Credit card fraud or a credit card scam is an unauthorized use of a credit card, debit card or other payment tool to fraudulently obtain money or property. While the terms fraud and scam are often used interchangeably, scams are actually a type of fraud.
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How Do Credit Card Scams Work?
Credit card scammers can get your credit card account information by theft or through a scam. Theft involves the physical stealing of a credit card, bills, or other documents that contain your credit card’s account information. Scams, on the other hand, may not involve stealing anything physically, but the scammer still gets your credit card information through one of a variety of types of credit card scams.
Identity theft is another common type of credit card fraud. The thief may use your personal information to open credit cards under your name that are sent to the scammer’s address.
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How Does a Credit Card Scam Affect My Credit?
Credit card scams can affect your credit score if the fraudulent activity is reported in your credit report with the credit bureaus. For example, if debt is accumulated or additional credit lines are opened that you aren’t aware of and therefore fail to make payments on, your credit score will be negatively affected.
However, it’s possible to remove fraudulent information from your credit report, so it will not affect your credit score long term. It may take several weeks for your score to reflect the removal though. Additionally, it’s important to note that placing a fraud alert on your credit reports won’t affect your credit score.
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Types of Credit Cards Scams
Credit card scams can occur many different ways. They can happen by phone, over email, online, via text message, or in person. It’s critical to stay aware of the types of credit card scams as you use your credit card so that you can be diligent about identification and prevention.
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Credit Card Reader Scams
Credit card skimming is when credit card information is taken during a credit card transaction, directly from a fraudulently installed credit card reader called a skimmer.
Skimmers are electronic devices that record credit card information from the magnetic strip on the credit card, during what appears to be a legitimate transaction. Skimmers are attached to credit card reader machines in locations like ATMs, retail stores and gas stations, and they are hard to detect visually, as they look like a part of the card reader machine. The victim does not know that this is occurring until it is too late.
The prevalence of EMV smart chips in credit cards has helped to prevent some of these credit card reader scams, but they can still occur.
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Gas Station Credit Card Scams
Payment methods at gas stations can be ideal for credit card scammers because they are heavily used but unattended. In fact, gas stations are some of the most common locations for skimmers. Make sure to inspect the credit card device at gas stations, especially if they look worn or tampered with.
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Credit Card Processing Scams
Not all credit card processing companies are legitimate. When making purchases online, be especially aware of what company is processing the transaction. Make sure that the company is secure and legitimate.
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Credit Card Scams by Phone
Credit card scam attempts by phone are fairly common. These scams involve a phone call or text message to try to get the target to use their credit card, often to “pay off” some alleged debt, fine or taxes. The caller typically claims to be from a government entity like the IRS or FBI, and usually threatens the caller with a legal action or arrest to scare them into providing the credit card information.
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Prepaid Credit Card Scams
Prepaid card scams are often done with gift cards. If someone asks you to pay for something by putting money on a gift card or buying a gift card, and to then provide them with the numbers on the back of the card, this is likely a scam. The scammer may pretend to be a friend, coworker, company tech support, or the government, and ask you to purchase a gift card immediately, often for an emergency reason.
Prepaid cards, like gift cards, are enticing for scammers because they have few protections or security measures. These monetary instruments aren’t subject to the Fair Credit Billing Act, which offers credit card users robust protections against fraudulent transactions.
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Credit Card Scanner Scams
One way how credit cards function is to transmit account information wirelessly through RFID (radio frequency identification) chips, which can be an extra security measure in some credit cards. However, they are not immune to transactional scams.
Devices sold online can read credit card information by scanning the electromagnetic signal from the credit card, even from a distance. That being said, the reader devices cannot get personal identification numbers or the CVV codes on the backs of cards, which can limit the extent of the damage that they can do.
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How to Report Credit Card Scams
The FTC is the main agency that collects scam reports. Report your scam online with the FTC at reportfraud.ftc.gov, or by phone at 1-877-382-4357.
You should also report the scam to the company’s fraud department, if the scam was related to an online seller, a payment transfer system, or used the company’s name or information falsely. If your credit card, debit card, or bank account was involved in the scam, you should also report the incident to your credit card issuer or bank.
Remember to place a fraud alert on your credit report to prevent future credit card scams from occurring. You should also report the incident to the credit bureaus, and you can put a freeze on your credit to prevent your information from being accessed without your consent.
Finally, you can put a hold on your credit card so that no one else can use it to make purchases.
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Tips for Avoiding Credit Card Scams
To avoid credit card scams, consider these tips from the FBI:
- Always review your credit card statement to look for unauthorized charges.
- Verify that a website is secure and reputable before providing your credit card number. Also check out the security/encryption software that the website uses, and verify that the actual individual or company is legitimate.
- Obtain a phone number and email to contact the seller directly to verify identification and information.
- Check with the Better Business Bureau and look at other websites regarding the person or company if you have any doubts or suspicions.
- Be cautious when responding to special investment offers, especially through unsolicited e-mail.
- Don’t give out your personal information to anyone claiming to represent your bank or credit card company. Instead, call the institution directly to see if the request was legitimate.
- If possible, purchase items online using your credit card, rather than a debit card, bank account or third party. Credit cards often offer additional purchase protections.
- Make sure the transaction is secure when you electronically send your credit card number.
- If anything looks suspicious or if you lose your credit card(s), contact the issuer of the credit card immediately.
- Check your transactions and credit report frequently for any suspicious activity.
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What Is the Most Secure Credit Card?
No credit card is completely secure. When you select a credit card, you can keep your eye out for features like the ability to freeze your account, purchase protections, fraud monitoring, and credit score monitoring if you’re concerned about security.
You can also look at the bank that is issuing the credit card to find out its security measures.
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Things to Consider When Applying for a Secure Credit Card
Secured credit cards can offer a secure and convenient method of payment, while also having the added bonus of potentially building a credit score (if used responsibly). Secured credit cards are usually available to applicants with bad credit, making them a worthwhile option compared to the unsecured credit card options for bad credit, which can come with high fees.
Secured cards require the cardholder to make a refundable security deposit, which typically becomes the amount of the card’s credit limit. Other than the security deposit and credit limit, secured credit cards work essentially the same as any other credit card. Issuers of secured cards usually report your balance and payment history to the three major consumer credit bureaus, which can help build credit with responsible use. You can compare credit cards to see which ones could be right for helping to build your credit.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
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Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Young is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Her ADV 2B is available at www.sofi.com/legal/adv.
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