The versatility of credit cards in terms of acceptance and rewards makes them a preferred payment method for millions. After all, credit cards were introduced to ease up your payments and, thereby, your lifestyle, right? We all love waving our cards at payment terminals to transfer funds. However, nobody wants to be an unfortunate victim of a credit card scam.
At 37.8%, credit cards emerged as the most reported method of payment involving scams in 2022. However, in Q3, the Federal Trade Commission (FTC) reported a loss of $1.9 billion through fraud. This exceeded the losses incurred in 2021 through frauds by 18.75%.
Scamsters, with their access to sophisticated technologies, are showing no intention of slowing down. Being a cardholder, you need to be proactive and draw your line of defense against credit card fraud.
Credit card scam statistics: The tell-tale reality of the crisis
The US witnessed a 1000% spike in the number of scam victims involving victims aged under 20 between 2017 and 2021.
65% of cardholders in the US have been victims of fraud at some point in their lives. This percentage translates to 151 million US citizens.
An alarming proportion of Americans have been targeted multiple times. Around 44% of credit card users in 2022 reported experiencing two or more fraud cases. The figure rose compared to 35% in 2021.
The median fraudulent charge increased by 27% in 2021. The total value of attempted fraudulent charges equates to 12 billion US dollars.
In 2021, around 390,000 cases of credit card fraud were fielded by the Federal Trade Commission.
According to the Nilson Report, financial losses stemming from credit card losses are likely to widen to $161.1 billion in the next decade. Credit card users of all age groups are likely to bear the burn.
What are the common types of credit card scams?
Strategizing your defense mechanism against credit card fraud starts with understanding the attack modules, right? We have discussed the top ten credit card scams that are storming the US right now. With these inputs, you can boost your resilience against these frauds and prevent financial losses.
1. Identity frauds
Identity frauds take place when fraudsters have direct contact with their targets. Sometimes, you might receive calls or emails from a party claiming to be a financial expert or some authentic-sounding organization. These scammers continue communicating with their victims over the phone, by text, or by email.
Eventually, the criminals manage to obtain the credit card information of their victims by deploying social engineering tactics. This implies that they capitalize on human errors or the mistakes that their victims happen to make to gain access to their credit cards. Eventually, the fraudsters spend your credit limit on the card to make payments.
According to a study, identity fraud scams led to losses of around $28 billion in 2021. This affected as many as 15 million cardholders in the US.
Since scammers carrying out identity frauds largely count on human mistakes, it’s possible to keep these miscreants at bay. Being skeptical about any incoming call, text, or email and responding to the same is the first line of defense against these scams. Carefully look out for suspicious money requests, misspelled words, wrong URLs, or dummy websites trying to imitate the actual one.
2. The hotspot scams
Do you frequently access public Wi-Fi? If you do, you are more likely to land in a hotspot scam. This is a common attack module to steal your credit card details. The criminals use unsecured networks through which they get access to your mobile handset or laptops. Once they do, all your card information gets stolen.
Besides, some fraudsters create false Wi-Fi signals. These signals have trackers embedded into them. Using this sophisticated mechanism, hackers obtain personal data, including credit card details, from unsuspecting victims.
The best counter strategy to remain safe from hotspot scams is to use your own mobile network. Refrain from accessing public Wi-Fi networks since it can be a trap.
Keep your eyes open for ‘free’ public hotspots. It’s wiser to pay for your network charges rather than lose thousands of dollars on your credit card. Not everything that comes ‘free’ is safe!
3. Arrest call scams
Instead of sophistication on the part of fraudsters, arrest scams bank on the weakness of human psychology.
You might receive a call from an authority claiming to be the Police or any respectable law enforcement organization. The scammers would then impose an imagined debt on you, threatening to take legal action if you fail to pay it off. Usually, these debts are related to unpaid taxes, traffic tickets, or fines. Sometimes, scammers claim to call from a federal agency, such as the FBI, SSA, or IRS.
In most cases, the threats come along with a tight deadline. The fake callers threaten dire legal consequences if you fail to make the payment within a short timeframe, such as 15 minutes.
Naturally, most people tend to pay off their ‘imagined’ debt out of fear of arrest. At times, scammers also replicate websites and phone numbers to make them look real.
When you make the payment, you end up losing the money you were not supposed to pay. Moreover, you may end up clicking on some malicious links sent by fraudsters that capture your credit card details! This exposes you to even more losses once they get your credentials.
Take guard against these fictitious arrest warrants, court orders, or ‘local police’. If you receive suspicious emails, SMSs, or phone calls with similar claims, reach out to the Police and report the number or mail id.
Remember, the US government summons people only through written documentation. Even if you have a real arrest warrant issued against your name, the ‘local police’ won’t ask you to pay fines.
4. Phishing scams
Phishing scams are not new, and these attack modules on credit card holders have been growing more sophisticated. Usually, a fraudster reaches out over the phone to the target.
Usually, phishing involves clicking on some links or responding to an email. It leads the victim to a fake website that resembles the authentic one. When you try to make a payment or enter your card details, thinking they are legitimate, you pass on your credit card details to the fraudsters.
Next, the miscreants would use your credit card details to purchase merchandise on eCommerce platforms or steal money by transferring the credit balance into bank accounts.
Senior citizens are more susceptible to phishing attacks since they aren’t well-versed with new technologies. The best defense against credit card phishing scams is to remain skeptical about all types of links or emails you respond to. Never provide your credentials or card details if you sense the essence of urgency when the other party contacts you.
5. Overcharge scams
Overcharge scams on credit cards also involve an unsolicited attempt of phishing. Usually, fraudsters try to trap the victim through text messages. The victim receives a message claiming their account has been overcharged.
The fraudsters claim they are calling from an authentic company where the victim purchased something. Commonly, these are subscription-based, such as Spotify or Netflix. In case you reply to the message, the fraudster will ask for your credit card details so that they can process the refund.
Sometimes, they provide a login link asking you to provide your card details. You may end up compromising the security of your credit card under both of these scam modules.
One of the viable ways of staying safe from this type of scam is to refrain from answering these texts or emails. Legitimate companies never urge subscribers or customers to furnish sensitive information through unsecured online platforms or calls. So, if you receive these cold calls, scrutinize your card statement for any illegitimate charges.
Once you find that there’s no such extra charge, simply block the fraudster. In case you come across some inaccurate charge on your statement, contact the merchant and sort the matter out.
6. Interest rate reduction scams
Among the over-the-phone credit card scams, you should be wary of interest rate reduction scams. These ‘companies’ say they can help you slash your credit card interest rate, saving you interest worth hundreds of dollars.
The scammer would state that they have deep connections with banks issuing credit cards. This empowers them with the advantage of getting the interest rate negotiated on your behalf. Just like any other social engineering scam, these fraudsters also impose a deadline by which you need to take the desired action.
A potential victim might get tempted to get their interest rate reduced and step into the trap. Now, once you talk to the live operator, the person will request your credit card details to do the needful.
FTC, in April 2021, declared a repayment of $11 million to the E.M. Systems and Services interest rate scam victims. Fraudsters launched fake websites before cold-calling people to get their interest rates reduced. They demanded a fee that ranged between $695 and $1495. This module scammed over 11,000 victims before the culprits got caught.
To remain safe from these scams, simply contact your bank to verify if they’re running any such interest-reduction scheme.
Skimming is a scam that credit card users find challenging to avoid. It does not involve any phishing attempt that you can spot easily. Fraudsters install data-collection devices in payment readers to hack them. This data gets passed on to the scammers without the cardholder’s consent or knowledge.
In most cases, fraudsters install these data-collection devices on ATMs and payment processing machines. So, be wary of making payments in gas stations and the ones away from street lamps. When you insert your credit card into one of these bugged machines, your credit card details get recorded. You would end up losing money through an unauthorized transaction.
As we mentioned, it’s challenging to prevent a skimming attempt. Fraudsters target areas that are not monitored frequently. Besides, scammers now install sophisticated skimming devices inside ATMs.
To secure yourself from these scams, don’t swipe your card in ill-lit ATMs or unsafe places. Also, keep your eyes open for mismatched fonts or graphics that do not sync with the other typographies in the machine. When entering your pin codes, use your hands to block the view.
8. Security breach scams
Visa has already alerted its customers of security breach scams that can potentially steal their credit card details. The imposter pretends to be a representative of the security and fraud department of Visa while targeting a potential victim.
They claim that your account has been reflecting a suspicious charge. When you admit that you didn’t make any such purchase, they ask you to verify your account to validate your claim. In most cases, the scammer would already have your name and some personal details to position themselves authentically.
Next, they would ask for your CVV, the three-digit security code on the flip side of your credit card. Sometimes, they would give you the actual phone number of Visa to make their claim seem more authentic. You might get convinced that they are genuine and end up providing your credit card details.
9. The charity scam
The charity scam involving your credit card is an attempt to exploit generous people. You might receive calls or emails just after major calamities like floods, wildfires, or hurricanes. The scammers appeal to the potential victims for donations. Sometimes, they claim to be from established charitable organizations like the Salvation Army or the Red Cross.
Naturally, if you have a kind heart, it’s easy to get carried away with the sad story. You may end up ‘donating’ money through your credit card, which eventually goes to the fraudsters’ account.
In most cases, the imposter pretending to be a charity worker requests ‘urgent’ funds. Once again, be vigilant to identify the essence of timeliness in their scam module.
So, don’t pay any money the next time you receive a call asking for help. Also, don’t divulge your credit card information, regardless of how legitimate the call seems to be. Politely hang up after hearing the information they provide you with. Do your homework over the web and reach out to the organization if you really want to help. In most cases, the number through which the caller had reached out to you would be that of a scammer.
If you do have a generous heart, why not donate through their official website?
10. Reward scams
Scammers are aware that you love purchasing merchandise online. They have developed a scam module where they try to entice victims looking for discounts or deals.
The fraudsters promise coupons and discounts to potential victims, and in return, they need to make some purchases. The scam begins with the victim receiving an email or text directing to a website that looks professional.
However, these websites lead the victims to malicious links. Rather than finding your discount codes or coupons, you would end up downloading malware into your system. These malicious programs are trained to collect your credit card details.
To stay safe from reward scams, refrain from falling from these unexpected discounts. Log into the official website of the eCommerce platform and verify whether they are offering any deals.
All of us dread scams, particularly if it involves large transactions on our credit cards. Now that you know about the common credit card scams, try not to fall victim.
The Federal Trade Commission has advised cardholders to report fraudulent activities on credit cards immediately after noticing them. This way, you can get some of your fraudulent transactions reversed. Most banks issuing credit cards include a clause that the customer wouldn’t be responsible for any charge if the cardholder doesn’t authorize any transaction. Don’t forget to contact the customer support team of your bank to inform them as well.
Besides, reach out to the FTC to report the scam. The authorities can gather relevant information from victims and build a case against the fraudsters. Reporting incidents will also help them spot trends and share awareness data for the benefit of the general public.