How to prevent credit card fraud

Man's hand reaching into another person's pocket to steal the wallet and commit credit card fraudImage: Man's hand reaching into another person's pocket to steal the wallet and commit credit card fraud

In a Nutshell

Whether you’re shopping online or using your phone as a wallet, preventing credit card fraud doesn't have to be complicated. A few easy steps, from setting up alerts to being careful about sharing sensitive information, can help you keep your cards and identity secure.
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EMV chips — those little, square computer chips on credit and debit cards — can be a big help in preventing credit card fraud. But there are other steps you can take to use your cards securely.

“The shift to chips was designed to prevent a very specific kind of fraud — counterfeit card fraud,” says Eva Velasquez, president and CEO of the Identity Theft Resource Center.

Velasquez is referring, of course, to the EMV liability shift that occurred in October 2015, when the U.S. joined Canada and Europe in switching from “swipe-and-sign” cards to “chip-and-signature” cards equipped with EMV chips.

The introduction of EMV chips (Europay, Mastercard and Visa chips) has certainly helped. According to Visa, the total number of dollars stolen through counterfeit fraud was down 76% in December 2018 compared to September 2015, just before the introduction of the chip. This improvement was for merchants who completed the upgrade to EMV chip technology.

But card theft and credit card fraud are still around, so it pays to stay vigilant even if you have an EMV card. With that in mind, let’s run through some easy but effective ways to beef up your security against fraudsters and help prevent credit card fraud.

What is credit card fraud?

According to the FBI, credit card fraud describes any instance where personal information related to your credit card is used without your consent to purchase items or receive money. Take note that these fraudulent charges can happen whether identity thieves steal your physical credit card or — as it may be more likely — they steal your card numbers online.

Use credit cards, not debit cards for online purchases

While EMV chips are a good start toward preventing credit card fraud by protecting you from skimmers, they’re just the beginning. If your credit card issuer or favorite online retailer offers two-factor authentication for purchases, definitely use it, Velasquez says. Two-factor authentication requires you to provide two types of identification proof, often a phone number confirmation or fingerprint.

The other mistake some online shoppers make: Shopping with a debit card. When you buy online, it’s generally a good idea to use a credit card.

That way, if your account is hacked, you’re merely waiting for the card issuer to restore a line of credit — and not missing much-needed cash, as you would from a checking account. (Federal law says you can’t be held liable for unauthorized transactions that occur after you report the loss of your ATM or debit card.)

Understanding your liability for fraudulent credit card charges

The Fair Credit Billing Act limits your liability for unauthorized charges on your credit card in the event of credit card fraud. Under FCBA, your liability maxes out at $50. But if you’re able to report the loss before your credit card is used, you won’t be held responsible for any charges you didn’t authorize.

Some more good news: If your credit card number is stolen, but not the card itself, you’ll have zero liability for unauthorized use.

What to do if you spot an unauthorized credit inquiry

Keep your credit card and CVV numbers safe

Skip storing card numbers on your online retail accounts. Not only will it help you protect yourself against credit card fraud, but it’s also a smart budgeting strategy because you can’t purchase with just the touch of a “Buy” button.

“It makes you think about your purchases,” Velasquez says.

Another key aspect of online credit card security is your card’s CVV (card verification value) number.

CVV numbers help limit fraud, and most online merchants require you to enter one along with your card number and expiration date.

But not all merchants use them. You may be risking your own security by shopping with a merchant that doesn’t ask for your card’s CVV number if that merchant stores your credit card information.

If your phone is your wallet, treat it like one

If you’re using your phone as a mobile wallet, then give it the security any wallet deserves by taking advantage of the security features your phone maker offers. This may take some time upfront, but it’ll help you prevent credit card fraud in the long run.

These features range from iPhone’s touch ID to PIN codes that can keep your phone locked and secure when you’re not using it.

You may also consider getting a mobile security app that will allow you to put an extra password on the apps you use for shopping and banking.

You might find the option included in the security program you’ve installed on your mobile device, like the App Lock feature in McAfee Mobile Security. Or as a free, stand-alone app, like Norton’s App Lock.

Avoid entering sensitive information on public computers and Wi-Fi

Public retail and coffee shop Wi-Fi is super convenient, but that doesn’t mean it’s super secure. Our advice? Skip it if you’re engaged in any kind of online activity that involves money, banking or credit cards.

If you insist on shopping and banking when you’re out and about, invest in a quality virtual private network, or VPN, service to protect against unwanted data collection and potential credit card fraud.

Even if your Wi-Fi connection is password-protected, that password can be easy for thieves to get their hands on. (Hint: It’s usually at the counter or pasted to the wall.)

Better to go with a VPN that keeps your sensitive information safe from prying eyes.

Additionally, some sites exist solely to collect data and card numbers for criminals, so before you buy, make sure you trust the source.

Set up alerts

Most card issuers allow you to set alerts that will text or email when your card is used in certain ways. “Every time there’s a ‘card not present’ transaction, I want a notification,” Velasquez says.

Remember: The faster you report loss or theft, the better. Your liability for unauthorized use tops out at $50 thanks to the FCBA, but If you can report the loss before your card is used, you won’t be responsible for any charges.

Next steps

First, a disclaimer: While heeding the above points may boost your credit security, there’s no such thing as “fraud-proof.” As technology becomes smarter, so do the criminals. The good news? Consumers are getting more streetwise in the ways of card fraud, too.

Consider using credit instead of debit cards online, skipping auto-reload options on merchant accounts, setting up mobile alerts for credit card activity, and putting a few extra locks on banking and shopping apps.

Velasquez’s advice: Just like dressing for uncertain weather, think of credit card security in terms of layers. Pile on as many as you can without significantly hampering what you need to do.

And remember, if you do find yourself a victim of credit card fraud, there are some clear steps you can take to report the fraud to the credit bureaus, creditors and law enforcement.

About the author: Dana Dratch is a personal finance writer (and coffee fanatic). She covers credit, money and lifestyle issues. Read more.