Credit card scams are an unfortunate reality of today’s financial world. According to the Federal Trade Commission, there were 2.1 million instances of fraud in 2020 alone, with nearly half of these cases related to credit cards.
With an increase in “card-not-present” online and mobile device shopping, the need to steal a physical card has been almost entirely replaced by scams that seek to simply collect cardholder data. Wallet and purse-snatchers have given way to digital savants who tunnel their way into online shopping carts and email inboxes through social engineering and malware.
As you seek to protect yourself and your payment information from becoming compromised, education and your instincts will be your closest allies.
7 Most Common Types of Credit Card Scams
Most commonly, scammers are focused on securing cardholder data, not the physical plastic card itself. Gaining access to cardholder data enables scammers to perform card-not-present transactions online or by phone. These transactions are more difficult to trace and create an opportunity for large-volume fraudulent purchases.
Contrary to popular belief, most compromised credit card information is captured by individual thieves, not merchant data breaches. Fraud perpetrators secure cardholder data through behaviors that imply trust through impersonation, creating cardholder confusion through phishing calls or purchasing merchant transaction data from dishonest employees.
1. The Interest Rate Scam
How it works:
You receive a call from an automated message letting you know you have qualified to lower your interest rate on your credit card. In order to claim the offer, you must enter your card information to proceed.
How to Protect Yourself:
Most credit card companies are not eager to reduce the interest you are paying them, and even those who are willing to reduce your rate are not likely calling you by phone or sending you an email inviting you to do so. Like most other “opportunities”, if the offer to reduce your payment is real, the provider should be glad to provide contact information or a link to a website so that you can verify their legitimacy.
2. The Fraud Alert Scam
How it works:
This occurs when the scammer calls you claiming to be from the fraud department of your credit card company. They sound legitimate, give you a claim number and say they will remove the fraudulent charges. During the call, they will ask you to verify the card number and expiration date while subsequently asking for the three-digit security code on your card. With that information provided, they now have access to your credit card.
How to Protect Yourself:
Credit card companies will never call you and ask for your card information. They already have that. If you are unsure about the legitimacy of the call, hang up and contact your credit card company directly.
3. The “Skimming” Scam
How it works:
A small device is inserted into a card terminal and collects magnetic stripe data when you insert your card. Often, the terminal can feel somewhat loose and/or may appear unusually worn. EMV “chip” cards are intended to reduce this risk, but have not eliminated the fraud technique.
How to Protect Yourself:
A best practice can often be a “grab test” on the payment terminal. Grab the card insertion slot with your hand and give it a quick tug to ensure no loose plastic has been inserted in the swipe/dip receptacle. If you feel uncertain about the terminal and another is available (such as a fuel station or grocery store), move to another one.
4. The Credit Card “Sign Up Farm” Scam
How it works:
Victims of this credit card scam are often willing participants, with the promise of making easy money for helping to generate what they’re told are legitimate credit card rewards. Scammers recruit people with good credit and offer to pay $1,000 to $10,000 for use of their Social Security number to open credit card accounts. The scammers rack up huge balances on the cards to generate reward points then convert the points to cash. The victims are never paid and are left responsible to pay for the credit balances.
How to Protect Yourself:
The lure of making easy money can be hard for anyone to resist. The simplest way to avoid falling victim to this scam is to never give or sell your Social Security number or any personal information to someone else.
5. Hot Spot 7 Free WiFi Scams
How it works:
In this credit card scam, your smartphone or laptop finds a “public WiFi hotspot” and when you connect, you are prompted to enter your credit card information in order to gain access.
How to Protect Yourself
If you need to access a public WiFi hotspot in places like a restaurant, store or coffee shop, ask an employee for the correct network name and password information. It rarely requires credit card information for access. Be wary of generic sounding network names like “Free Public WiFi”.
6. The Hotel Front Desk Scam
How it works:
This occurs when scammers call your hotel room and pose as a hotel employee from the front desk. They say there is an issue with the computer system and so they need to reprocess or confirm your credit card information. The scammers generally call late at night or early in the morning to catch you off guard.
How to protect yourself:
Most hotels keep credit card information on file, but don’t charge you for the stay until you check out. If there is a problem with your card, the hotel will notify you in a reasonable way. The hotel employees will never make an unsolicited call to a guest’s room, unless in case of an emergency. Also, take care of all your financial business face-to-face at the front desk.
7. The Credit Card Debt Reduction Phone Call Scam
How it works:
You receive an unsolicited call from someone claiming to be from your credit card company. They offer to help you eliminate your debt by negotiating with your creditors to settle or reduce repayment obligations. They will require you to pay a hefty upfront fee, but fail to help settle or lower debt, sometimes providing no service at all.
How to Protect Yourself:
If you receive this type of call with an offer to help settle your debt for a fee, hang up immediately. It is illegal to demand up front fees for debt settlement services. These scammers target those struggling with debt or have bad credit, those who are most vulnerable.
Tips for Reporting Credit Card Scams
After sharing all of these types of scams, we want to provide tips for reporting them. If you spot suspicious charges on your credit card, there are steps you can take to report the fraud and ensure you don’t have to pay for someone else’s purchases. First, contact your credit card issuer right away. According to the Fair Credit Billing Act, you must report fraudulent charges within 60 days of receiving your billing statement. After you’ve let your credit card issuer know your account has been compromised, change your passwords, If you have the option to implement a two-factor authentication on your account, now is the time to do so. Secondly, contact the three credit bureaus (Equifax, Experian, and TransUnion); confirm your identity and ask for a free fraud alert to be linked to your report. Lastly, notify the authorities. Fill out an identity theft report with the FTC at IdentityTheft.gov. The FTC is a federal law enforcement agency which means if you inform them that you are the victim of fraud, you won’t have to file a police report locally.
Protect Yourself from Credit Card Scams
If you have ever been a victim of a credit card scam, then you know how convincing or sneaky scammers can be. Numerous people fall victim to these scams every year. Knowledge is key in protecting yourself. Credit card companies will never call you and ask for your personal information. If you are unsure of the legitimacy of the call, contact the credit card company using a trusted phone number on their website or statement.
When shopping online, the traditional and best advice is to always look for a padlock icon near the URL to indicate that the website is using a Secure Socket Layer (SSL) security certificate to protect data transmitted through the address. Also, when possible, reserve online shopping activities for a private home network connection. The rise of payment proxy sites such as PayPal and mobile wallets like Apple Pay and Google Pay also allow you to “mask” your payment information with a tokenized card number, which also helps to protect your card details in the event of a compromise.
Partnering with credible institutions is a great way to protect yourself. At HFS Federal Credit Union we take fraud seriously. When a transaction seems suspicious, we will send you a fraud alert through text message, phone call and email. We also provide an easy way to monitor your credit card through Online Banking and the HFS Cards App. Apply for a credit card with HFS FCU today and check out our alert options to help you look out for any fraudulent charges.
