What to know about credit card fraud detection

Credit card fraud affects hundreds of thousands of people each year, making it one of the most common types of fraud in the U.S.1 With its prevalence as a threat to credit card users, credit card fraud detection is especially important.

What are some potential ways individuals can help fight credit card fraud? From using a trusted credit card and credit product provider to identifying signs of suspicious activity, this guide provides an overview of possible strategies people can use to help stay safe against credit card fraud.

What is credit card fraud?

Considered a form of identity theft, credit card fraud generally refers to the unauthorized use of someone else's credit card information to conduct transactions. There are several types of fraud on a credit card that can occur. Here are some to know:

  • Lost or stolen card: When a credit card is physically stolen from the cardholder and then used by a fraudster until the cardholder reports it as stolen.
  • Card not present (CNP): This can occur when a fraudster uses stolen credit card information (such as the card number, expiration date, and CVV code) for online or phone transactions where the physical card is not required.
  • Card testing: Criminals may use stolen credit card information to test the validity of card details by making small online purchases before attempting large transactions or reselling the details on the dark web.
  • Card cloning: Duplicating credit card information onto counterfeit cards for in-person transactions.

How credit card information may be stolen

There are many possible ways credit card information may be stolen, from a lost card being picked up and used by someone else to nefarious digital schemes. Here are some examples:

  • Card skimming: Criminals may install small devices called skimmers on ATMs, gas station pumps, or point-of-sale terminals to capture card information when the card is swiped or inserted.
  • Phishing: Fraudsters may send fake emails or messages, posing as legitimate organizations, to trick individuals into revealing their credit card details.
  • Data breaches: Hackers may target businesses, financial institutions, or websites to gain unauthorized access to large databases of credit card information.
  • Account takeover: Criminals gain unauthorized access to a person’s online account associated with a credit card, which may contain stored card information.

Potential signs of suspicious activity

When it comes to fraud on a credit card, possible signs of suspicious activity may look different. Here are some signs that may indicate fraudulent activity on a credit card account:

  • Unusual charges or transactions on credit card statements.
  • Unfamiliar merchants or locations listed with transactions.
  • Very small transaction amounts that may indicate the card is being verified.
  • A credit card is nowhere to be found and assumed to be stolen.
  • Unexpected changes to a credit report.
  • Communication from creditors or collection agencies.

What to do if you suspect credit card fraud

Wondering how to report credit card fraud? If an individual suspects credit card fraud, there are a few steps they can take. Here is a general breakdown:

  • Notify: Contact the credit card provider immediately, tell them which charges were unauthorized, and ask for them to be removed.
  • Close and freeze account: Ask that the credit card account be closed or frozen and request a new credit card number and PIN.
  • Place a fraud alert: Contact at least one of the three credit bureaus to place a fraud alert.
  • Review and correct credit report: If incorrect information is listed on a credit report, contact the credit reporting agency to remove the fraudulent information.

What happens if a financial institution detects fraud?

Nowadays, many banks and credit card companies offer real-time fraud alerts to identify potentially suspicious activity. If an individual’s bank detects fraud, here’s what may happen:

  1. The bank's fraud detection system or security team may identify an unusual or suspicious transaction on someone’s account.
  2. Next, the individual may receive an alert to verify the flagged transaction and confirm whether they recognize it. This alert may come via email, phone call, or text message.
  3. To potentially prevent further unauthorized activity, the bank may temporarily suspend the affected account until the cardholder is reached, such as disabling online banking or automatically declining the transaction.
  4. If the transaction is confirmed by the account holder as fraudulent, a new card with a different card number will likely be issued immediately, and the fraudulent transaction will be removed from the account.

Potential ways to keep credit cards safe

Keeping credit card information safe is essential to help fight fraud. Start with these potential tactics for credit card fraud prevention:

  • Keep physical credit cards in a secure wallet or cardholder. Avoid leaving cards in visible or easily accessible places.
  • Consider using a digital wallet. Digital wallets tokenize card information, which can add an extra layer of security by not revealing full financial information when being used. Some digital wallets may also offer early fraud alerts to keep users informed of potential fraud in real-time.
  • Practice safe online shopping habits, such as using secure and reputable websites and those that offer secure checkouts. Always verify a website's authenticity before making a purchase.
  • Avoid making online purchases or accessing credit card accounts while connected to public or unsecured Wi-Fi networks.
  • Review credit card statements and account activity regularly to detect any unauthorized transactions.
  • Enable real-time account alerts for transactions to monitor every purchase made on a credit card.
  • Take advantage of offerings from credit card networks that help keep accounts secure. For example, PayPal Cashback Mastercard®2 cardholders can enroll in Mastercard’s 24/7 Identity Theft Protection™ program for added security. See Mastercard Guide to Benefits for details.

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