Do you want to know how to prevent fraud?



If you want to prevent credit card fraud, then you need to know how credit card companies treat fraud, the procedures for dealing with it, and your rights and responsibilities when it comes to unauthorized charges. This guide will walk you through the types of fraud you’re likely to encounter, spotting fraud when it happens, and reporting it to the proper authorities.

What Is Credit Card Fraud?

Credit card fraud is primarily the unauthorized, illegal use of your credit card to obtain goods without paying for them or to obtain funds from your account by way of a cash withdrawal. Credit card fraud is frequently an integral part of a broader theft of your identity, as very often your personal information is used to then obtain new loans or other lines of credit in your name.

How To Identify Fraud

Not all credit card fraud involves outright theft of the physical card. Some other ways crooks can spend your credit include:

  • Rifling through your trash to find discarded receipts or carbon copies of card numbers.
  • A dishonest clerk, server, or retailer may make a copy of your credit card information, including the security feature on the back of the card.
  • A telemarketing scam may attempt to get you to give out your credit card information in order to claim a free gift (citing that you must pay for shipping).
    Fraud point of contact 16.04.37

Crooks may also employ high-tech methods, including:

  • Skimming – Electronic devices called “skimmers” can read your magnetic strip and grab your credit card details. Dishonest service clerks can use these devices to make an electronic copy of your card, which they then copy to a blank credit card or computer so that they can make fraudulent charges. See this reference for more guidance on skimmers and what to look for.
  • Phishing – Phony emails claiming to be a business or institution you might know asking for your credit card information or other personal information. This is a type of social engineering tactic where the crook hopes that you will voluntarily give up your personal information so he or she can use your credit for themselves.

Who Pays For Credit Card Fraud?

Back in 1992, theft due to credit card fraud cost cardholders and their respective credit card companies a combined $864 million. Today, those costs are $190 billion. A 2009 Lexis Nexis study found that banks alone lose roughly $11 billion, and customers lose roughly $4.8 billion. An updated 2014 study found that the trend is continuing.

Even if you’ve never been victimized directly, credit card fraud still affects you. When a credit card company has to cover fraudulent charges, it makes up the loss with higher fees and implementing interest rate increases across all customers.

Who Investigates The Fraud?

For most cases under $2,000, credit card fraud is investigated by the issuing bank or card provider and not the police. This is mainly because some police departmentsdon’t consider cases under $2,000 to be worth investigating.

In cases where the dollar amount exceeds $2,000, local police will typically get involved and work alongside the card issuer to pursue the criminal. For very large cases, the Federal Trade Commission may be involved.

How To Prevent Credit Card Fraud

Here are some ways to reduce your risk of falling victim to credit card fraud:

  • Sign any new cards immediately. By signing your cards, you establish your signature on the card. If it’s ever stolen, it will be difficult for someone else to erase or cover your signature and forge it in their own handwriting.
  • Carry your cards separately from your cash wallet. Most people carry their cards and wallet together. But if your wallet is stolen, your cards will also be stolen.
  • Keep your card in view when you can after you hand it over to pay.
  • Don’t sign a blank receipt. Draw a line through any space above the total amount, including any tip amounts, if you do not intend to authorize additional charges on your card.
  • Void all carbon copies and incorrect receipts.
  • Save all receipts in a safe place.
  • Open your billing statements as soon as you get them, and reconcile your card accounts every month, in the same way you would reconcile your checking account.
  • Report any suspicious activity on your card immediately.
  • Notify your card company immediately when you travel or move.
  • Never lend out your credit card to anyone.
  • Never leave receipts lying around. Always destroy them using a shredder or by cutting them into small pieces.
  • Never put your card number on a postcard, the outside of envelopes, or in a photo online.
  • Never give your number out over the phone unless you initiated the transaction and you know the company is reputable.

See also: What Could a Boarding Pass Tell An Identity Fraudster About You?

Celebrity Cases of Fraud

Even celebrities aren’t immune to credit card fraud.

Will Smith

Will Smith, the actor who starred in movies like ‘Men In Black’ and ‘Independence Day’, was once a victim of ID theft by Carlos Lomax. Lomax opened up 14 credit cards in Smith’s name and charged $34,000 in his name. He was eventually caught, but not before damaging Will Smith’s credit and reputation. Smith recovered, of course, but Lomax hasn’t.

Bill Gates

A Bulgarian college student, named Alexey K., hacked Bill Gate’s personal information and opened a credit card in his name. This brash 22-year-old was a known member of a global crime ring involved in producing counterfeit IDs in more than 25 countries worldwide. Once caught, authorities were able to put an end to Alexey’s criminal activities and arrest more than 30 people involved in other related crimes since 2004.

Jennifer Aniston, Anne Hathaway, and Liv Tyler

Jennifer Aniston and Anne Hathaway were victimized by a local retailer they frequented. Maria Gabriella Parez, the owner of the Chez Gabriela Spa, scammed them both out of thousands of dollars. Parez catered to stars like Aniston and Hathaway, seeing to their hair, skin, and other cosmetic needs. A basic service started at $300 for a facial.

Liv Tyler’s management company discovered a discrepancy in the billing on the actress’s American Express card that amounted to $214,000 in erroneous charges by the spa. It was subsequently found that Aniston and Hathaway had also been victimized in a similar fashion.

Infamous Cases of Fraud

The Best Western Scam

One of the world’s largest and most well-known hotel chains had its IT security networks hacked. The security breach resulted in a year’s worth of visitor data, including home addresses, phone numbers, and credit card information being stolen. The amount of potential damages to hotel guests amounted to more than $5 million.

The Largest UK Credit Card Fraud In History

A group of international criminals stole credentials for over 32,000 credit cards, made clone cards, and subsequently went on a spending spree with their “new-found money.” They used these cards to rack up over £17 million ($24.1m) in fraudulent charges over a period of several years.

The scam was initiated by Russian and eastern European criminals working out of London. Their elaborate scheme involved shifting money from the UK to Poland, through Estonia, Russia, the U.S., and the Virgin Islands.

They were eventually caught, however, during a routine anti-terror check by transport police. The officer became suspicious when they found forty mobile phone top-up cards during their check. This finding led to an investigation which brought 5 men to justice.

Anup Patel’s Credit Card Skimming Scam

In 2008, England experienced another crime wave when Anup Patel and an accomplice stole more than 19,000 credit card numbers using gas station credit card terminals. The scam involved using a special hardware device called a “skimmer.”

Skimmers typically replace or attach to a legitimate credit card terminal. When a victim uses the terminal, the information passes through the skimmer and is captured. From there, the thief can duplicate the credit card information, make phony cards, and use them as though they were authentic.

Patel’s plan was to set up a home-based credit card factory. Patel and his accomplice also set up hidden cameras to capture private information like PINs.

The scammers stole $3.5 million before they were caught.

TJX Security Breach

From 2005 to 2007, a security hole allowed hackers and other criminals to steal cardholder data from T.J. Maxx, Marshalls, and other similar retail stores. Because the security breach spanned several years, it’s impossible to know the full extent of the damages. However, it is estimated that more than 45 million credit card numbers were stolen and that $8 million in fraudulent purchases were made.

How To Report Credit Card Fraud

If you think you’ve been a victim of credit card fraud, you must act immediately. Most credit card companies publish a toll-free number for you to call. This number is also located on your statement and in your online account.

Some credit card providers also offer 24/7 assistance for fraud. For example, if you have a major credit card, like a Chase Sapphire or a Chase Freedom card, Chase bank has an established procedure in place that helps you report the fraud over the phone, document it, have the charges reversed, and then obtain a new card.

A similar procedure exists for other card providers like American Express and banks like CitiBank of AmericaTD Bank and HSBC.

Most banks also encourage you to contact the three major credit bureaus to place a fraud alert on your account. A fraud alert sends out a blanket request to all creditors to contact you before they open any new accounts on your behalf.


You can also order your credit report and score by contacting the credit bureaus directly:

  • Equifax 800.525.6285
  • Experian 888.397.3742
  • Trans Union 800.680.7289

By law, you have no further liability once you report the card stolen, regardless of the number or amount of unauthorized charges. Your maximum liability, even before you report fraud, is $50 per card.

If you think that someone might have illegally used your credit card, you must call the card company or bank immediately. You may also want to follow up with them with a letter.

The card issuer will write back to you, asking you to sign an affidavit under oath that you didn’t make the purchases being disputed.

You may also sue the criminal who stole your identity and credit card information. Normally, this is done in small claims court, unless the amount exceeds the state’s small claims limit (small claims limits by state).

You should consult a lawyer before suing, however, so that you understand your rights under the law and potential damages to which you are entitled.

Most often, if the criminal is caught, he or she also faces criminal charges.

Do not confuse credit card fraud with mistaken or erroneous charges. For example, if you authorize a charge to your card, but the merchant accidentally processes the transaction twice, this would not be considered fraud. However, you would want to dispute the additional charges for items you did not receive or cases where you were double-billed.

In these cases, you must dispute the charges within 60 days under The Fair Credit Billing Act. You must write a letter to the card issuer, letting them know there were erroneous charges on your account.

If you need more information about credit card fraud, contact Public Reference, Federal Trade Commission, Washington, D.C. 20580 for several free publications:

  • Credit Billing Errors
  • Fair Credit Billing
  • Lost or Stolen
  • Credit and ATM Cards
  • Telemarketing Travel Fraud

There is also a free PDF produced by the FTC available for download here.

Take Extra Precautions When on Vacation

The risk of credit card fraud can increase when you use your card in unfamiliar environments. Cultural and language barriers create fertile grounds for fraudsters to operate in. Knowing what to look out for, how to stay protected and what to do in case you fall victim to such attempts, is the best form of defence when travelling.

What To Look Out For

  • Theft

Pickpockets are known to take advantage of situations where people gather in crowds and confined spaces such as packed trains and museums. Use inside and front facing pockets where possible. Thieves sometimes operate in gangs, whereby the thief passes on the stolen item to a chain of collaborators, so if the suspected thief is confronted, the items he has stolen have already moved along the chain.

Hidden pouches that you can wear on the inside of your clothes offer a cheap solution for storing your cards and other valuables.

  • Tampered ATMs

Advances in technology have seen credit card skimming technology become more sophisticated. Look out for ill fitted keypads on ATMs which may be fitted on top of the official keypad to skim your pin details.

Credit card skimmers can also be fitted to the card dispenser, so make sure they are not tampered with and look for any additional cameras that are pointed at the ATM from above the machine which can also be used to capture your pin number. Any machine that looks tampered with or altered in any way should be treated as suspect. Seek an alternative ATM. Online ATM locators from VISA and MasterCardcan point you to the next nearest ATM, as can mobile apps like Google Maps.

Safety Tips

Planning ahead can minimize the need for you to improvise while travelling. Hotels, transport, excursions and hire cars can all be prepaid from the comfort of your own home thereby minimizing the need to make transactions on the go.

You can even research restaurant and taxi expenses online which allows you to budget for the amount of daily cash you will need and minimize the need to use your card for such purchases. Make use of hotel room safes to avoid carrying excess amounts of money or cards. As a general rule, use cards for major purchases and use cash for small items.

What To Do If Things Go Wrong

Your personal safety is of the highest importance in any such situation. Seek to distance yourself from any situation where theft may have occurred. Do not confront any assailants, even if you feel you are able to overpower them as they are often armed and they may have collaborators at hand that you are unaware of.

Make your card issuer aware of any fraud, theft or loss of your card or identity details. The sooner you do this the better.

Before you travel, it is a good idea to make a note of the emergency hotline contact details of your card issuer in your country or the country you intend to travel to. Keep this information separate to your actual card. Your card issuer will then be able to walk through you any next steps you could take.

Having a backup card, like a prepaid travel debit card, can also be part of your preparations and should also be stored separately from your main card during travels.

Card Issuer’s Global Emergency Contacts 

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