The Very Best Ways to Prevent Credit Card Fraud
Consumers reported credit card fraud more often than any other form of identity theft in 2017, according to the Federal Trade Commission. While it's important to know what to do when you're a victim of credit card fraud, proactively protecting your sensitive information can prevent you from falling victim in the first place.
Here's a comprehensive guide to all the best ways to prevent credit card fraud from happening.
The Difference Between Credit Card Fraud and Identity Theft
Credit card fraud and identity theft are often used interchangeably, but there are some key differences to understand.
" Identity theft is much more comprehensive," says Michael Bruemmer, vice president of consumer protection at credit reporting agency Experian. "It means that not just one aspect of your identity has been taken. They've got your Social Security number, your home address, your credit card number."
With this information, identity thieves can file fraudulent tax returns, apply for government benefits, open mobile phone or utility accounts and more.
Credit card fraud is one of these forms of identity theft and can happen in two ways:
-- Existing-account fraud: Thieves access a current credit card account by stealing either your credit card information or your login information with an online retailer.
-- New-account fraud: Fraudsters apply for a new credit card account in your name by using your Social Security number, address and other identifying information.
[Read: The Best Rewards Credit Cards of 2018.]
In both cases, the thief will likely rack up as many charges as possible before you notice. You can take precautionary action to ensure you spot fraud when it happens, including setting up transaction alerts on your credit cards and signing up for a credit monitoring service.
But again, it's critical that you also take steps to prevent thieves from even getting this far.
15 Ways to Stop Credit Card Fraud Before it Happens
There's no surefire way to eliminate the threat of credit card fraud entirely. But since your everyday actions can increase the likelihood of it happening, here are 15 things you can do to limit your exposure.
1. Be careful about whom you give your information to. While it's more common to fall victim to identity theft by a stranger, many fraud cases are considered "familiar fraud," which means the victim knew the perpetrator. It's always a good idea to avoid giving out your credit card information or Social Security number, even to trusted family members and friends.
2. Use bank-owned ATMs for cash advances. Credit card thieves often use a device called a skimmer to steal your credit card information. They place these devices on ATMs and fuel pumps and "skim" the data from the magnetic strip on the back of your credit card.
"If you're going to use an ATM, use one that is affiliated with your bank," says Bruemmer. "Don't use the one in the convenience store or at the bar or outside on the street. These machines tend to be less secure."
In fact, it may be a good idea to avoid cash advances altogether. Not only do credit card issuers typically charge higher interest rates on these transactions, but they also typically start charging interest immediately with no grace period.
3. Pay inside the gas station. Since fraudsters also target gas pumps, it may be a good idea to pay inside rather than at the pump. If you're short on time or don't want the inconvenience, at least check the card reader to see if you can spot any irregularities. Skimming devices won't always look the same, use the same material or fit perfectly onto a legitimate card reader.
4. Use mobile payment apps for in-store shopping. Your credit card information is less likely to be skimmed at an in-store card reader, but the threat still exists. Avoid the problem by using mobile payment apps, such as Apple Pay, Samsung Pay or Android Pay, that use a technology called tokenization.
"Tokenized transactions are transactions that no longer are associated with the primary account number that you have on the front of a card," says Seth Ruden, senior fraud consultant at ACI Worldwide. "They slice and dice that data until it's unusable for a second transaction."
[Read: The Best No-Annual-Fee Credit Cards of 2018.]
5. Frequent retailers that use a chip reader. Not all retailers accept mobile payments, especially small businesses. So, it's a good idea to patronize stores that have you insert your card instead of swiping it. When you insert your card into a card reader, it reads the card's chip rather than the information on the magnetic strip. The information on the chip is much more secure and keeps your card data safe from skimmers.
6. Be careful about giving your information over the phone. Lenders, doctors' offices and countless other businesses accept payments over the phone. But this option makes it possible for scammers to steal your information by posing as these companies. What sets legitimate phone payments apart from fraudsters is that the latter will typically call you to ask for payment rather than the other way around.
"I don't care if it's someone you do business with, or you think you do business with them," says Bruemmer. "Never give out your credit card information over the phone if you're not initiating the transaction."
7. Don't send your information in the mail, via email or in a text. Once you send sensitive information, you no longer have control over who can access it. There's no guarantee that the intended recipient doesn't forward it to someone else or that a thief won't access it without their knowledge. So, if you have to give your credit card or other information to someone else, do it in person or over the phone.
8. Don't save your credit card information online. Nearly one in five data breaches in 2017 exposed credit and debit card information, according to the Identity Theft Resource Center. Since you have no control over a retailer's cybersecurity protection, you can limit your risk of exposure by entering your card information manually every time you shop online rather than saving it with your favorite retailers.
9. Use a virtual credit card number online. Even if you don't store your credit card number online, it may still end up on a server if you use it to make purchases. To virtually eliminate the risk entirely, some credit card issuers offer programs that give you a unique virtual credit card number that's tied to your primary account every time you shop online. The number is valid for one use only, so it's useless if someone steals it.
10. Avoid unsecure websites. Websites that don't use proper encryption techniques are easy pickings for fraudsters. If the site is secure, you'll see a padlock on the left side of the address bar at the top of your browser.
Also, the web address will begin with HTTPS. If it begins with HTTP, the site is not secure, and you should avoid inputting any personal information.
11. Use a virtual private network on public Wi-Fi. If you're sitting in a Starbucks, waiting at the airport or using an internet cafe, anyone else on that public network can scan the data that goes back and forth between your computer and the router. What's more, some hackers set up a network with a similar name to the public network and get your information that way. That doesn't mean you have to avoid public Wi-Fi altogether. Instead, use a virtual private network, or VPN, to keep your information safe from eavesdroppers.
[Read: The Best Starter Cards for Building Your Credit.]
12. Use a password manager. Using the same password more than once online can open you up to identity thieves. Let's say, for example, that you have the same password for website A and website B. You haven't stored any credit card or other sensitive information on website A, but you have two credit cards stored with the retailer that owns website B. If website A experiences a data breach and your login information is compromised, thieves may try to log in to several other websites using that same information to see if they can get in. As a result, your cards stored on website B are at risk, even if the retailer never suffers a data breach.
To give fraudsters fewer opportunities without risking the odds that you'll forget most of your unique passwords, Ruden recommends using a password manager like LastPass or 1Password. "I have a unique password for every website because my password manager creates the passwords for me and always makes them complex," he says. "I don't have to remember them anymore."
13. Use a money belt when traveling. If you're heading overseas, you may be vulnerable to pickpockets. This is especially the case if you stand out as a tourist. To keep your wallet safe, use a money belt that's not easily noticeable or accessible to anyone but you.
14. Get a chip card with PIN capability. Most credit cards in Europe come with a chip and PIN feature, but few card issuers in the U.S. have followed suit. Without a PIN, you'll not only have a difficult time using automated kiosks overseas, but you may also be exposed to potential fraud.
"When you have a chip transaction and a PIN, it makes it a little bit harder for a criminal to reuse that data unless they also know your PIN," says Ruden. "So, we're creating an additional hurdle."
15. Set up a fraud alert or credit freeze at the first whiff of trouble. If you have any reason to believe that someone has accessed your Social Security number and can open accounts in your name, contact the credit bureaus. You can set up either a fraud alert or a credit freeze. If you set up a fraud alert and a thief tries to open an account, the creditor will typically call you to verify your identity and confirm that you were the one who applied. With a credit freeze, creditors can't even access your credit reports, making it impossible for them to approve a credit application.
The Bottom Line
"You expose yourself to fraud on a daily basis without knowing it," says Ruden. "But there are small things you can do to prevent some types of fraud. What it comes down to is how many places you transact at and how likely it is that those places are going to be exposed at one time or another."
Even if you take all the right precautions, fraudsters can still steal your information through means outside your control. But by doing your due diligence, you can limit their opportunities.
Ben Luthi is an experienced personal finance and travel writer, and has worked in financial planning, banking and auto finance. His work has appeared in several publications, including Time, Success, USA Today and the Deseret News. Follow him on Twitter @benluthi.
