Credit Card Fraud: How it Occurs and How to Prevent It

/ BY / Identity Theft

Approximately 10 million people in the US each year become unsuspecting victims of credit card fraud. Thieves don't just steal cards, either-they can open up entire lines of credit without your knowledge, leaving you to clean up the mess. Sometimes, victims don't even find out about credit card theft until the damage is done.

Types of credit card fraud

There are different ways thieves go about getting your credit card information or opening it from your account:

  • Theft. This type of fraud involves actually stealing your credit card and then using it before the theft is discovered or reported. Usually, this happens when a purse or wallet is stolen. This can be especially harmful when a stolen purse or wallet contains ID and a social security card, which can lead to identity theft.
  • Identity theft. This occurs when a thief assumes someone else's identity in order to open lines of credit. This occurs when a thief obtains access to information like ID cards, bank information, or checks.
  • Online theft. With more and more people turning to the Internet to shop, savvy thieves steal credit card and pin numbers and incur their own charges. This also happens when consumers make purchases on sites that aren't secure.
  • Phishing. This type of credit card fraud occurs when a thief or fraudulent group emails the victim claiming to be an official website, usually a bank or credit union. The email asks that readers "verify" credit card and bank information and then steals the information.

How to prevent credit card fraud

Luckily, there are many laws in place that protect consumers from fraudulent credit card activity, so when reported correctly it is possible to get fraudulent charges reversed. But dealing with the process of reporting the card as stolen, removing the charges, and cleaning up your credit score is a hassle that can take months. It's much easier to prevent credit card theft in the first place.

These are some of the easiest, most effective ways to prevent credit card theft:

  • Safeguard your belongings. Never leave your purse or wallet unattended. You should also be careful what you keep in your wallet; store your social security card in a safety deposit box in your home instead of carrying it in your wallet or purse.
  • Opt out of credit card offers. One form of credit card theft occurs when a thief steals credit card offers from mail boxes and activates the card in the victim's name. You can remove yourself from these unsolicited mailing lists by calling 1-888-5OPTOUT. You can find more information about that here.
  • Never give out personal information over the phone or online. No legitimate bank or financial institution will ever ask you to enter your personal account information online. If you receive an email asking for this information, contact your financial institution.
  • Destroy financial information and statements. Some thieves will even resort to digging through trash for bank statements and other personal information. You can prevent this by shredding your statements.
  • Be careful when making online purchases. Only purchase from reputable sites that encrypt the information you provide. You can make sure a site is secure by checking the URL-if it begins with https instead of http, it's secure.
  • Check your statements often. Just because your card is not physically stolen doesn't mean the information can't be used. Make sure you check your credit card and bank statements regularly. If there are any fraudulent charges on your account, report them to your bank or credit card company.

By being alert and taking the proper precautions, you can make sure you don't fall victim to credit card fraud.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.