Financial Scams and How to Avoid Them: Credit Card Fraud

Financial Scams and How to Avoid Them: Credit Card Fraud

The call comes in the middle of a dinner party… American Express is wondering if by any chance you’re in a bar in Acapulco purchasing drinks. Because just yesterday, you were buying gas in Alaska, which is also odd because you live in Tennessee.

After nearly choking on your Chardonnay, you assure them that these charges have nothing to do with you. You hang up and spend the rest of the party anxiously thinking about what a pain it’s going to be to get this worked out.

Just as surely as phishing emails will pop up in your inbox, at some point you will likely be confronted with credit card fraud. Let’s consider how this kind of fraud works and, most importantly, how you can avoid it…

Types of Credit Card Fraud

There are actually a few primary types of credit card fraud.

The first is application fraud, in which someone obtains enough personal information about you to open a credit card in your name.1 The scariest part about this fraud is it can go on for some time before you are aware of it, and by the time that happens, you may have a mess to dig out of.

The next type is account takeover, in which someone has enough personal information to take over one of your existing credit cards.1 They then report the card stolen and request a new card be issued on the account and sent to a new address. You can guess the next step… a shopping spree.

The third type is account skimming, in which unscrupulous employees steal credit card information from customers and either sell it to identity thieves or use it for illicit purposes themselves.1

Our internet-linked system of commerce opens other doors for fraud as well. Databases and company financial records are regularly hacked. The proliferation of online purchases has created a system in which the fraud perpetrator doesn’t even need a card in hand to make an illicit purchase.

Tips on Avoiding Credit Card Fraud

The Federal Trade Commission (FTC) offers numerous tips to avoid falling prey to this scam, the primary one being: Treat your credit cards with the same care you would treat cash.2

Think of it this way: How would you handle your purse or wallet differently if you were carrying around thousands of dollars of cash? Chances are you’d keep a closer eye on it, and you should treat credit cards with the same care.

Other recommended fraud protection steps from the FTC include2:

  • Don’t give your account number to anyone on the phone unless you’ve made the call to a company you know to be reputable. If you’ve never done business with them before, do an online search first for reviews or complaints
  • Carry your cards separately from your wallet. It can minimize your losses if someone steals your wallet or purse. And carry only the card you need for that outing
  • During a transaction, keep your eye on your card. Make sure you get it back before you walk away
  • Never sign a blank receipt. Draw a line through any blank spaces above the total
  • Save your receipts to compare with your statement
  • Open your bills promptly — or check them online often — and reconcile them with the purchases you’ve made
  • Report any questionable charges to the card issuer
  • Notify your card issuer if your address changes or if you will be traveling
  • Don’t write your account number on the outside of an envelope.

Resolving Fraud With Your Credit Card Company

Credit card companies are more aware than ever of credit card scams and often flag suspicious transactions before you catch them on your bill. Scammers will often make a couple of lower-dollar charges that slip under the radar to see if they’ll go through before making larger ones.

Whether you or your credit card company catches it first, a phone conversation is in order to resolve the fraud. Most often, you’ll find your credit card company very willing to help right away and remove the fraudulent charges.

Your card will be canceled and you won’t be able to make any more charges on it. The wait to get a replacement in the mail isn’t fun, but the company usually gets a new one to you in short order.

You may receive a phone call from someone identifying themselves as being from the fraud department representing your credit card. Before sharing account information with them, ask to call them back, because believe it or not, sometimes this is a scam as well!

Take their name, but don’t use the phone number they give you. Instead, turn your card over and call the fraud or customer service number listed on the card itself. Follow the prompts to get connected with the fraud department or customer service and have whoever you are connected with look into further information regarding your account.

You may also experience a hold or phone call regarding an actual, legitimate purchase that you make. No need to panic here — the credit card company is actually looking out for you!

Perhaps you live in Wisconsin and made an online purchase that was processed in Florida, and this is outside of your normal spending habits. The credit card company just wants to make sure that you really did make that purchase.

While it’s a mild inconvenience to have a legitimate transaction questioned, it’s a sign that your credit card company is looking out for its customers! Remember, credit card companies are competitive and they want happy customers — this works in your favor!

Strong Passwords Are a Must

One of your best safeguards against credit card scams, in addition to the list above, is to use unique passwords for each credit card, make the passwords difficult and change them every few months. Yes, it’s a chore, but far less so than sorting out a fraud mess!

One suggestion is to make each password a short sentence. That way it will be easier for you to remember yet tougher to hack. Avoid kids’ names, birthdays, maiden names and pet names — those are often too easy to fish out on social media.

Try a password keeper app such as 1Password, available free for smartphones and computers. It can actually generate truly random, difficult passwords for each of your accounts. It’s a convenient means of making sure that each of your accounts has the most secure password possible.

Some Resources for Help

Experian, a credit monitoring and reporting company, suggests that in addition to checking over their bills for fraud, customers should also carefully examine their credit report two or three times per year.3 Watch for any accounts popping up that you didn’t open and act quickly to have those shut down. If necessary, Experian can put a security alert on your account. Here are some quick links to bookmark just in case:

You may also want to look into credit monitoring or identity theft protection — there are numerous companies that provide these services at reasonable rates.

If you would like to file a consumer complaint with the FTC, you can do it online here or by calling the FTC’s Consumer Response Center at 1-877-FTC-HELP (1-877-382-4357).

This holiday season, chances are you’ll be busier than usual and spending more than usual… meaning your credit card information will be in the hands of countless merchants both online and in person. This is the time to step up your vigilance so that your holidays don’t end on a sour note.

With purpose,

Patrick Gentempo

Patrick Gentempo