Credit cards are convenient ways to make purchases, but they’re not perfect. Credit card scams are everywhere, and credit card fraud is a growing problem. Read on for answers to common questions about spotting and reporting credit card fraud.
What is credit card fraud?
Credit card fraud is when someone uses your credit cards without your permission. They might use it to make purchases or withdraw funds. Credit card fraud can happen when someone steals your physical credit card. It can also happen if your credit card data is stolen and used online.
Another form of credit card fraud involves identity theft. This can occur when someone uses your personal information to open a credit card in your name. For example, a thief could use your Social Security number to apply for a credit card without your knowledge. More than 270,000 cases of credit card fraud occurred in 2019 alone.
What is a credit card scam?
A credit card scam is a lie or trick used to get your credit card information. It can be as simple as a phone call from someone pretending to be your card issuer. There are also more complex scams that involve fake web pages designed to look like your issuer’s login page.
Credit card scams are extremely common. They can happen in person, by phone, through an email, or even via social media.
How do credit card companies spot fraud?
Credit card companies have developed extremely sophisticated tools for detecting fraud. They monitor every transaction on every card. Then, credit card issuers use complicated computer algorithms to look for unusual transactions. For example, if you rarely leave your city and your card is used in another state, your card issuer might flag your card for possible fraud.
Depending on the company, flagged transactions can have a variety of results. Some issuers will send text messages or automated phone calls. This allows you to confirm whether it’s you making the purchase — or not.
In some cases, the purchase might be denied, especially if the credit card company is unable to contact you. This could happen if your card account is used in another country, for instance. The transaction might also be denied if you try to make a purchase with a website known for fraudulent activity.
How to spot credit card fraud
Although cardholders don’t have the fancy algorithms that card companies use, you can still spot fraud. The simplest way to catch credit card fraud is to keep a vigilant eye on your accounts.
Check your transactions at least once a month. If you spot a purchase you didn’t make, dispute the charge right away. Of course, you should also report a lost or stolen card as soon as possible.
Don’t forget to regularly check your credit report for signs of credit card fraud. You are entitled to a free report from each of the three credit bureaus every year. Immediately report any accounts you didn’t open yourself.
How does fraud happen on credit cards?
Fraud can occur when thieves get either your credit card data or your physical credit card. For example, credit card fraud happens when criminals acquire your credit card information or your account login information.
Common ways fraudsters get your credit card information include theft and scams. For example, a thief may steal your mail or get old documents from your trash. Your physical credit card can be stolen. Your card can also be copied via a skimmer or scanner. Thankfully, chip credit cards have reduced the amount of fraud from copied credit cards.
Phone scams are also common. Fraudsters may pretend to be a bank or government agent and demand your account data. Other scams can include complex fronts like fake charities or counterfeit businesses.
Another common type of credit card fraud happens when your identity is stolen. Identity thieves can use your personal information to open credit cards in your name. They can then rack up debt on the cards and disappear.
How do I report credit card fraud?
The process for reporting credit card fraud depends on the type of fraud. If you spot fraudulent purchases on your card, you can report them to your issuer. You can easily report credit card fraud to your card issuer through its website or mobile app. Of course, you can also call the number on the back of your card.
If the credit card fraud involves unauthorized accounts opened in your name, there are two steps you need to take. First, contact the card issuer and alert them to the fraudulent account. You can usually do this online or by phone.
Next, contact the credit bureaus and report the credit card fraud by disputing the account. You’ll need to file an account dispute with each credit bureau — Equifax, Experian, and TransUnion. Identity theft should also be reported to appropriate legal authorities, including the Federal Trade Commission (FTC). Check identitytheft.gov for help reporting identity theft.
What to do if you’re the victim of credit card fraud
The exact steps to take if you’re a credit card fraud victim can vary.
If your card is stolen and used fraudulently, report the theft to your issuer. You should also freeze your credit. Make sure you dispute unauthorized transactions, too. Your issuer will send you a replacement card, likely with a new number.
Even if it’s just your credit card data that was stolen (not the physical card), immediately dispute any transactions on your card you did not make. Consider freezing the credit card until the issue is resolved. Your issuer may decide to replace your card and give you a new number.
If a thief has obtained your login credentials, report the fraud to the card issuer right away. You should also change your account password and username. Be sure to change your credentials for any other accounts that use the same username or password.
In all these cases, remember that your liability for fraudulent credit card purchases is limited. Many card issuers have $0 liability policies in place.
If a credit card is opened in your name without permission, it gets more complicated. This means you are the victim of full-scale identity theft. You’ll need to report the credit card fraud to the card issuer. You should also file a dispute with each of the three credit bureaus.
Lastly, report the identity theft to any required authorities. This can include filing a police report and contacting the FTC or the Social Security Administration. If you’re not sure where to start, try identitytheft.gov for more information.
Although your liability is limited, identity theft can be hard to prove. Unfortunately, your credit score may suffer in the process. You may need to take steps to increase your credit score while you work to resolve your identity theft. It can be frustrating to have your credit damaged through no fault of your own, but there are steps you can take. Credit cards for bad credit can be useful if you have trouble getting approved for a new card after identity theft. Check out our guide for more on how to rebuild your credit.
Common credit card scams
There are as many different credit card scams as there are scammers (if not more). But most common scams fit into a few main categories:
- Phishing: These are email scams that include links to fake login pages. The email will claim there’s an issue with your account or pretend to be a fraud alert. When you use the email link, you are taken to a counterfeit website that may look very real. When you use your login credentials on the fake site, the fraudster gets access. Never log into your credit card account through an email link. Instead, go directly to the issuer’s website through your address bar or search engine.
- Impersonation: These scams often occur by phone but may also be by email. Fraudsters pretend to be your bank, a government agency, or even law enforcement. They may use fear or threats to coerce you into giving up your information. Remember that no legitimate agency or bank will ask for your credit card login credentials by phone or email.
- Fake organization: Some scammers will pretend to be part of a charity or popular organization. They may ask for donations or try to sell you something that doesn’t exist. When you give them your credit card information, they can use it to make fraudulent purchases. Avoid giving out your card data by phone or email.
- Get rich quick: This common type of scam will offer quick cash or free credit card rewards — they just need your personal and/or card information. Always be wary of anyone who asks for your Social Security number or other personal info. If it seems too good to be true, it probably is.
Of course, these are just a few of the most common types of credit card scams. Always use caution before giving out your personal or credit card information.
How to report credit card scams
Credit card scams and card fraud are crimes. If you fall victim to a credit card scam, you can report it to your local government — specifically, your state consumer protection office. You can also report scams to the FTC at the federal level. This is particularly important if the scammer is impersonating a government entity.
If you lost money or possessions to a credit card scam, you can also file a police report. Contact your local police department to file a report.
What to do if you’re the victim of a credit card scam
As soon as you know you’ve been scammed, report it. Dispute any fraudulent credit card transactions with your issuer. You can do this online or by phone. Next, report the scam to the local government authorities. You may also want to file a police report with your local law enforcement. Watch your credit reports and pay attention to activity on all your accounts to catch any additional fraud. You might also consider setting up a fraud alert or credit freeze.
3 credit habits that you need to break
Are you using your credit card responsibly? Or do you have a few bad habits? Take a look at three common bad habits that people have with their credit cards and the best ways to stop doing them.
Habit 1: Pushing the limits
The first bad credit habit is pushing your outstanding balance close to its limit. What’s wrong with that? The first problem is that you’re giving yourself a larger debt load to contend with every month — one that accumulates interest the longer that it sits. It could be very difficult to pay down, and it could even lead to you maxing out your card.
The second problem with this habit is that it leaves you vulnerable to emergencies. You’ve taken up the majority of your available credit, so you can’t depend on it for unexpected payments. What if you need to pay for an urgent repair and there’s not enough room on your card? What can you do?
To avoid that difficult situation, you could apply for an online loan to help you cover the emergency costs and move forward. See how you can apply for an online loan in Ohio when you have no other safety nets to fall back on. It’s important that you only turn to this solution when you’re dealing with an emergency. It’s not for everyday purchases or small budgeting mistakes.
In the meantime, you should try your best to keep your credit utilization at 30% or lower — this means that your balance should be below the halfway point of your limit.
Habit 2: Paying the minimum
You pay your credit card bills on time, but you only give the minimum payment. While this habit can stop you from racking up late fees and penalties, it can still get you into hot water if you’re not careful.
Only paying the minimum for your bill will make it very difficult for you to whittle down the balance, especially when you’re continuing to charge expenses on your card. You’re only taking $20-$25 off a growing pile.
So, what can you do? If you’re paying this amount by choice, stop it — you’re only making things harder for yourself down the line. If you’re paying this amount because you don’t have any more funds, look at your budget to see whether you can cut your monthly costs to get more savings and use them to tackle your balance.
Habit 3: Using it for every single expense
You don’t need to put every single expense on your credit card. Your morning coffee? Your afternoon snack? Putting these small, everyday expenses on your card is a habit that can make your balance climb quickly.
You also don’t want to put some very important expenses on there, like mortgage payments. For one, these payments are large and will take up a significant amount of your credit. Secondly, if you need to use a credit card to make these payments on time, you need to reinvestigate your budget to see whether you can actually afford your living space.
So, what you should you do? Use a debit card, cash or checks to pay for the items above. Only put expenses on your credit card that you’re positive you can pay off in a reasonable timeframe.
Don’t let these bad habits drag you down and get you into financial trouble. Break them now, before it’s too late.
Free credit reports have been extended; here’s why it’s important to check yours regularly
Typically, you’d be able to check your credit report — at least for free — just once annually through each of the three major credit reporting agencies. But thanks to the coronavirus pandemic, credit reports are now more accessible than ever.
Credit reporting companies Equifax, Experian and TransUnion are all offering free credit reports weekly through April 20, 2022.
The move means better insight into your financial health during what, for most, is an economically challenging time. According to experts, it might also be a time that’s ripe for at-risk personal information and identity theft, too — even more reason consumers should be checking their credit on the regular.
Have you checked your annual credit lately? If not, here’s what you need to know about these free nationwide credit reports and how to get them. If you’re not sure where you fit on the credit score spectrum, you may want to start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.
Free credit reports for all?
The nation’s three credit bureaus initially started offering free weekly credit reporting last year, just after the pandemic began. In early March, they announced they’d extended the offer for another year, this time through April 20, 2022.
To request your free credit reports and access copies, you can go to AnnualCreditReport.com and provide some basic information to verify your identity (things like your date of birth, Social Security Number, and address).
Once your report is ready, you should see a detailed list of all open and closed accounts in your name, your payment history, recent credit activity and more.
Protect yourself from identity theft
There are many reasons why checking your credit activity is important, but chief among them? That’d be the prevalence of data breaches in today’s world — not to mention the risk of identity theft they come with.
“In the past, it was perfectly acceptable for people to check their credit history once a year, but now with security breaches happening on a regular basis, consumers should be monitoring their credit more closely than ever,” said Clint Lotz, president and founder of TrackStar.ai, a predictive credit technology firm.
Lotz said the Equifax breach — which exposed over 147 million Americans’ personal information in mid-July 2017 — is the perfect example of why watching your credit report is important as far as identity theft protection goes. The pandemic, he said, adds an extra layer of risk to things.
“It took them [Equifax] months before they even realized they had been hacked, and considering that they hold files on hundreds of millions of Americans, it’s fair to say that many identities were stolen by the time they caught up to it,” Lotz said. “With many of us worrying about very serious issues not related to our credit, it’s a prime time for that stolen data to be put to work by bad actors in slow, methodical ways and in the hopes that nobody notices it.”
More reasons to check your credit
Checking your credit health often isn’t just good for detecting fraud alerts and to protect your identity, though. You can also monitor your report for errors — things like inaccurately reported late payments, for example — and then dispute those with the credit bureau.
If the error gets corrected, it could improve your credit score and make a jump from bad credit to a FICO score that’s more favorable. Not sure of your credit score? Head to Credible to check your score without negatively impacting it.
You can also use your credit reports and scores to monitor your financial habits — like the timeliness of your payments or how much debt you have left to pay off. Both of these factors can play a big role in your score, as well as how likely you are to get approved for loans, credit cards and other items.
“If you’re taking out a loan, getting insurance or even applying for a new job, checking your credit will allow you to see an overview of what would be seen by others looking at your credit,” said Leslie Tayne, a debt relief attorney with the Tayne Law Group. “Staying up-to-date on your credit reports and information allows you to know exactly where you need to improve.”
Want to be sure your credit is stellar before applying for a loan or insurance policy? Consider Credible’s partner product Experian Boost, which lets you use positive payment history on utilities, streaming and other bills to improve your credit score.
Set up a monitoring service, too
Though checking your credit reports manually is smart, you should also consider signing up for a credit monitoring service. These consumer financial services check your credit information and score regularly and alert you of any changes.
If you’re interested in monitoring your credit or improving your score, head to Credible and learn more about how Experian can help. You can also use Experian Boost to get credit for on-time bill payments.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Do Personal Loans Have Penalty APRs?
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.
The Blue Cash Preferred® Card from American Express, for instance, has a 13.99% to 23.99% variable APR, but the penalty APR is a variable 29.99% (see rates and fees). Penalty APRs usually last for at least six months, but card issuers often reserve the right to extend them — especially when you continue making late payments. A look at the terms for the Citi® Double Cash Card show us that the “penalty APR may apply indefinitely.”
Penalty APRs are certainly not a trap you want to fall into, but it’s not something you usually have to worry about if you have a personal loan. Personal loan lenders can, however, charge late fees upwards of $39 per late payment. Whether your loan charges late fees all depends on how good of a loan you qualify for, and that comes down to your credit score, borrowing history and ability to make your payments.
Personal loans also tend to charge lower interest rates than credit cards, too. The average personal loan interest rate for two-year loans is currently 9.46% according to Q1 2021 data from the Federal Reserve, compared to 15.91% for credit cards.
Typically, interest rates for personal loans range between roughly 2.49% and 24%, but personal loans for applicants with bad credit can come with even higher APR — so do your research before applying.
Other common personal loan fees include:
- Interest: The monthly charge you pay to borrow money
- Origination fee: A one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs
- Late fee: A one-time fee charged for each payment that you fail to make by the due date or within your grace period
- Early payoff penalty: A fee incurred when you pay off your balance faster than planned (because the lender misses out on months of expected interest payments)
As you can see, personal loans can be costly, even without a penalty APR. It’s obviously best to avoid paying extra fees whenever possible. That’s easier to do when you have a good to excellent credit score, since you’ll qualify for better loan options.
None of the loans on our best personal loan list charge origination fees or early payoff penalties, but some may charge late fees.
Find the best personal loans
For rates and fees of the Blue Cash Preferred® Card from American Express, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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