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Americans lost over $3 billion to credit card fraud in 2020: How to spot it and keep your money safe

“The faster you catch fraud, the less likely it will be a problem.”

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Concerns about cyberattacks are rampant after last month's Colonial Pipeline ransomware attack, which cost the company $5 million and drove up gas prices. But cyberhacks and data breaches don't just happen to big banks and corporations: Scams target individual people, too, and put sensitive financial information at risk.

Credit card fraud, in particular, has been taking off. Fraud reports surged by 107% from the first quarter of 2019 to the fourth quarter of 2020, according to data from the Federal Trade Commission. Consumers lost a staggering $3.3 billion last year alone, up from $1.8 billion in 2019.

"I'd go as far as saying that we should just assume our data is out there," says Bankrate analyst Ted Rossman. "There have been so many high-profile data breaches in recent years that chances are, there's a criminal with access to your information."

While even the most cautious credit card user may not be able to ward off all scammers, there are still measures you can take to keep your money and financial data safe. Here are some common ways credit card fraud can happen, and what to do if you become a victim.

How to keep your info safe during daily activities

Credit card fraud, which is considered a form of identity theft, can occur in the real world as well as online. While you're likely aware that you should call your provider right away if your card is lost or stolen, there are also ways to steal your information without stealing the card itself.

Hand-to-hand transactions make it easy for someone to memorize or write down your data. Anytime you hand over your card, be sure to get it back quickly. If you're standing at a cash register or ATM, cover up your card from peering eyes in the background. And don't read your credit card details over the phone or email them to anyone.

Look out for skimmers, too, which are devices attached to a card reader that send your information to a third party when you swipe. Any odd or loose-fitting device placed over the card reader is a red flag. If your card has a chip, experts recommend inserting or tapping it, rather than swiping, for added security.

VIDEO1:5001:50
How to spot a phishing scam

Video by Ian Wolsten

Impersonating businesses and charities is a go-to for criminals looking to snatch someone else's money, whether in person, online, or over the phone.

"Let's say you get a phone call or an email from someone purporting to be the IRS, Social Security Administration, [or] your bank," Rossman says. "They might be a fraudster looking to steal your identity. If you think the communication might be real, contact them through a method that you trust and you initiate, such as calling the phone number on the back of your card."

"Unfortunately, a lot of people get scammed out of their stimulus payments, tax refunds, and other benefits because of these phishing scams," he adds. "The best fix is to avoid giving out sensitive information."

Be cautious when shopping or banking online

Websites are another place to exercise caution, especially if you aren't exactly sure whom you're dealing with. If you're shopping online, check that the site you're buying from is encrypted — meaning the URL starts with "https:," not "http:." Encrypted files hide the content of any sensitive information you enter, in order to prevent it from being read or accessed by another party.

The Wi-Fi network on which you shop makes a difference, too. A 2020 Bankrate survey of more than 2,500 people found that over a third of respondents used public Wi-Fi to make a purchase, which isn't as secure as home or office internet.

Chances are, there's a criminal with access to your information.
Ted Rossman
Bankrate

Online banking offers another possible access point to your information. Be sure you're using strong, unique passwords for your online banking accounts, as well as any e-commerce site where you've stored your credit card data.

"[About] 80% of Americans reuse passwords, which can be a problem if one gets stolen," Rossman says. "If you're also using that elsewhere, your problem just got bigger." A password manager, such as LastPass or Dashlane, can help safeguard your login credentials.

Rossman recommends choosing credit cards over debit cards for your online purchases. "Credit cards are much safer than debit cards, because if your debit card is hacked, that's real money missing from your checking account. You should get it back, assuming you report the theft promptly, but it could take weeks," he says. "A credit card, on the other hand, is just a line of credit. It's the bank's money (up until you pay them back), not yours."

'The faster you catch fraud, the less likely it will be a problem'

You should make a regular habit of reviewing your credit card statements for suspicious activity, says Rossman. "I suggest reviewing all of your bank and credit card statements at least once a month."

If you see a suspicious charge or charges, tell your bank and credit card company ASAP. You can also report offenses directly to the three major credit bureaus — Experian, Equifax, and TransUnion — so they can place a fraud alert on your account.

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How to successfully use a cash-back credit card

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Most credit cards come standard with sophisticated security features. You can also consider using a credit monitoring service like LifeLock or IdentityForce, which will track your purchases and alert you of suspicious activity on your accounts. Charles H. Thomas III, a certified financial planner and founder of Intrepid Eagle Finance in South Carolina, recommends signing up for text or email alerts so you see them immediately.

"The faster you catch fraud, the less likely it will cause a problem for you," Thomas says. "If you see a charge that doesn't seem right, contact the issuer right away. All card providers staff on the weekend, so there's never a reason you have to wait to report a suspect charge, even a small one."

If you're not entirely sure what's going on, a credit freeze can be a convenient way to lock down your cards while you formulate a game plan. A temporary freeze means fraudsters can't gain unauthorized access to your data. It takes only a few minutes, and you can do it online or over the phone.

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