Editorial Policy

8 ways to prepare for and survive credit card fraud

Allie Johnson

January 6, 2016

The reality is you likely will be a victim of credit card fraud at some point — even if you take steps now to reduce your risk. There also are measures you can take to make card fraud less of a hassle when it happens.

About 12.7 million Americans experienced identity fraud, amounting to  $16 billion in 2014, according to the Javelin Strategy & Research 2015 Identity Fraud Study.

While EMV chip cards are aimed at reducing fraud and mobile payments also increase transaction security, new account fraud, in which a thief applies for credit in the victim's name, remains an issue. According to the Javelin study, new account fraud hit a low in 2014, but continues to be one on the most damaging types of fraud.

Any time card information gets compromised, whether there's a fraudulent charge on your account or not, your card issuer should deactivate your old card and issue you a new one, which can cause problems if you have the card linked to online retailers or bill pay accounts.

It's smart to know what to do when card fraud happens to you, says Eric Tyson, author of “Personal Finance for Dummies,” because, “it's not if, it's when.”

Here are eight ways to prepare for and survive credit card fraud:

  1. Call your issuer. It's smart to find out before fraud occurs exactly what your card issuer's process is for handling fraud or suspected fraud. What if your issuer spots a purchase it seems you didn't make? Does your card company just shut down your card and ask questions later? Or, will your card issuer text to ask, “Did you just make a purchase at Wal-Mart for $94.92? Text 1 for yes and 2 for no.” It's good to know ahead of time what to expect, says Harrine Freeman, a financial expert who offers credit counseling and restoration. “Different companies have different procedures,” she says.
  1. Keep your contact info up to date. If your bank normally texts a cardholder when it spots a possible fraudulent charge, but you forget to provide your new cellphone number, you'll miss the message. Make sure your credit card issuers always have your correct address, email address and phone numbers, Tyson says.
  2. “It's not if, it's when” will you be a victim of card fraud?
    — Eric Tyson,
    author of “Personal Finance
    for Dummies”

  1. Carry two credit cards. If your issuer spots fraud, your favorite card can get shut down on the spot, cutting off not only the thief — but also you. It pays to keep backup plastic in your wallet, especially if you're going out specifically to make a purchase or you're traveling, Freeman says. You may not want to hand over your debit card at, say, a hotel or rental car counter because these types of businesses may pre-authorize your card for hundreds of dollars, tying up those funds for days. “I'd carry two cards,” Freeman says.
  1. Be savvy about recurring bills. Do you use a credit card to pay certain recurring bills, such as car or life insurance or a gym membership? This can pose problems if the card you have on file gets shut down due to fraud or you forget to provide your new card number. You might use one card for recurring bills and a second card for shopping, so the card you use for bills doesn't get exposed to risk of fraud every time you use it. Note which recurring bills are attached to which credit card, the due date for the bill and the customer service phone number, Tyson says. That makes it quick and easy to check your records, and call the service provider as soon as you get a new card, he says.
  1. Check your accounts often. Credit card issuers seem to have an uncanny ability to detect fraud before you do. For example, a few months ago Tyson's card issuer flagged a fraudulent purchase made at a liquor store in another state. But a fraudulent charge could slip past your card issuer. Don't leave all the work to them. Check your accounts online regularly, Freeman says. If you spot something that looks fishy, notify your issuer immediately.
  1. Jump through the hoops. If fraud occurs, you'll probably need to speak with the fraud department of your credit card company, verify your identity and maybe sign an affidavit detailing the fraud. The good news: You probably won't be liable for the fraudulent charges on your credit card. Federal law limits your liability to $50, but most payment networks, such as Visa and MasterCard, offer zero liability. Ask questions about how the fraud occurred, Freeman says. If you learn the thief might have swiped personal information beyond your card number and payment details, you may want to take additional steps to protect your identity.
  1. Need the replacement card fast? Ask. Was your go-to card closed due to fraud right before you want to leave on vacation or are about to buy a new refrigerator? Explain the situation, and your issuer might overnight the replacement card — possibly at no charge to you for the quick turnaround. “You might have to make it clear to them, ‘Gee, I really need this card,'” Tyson says.
  1. Prevent future fraud. If you've been a victim of credit card fraud, consider adding a fraud alert, which alerts creditors to verify your ID before opening accounts in your name, or even a credit freeze, which locks down your credit. “That could protect you from ID theft,” Freeman says. Credit monitoring is another option.

While anyone can be a victim of card fraud, the Javelin study found students showed the least amount of concern about fraud occurring (64 percent). Students also are the least likely to detect identity fraud themselves. According to the study, 22 percent of students were notified that they were a victim of identity fraud either by a debt collector or when they were denied credit, three times higher than average fraud victims.

Additional tips to protect yourself from card fraud and identity theft? The American Bankers Association and Experian's ProtectMyID recommend: Avoid using public Wi-Fi hot spots that make it easy for thieves to hack into the information stored on your mobile devices. Password-protect your phone since it provides access to sensitive information and accounts. Review credit reports regularly, and watch for signs of fraud.

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