting fees before settling clients' debts. The FTC advises consumers to call the bank directly to settle debts. Credit cards typically have a customer support number on the back. If you get a rate-reduction call, your best bet is to hang up.

Phishing scams

A phishing scam is a type of wire fraud where scammers pretend to be a reputable business, according to the FTC. They target people through text, email or phone. They may convince victims of suspicious activity on their account or payment issues in an effort to steal credit card numbers or SSNs.

Scammers often disguise themselves as legitimate businesses or websites by changing a single letter, symbol or number, says the FBI. For instance, it might be an email from a business you've made purchases from in the past, but a closer look will reveal that the name is misspelled, or their logo is slightly off.

If you think you may've clicked on a phishing link, the FTC recommends updating your security software and running a scan.

Spyware

Spyware is a software program that allows criminals to secretly monitor a victim's computer, according to the National Institute of Standards and Technology. It can secretly record what the victim types, websites they visit and their private chats. Criminals can use spyware to obtain sensitive information like passwords, personal identification numbers (PIN) and credit card numbers.

Carnegie Mellon University's (CMU) Information Security Office explains that spyware attacks can lead to identity theft. Spyware may redirect victims to fraudulent sites, giving criminals even more control over their computers, where important credit card and banking information might be stored. Signs your device is infected with spyware include slow system performance, programs crashing, frequent pop-ups, strange desktop icons and browser function keys not working properly.

Spyware can be difficult to get rid of once installed, according to the Federal Deposit Insurance Corporation. If you fall victim to spyware, the US Computer Emergency Readiness Team recommends resetting all your passwords on a different device. This includes passwords to bank accounts, email and social media. Avoid using the infected computer. CMU further encourages disabling its wireless connectivity.

How to protect yourself from credit card scams

Credit card fraud can happen any number of ways, says the FTC. Fraud can be as simple as stealing a physical credit card or stem from an online breach that eventually leads to fraud. To help keep your card and banking info secure, here are some tips to consider.

Check the company's reputation before doing business

If you're about to do business with a new company, says the FTC, make sure they're on the up and up before giving them any sensitive information. Check for their reviews online and look for any complaints against them.

The FBI advises consumers to get the company's physical address, not a P.O. box. Call the seller and see if the number works, too. You may not want to do business with anyone who won't give you this information. In addition, be cautious with special investment offers through unsolicited emails.

Carry only the card you need

The FTC advises carrying cards separately from your wallet and only bringing the card you need for a specific errand. If your wallet or purse is ever stolen, it'll minimize the damage.

Be vigilant with in-person transactions

Keep an eye on the card when the cashier has it, says the FTC. Draw a line above the total amount on the receipt in case someone tries inflating it later. Don't sign blank receipts.

Be vigilant with online transactions

Websites can be set up quickly, warns the FBI. So don't let a flashy page fool you. Consider making online purchases with a credit card rather than debit. It's easier to dispute charges on credit cards. Additionally, a padlock icon next to the website URL may suggest increased security for transactions but take it with a grain of salt.

Check your billing statements

Monitor your billing statements regularly, says the FTC. Keep your receipts and make sure they match charges to your account. Notify your bank of any weird charges immediately. Another good practice is to tell your card issuer if you'll be travelling so that they don't flag any transactions. If you lose your card, says the FBI, call your card issuer immediately.

What to do if you think you've been scammed

Falling victim to credit card fraud can be stressful and scary – but you don't have to deal with the stress alone. Here's what you can do if you think you've been scammed.

Call your card issuer

Call your financial institution immediately if your card is lost or stolen, says the FTC. Banks often have a 24/7 service that specifically handles these issues. Reporting the loss means you're no longer liable for unauthorized charges. Check with your home or renters insurance carrier to see if they cover stolen cards.

Check if your SSN has been compromised

If you're unsure if your SSN has been compromised, check your annual SSN statement, advises the NCUA. You can check your SSN statement for free at the Social Security Administration website. Make sure its reported income is accurate. It can be an effective way for victims to determine if they're the victim of synthetic identity fraud Also, be on the lookout for incoming mail with someone else's name on it sent to your home.

File an identity theft report

If someone steals your identity, you can file a report with the FTC. You also have the right to place a fraud alert for one year on your credit report. This ensures creditors will take extra precautions to vet who applies for credit in your name. Connect with any one of the three national credit bureaus. Whichever you contact will notify the other two.

You can also have credit bureaus remove fraudulent charges from your credit report. Send a copy of your FTC Identity Theft Report when you connect with them.

Additionally, if a scammer gets hold of your password or username, be sure to update that information. If you use the same password on other websites, change those as well.

Contact the authorities

You can report scams to your local police, according to the US Government. Fake emails, websites and malwares can be reported to the Internet Crime Complaint Center. If you're the victim of an international scam, contact econsumer.gov. Notifying these agencies helps them track patterns and prevent scams.

Consider identity theft protection

Some insurance companies offer an identity theft protection plan. It not only helps recoup stolen money, but it might also help repair identity. Plus, a protection plan could come with prevention measures and monitor your credit and bank accounts to catch fraud as it's happening.

Reach out to your insurer to see if they offer identity theft insurance or an identity theft protection plan. Protection varies from insurer to insurer so be sure to ask about the types of coverage theirs come with.