Key takeaways
- Credit card fraud is on the rise, but there are many systems in place to protect your identity and your finances
- Many credit card companies offer zero-liability fraud protection if you report the fraudulent charges within 30 days
- The Fair Credit Billing Act limits liability to $50 if you report the fraudulent charges within 60 days of receiving your statement
Credit card fraud has become increasingly prevalent in recent years. According to The Federal Trade Commission’s most recent database, there were over 416,000 reported cases of credit card fraud in 2023, making it a common form of identity theft.
Fortunately, there are numerous measures in place to safeguard against potential credit card fraud. Two-factor authentication provides an extra layer of security by requiring verification of your identity before accessing financial services. Credit freezes allow you to block new lines of credit from being opened in your name. Additionally, digital wallets and virtual credit cards offer enhanced protection during both in-person and online transactions.
If you fall victim to credit card fraud, you are entitled to certain rights. The Fair Credit Billing Act (FCBA) offers consumer protections against inaccurate charges and billing errors, while many credit card issuers provide zero-liability fraud protection to shield you from financial responsibility for fraudulent transactions.
Here’s how you can assert these rights and restore order to your life and finances.
Identifying credit card fraud
Regularly reviewing your credit card transactions is an effective way to detect potential fraud. Some individuals check their online accounts daily or weekly to verify recent charges, while others use their monthly statements for a comprehensive review.
In some cases, your credit card issuer may identify suspicious activity before you do. You might receive a mobile alert prompting you to confirm the legitimacy of a recent transaction. This alert could be triggered by an unusually large purchase or multiple consecutive transactions at the same retailer. Although such alerts may be inconvenient, they serve as a valuable defense against credit card fraud.
Occasionally, your credit card issuer may temporarily lock your card until you confirm the authenticity of a recent charge. This precaution prevents potential fraudsters from making additional charges on your account. While credit card locks can be disruptive, they are a proactive measure to safeguard against fraud.
Reporting credit card fraud
If you discover fraudulent charges on your credit card, take the following steps to report the charges and protect yourself:
- Notify your credit card issuer immediately. Contact the number on the back of your credit card to receive guidance on the next steps.
- Change your passwords. After discussing the fraud with your issuer, consider updating passwords for your credit card accounts, online banking, and email accounts.
- Submit a dispute statement, if required. If requested by your issuer, use the FTC’s dispute letter template to craft your dispute. Send the letter to your issuer either by mail or online.
- Continue making payments on your credit cards. While disputed charges cannot accrue interest or late fees, ensure timely payments on other outstanding balances.
- Wait for your new credit card to arrive. In case of suspected fraud, your issuer should issue a new card with a new 16-digit number. You may receive a temporary card for online use until the physical card arrives.
- Update your accounts with the new credit card number. Update account information with utility providers, online retailers, and subscription services using the new card. Don’t forget to update your digital wallet as well.
Liability for fraudulent charges
Many credit card companies offer zero-liability fraud protection for charges reported within 30 days, absolving you of liability for unauthorized transactions.
The Fair Credit Billing Act limits liability to $50 for charges reported within 60 days of receiving your statement, ensuring you are not responsible for more than $50.
Failure to report fraud within the specified time frames may result in full liability for the charges.
Bank refuses to refund fraudulent charges
Preventing credit card fraud
Freezing your credit is an effective strategy to protect against credit card fraud. A credit freeze prevents new credit cards, loans, or lines of credit from being opened in your name.
Each major credit bureau (Experian, TransUnion, Equifax) allows you to freeze your credit at no cost, with the option to unfreeze when necessary for new credit applications.
Additionally, placing a fraud alert on your credit report notifies creditors to verify your identity for any credit applications. A fraud alert placed with one bureau will be automatically shared with the other two bureaus.
Consider enrolling in a credit monitoring service to track credit reports, scores, and potential fraud risks, enhancing vigilance against unauthorized activities and compromised personal information.
Submitting an identity theft report
If you are a victim of credit card fraud, consider filing a Federal Trade Commission identity theft report. Submit the report to credit bureaus along with identification proof and a letter detailing fraudulent charges to prevent inaccuracies on your credit report.
Upon reporting to credit bureaus and providing the FTC report, lenders will be informed of your fraud victim status, preventing debt collection. The credit bureaus will investigate and rectify your report to eliminate fraudulent activity from your credit history.
The final word
In the event of credit card fraud, you hold certain rights. Prompt reporting within 30 days minimizes liability and facilitates financial recovery. Initiate contact with your credit card issuer, update passwords, freeze credit, and consider credit monitoring to deter future fraud attempts.