August 9, 2023

8 types of credit card frauds you need to be aware of

Learn about credit card fraud, a serious financial crime impacting individuals and businesses. Discover the different types of fraud, its consequences, and how to safeguard against it. Stay informed to protect your financial security

Did you know that there were over 4.8 million reports of frauds and identity theft in 2021, with credit card fraud being one of the most common types? In today's digital age, credit cards have become integral to our daily lives. They offer convenience and flexibility for making transactions, both online and offline. However, with this rise of online transactions, the risk of credit card frauds has also increased.

Before diving further into the topic it is recommended to read about the 5 ways to keep your credit card safe by Bright Money!

This article will delve into the world of credit card fraud, discussing fraud definition, the different types of fraud, and providing statistics highlighting this threat's seriousness.

What is a Credit Card Fraud?

A Credit Card Fraud is a form of financial crime where unauthorized individuals use someone else's credit card information to make fraudulent transactions. These unauthorized transactions may include online purchases, cash withdrawals, or even the creation of counterfeit credit cards for in-person transactions.

In 2021, the United States alone accounted for 38.6% of global payment card fraud losses. It is a severe offense which can lead to financial loss and adversely affect an individual's credit score.

8 type of Credit Card Frauds you need to be aware of

Types of Credit Card Fraud

Fraudsters are always coming up with new strategies to take advantage of holes in the payment system and steal private credit card data. In order to safeguard themselves against potential monetary losses and security breaches, people and companies must understand the many forms of credit card theft. Here are the types of Credit Card Frauds:

8 types of harmful Credit Card Fraud | Bright Money
8 types of Credit Card Fraud

1. Card Not Present (CNP) Fraud

CNP fraud is a prevalent type of credit card fraud, primarily occurring in online transactions where the physical presence of the credit card is not required. Fraudsters obtain credit card information, including the card number, expiration date, and security code, through various means, such as data breaches, phishing scams, or purchasing stolen data from the dark web.

Armed with this information, they make unauthorized purchases on e-commerce websites or over the phone. The rise of e-commerce has led to an increase in CNP fraud, which accounted for 48% of all card fraud losses in the United States in 2020.

The absence of physical verification makes CNP fraud appealing to criminals, as they can operate from the comfort of their homes and avoid face-to-face interactions that might raise suspicion. To mitigate the risk of CNP fraud, online merchants should implement robust fraud detection systems, use address verification services, and encourage customers to enable two-factor authentication for added security.

Example: You receive an email that appears to be from a well-known online retailer. It offers a special promotion: "Get 50% off your next purchase! Just click the link and enter your credit card information to claim your discount." Eager to save money, you click the link and provide your card details. Later, you notice unauthorized charges on your card, and the promised discount never materializes.

How to Know if You're Being Scammed:

  • Unsolicited Offers: Be cautious of unexpected emails offering enticing deals or discounts. Scammers often use this tactic to lure victims into sharing their card details
  • Urgent Requests: Scammers create a sense of urgency to pressure you into taking immediate action. Be skeptical of emails that demand an immediate response or threaten consequences if you don't comply
  • Suspicious Email Address: Check the sender's email address closely. Scammers often use email addresses that mimic legitimate companies but have slight variations or misspellings
  • Poor Grammar and Spelling: Many phishing emails contain grammar or spelling errors. Legitimate companies usually maintain professional communication.
  • Non-Secure Website: Before entering any sensitive information, ensure the website's URL starts with "https://" and has a padlock icon in the address bar, indicating a secure connection.

How to Avoid CNP Fraud:

  • Verify the Source: Before clicking on any links or sharing card details, verify the sender's authenticity. Contact the company directly using official contact information obtained from their official website
  • Use Strong Passwords: Create unique and strong passwords for online accounts. This prevents scammers from accessing your accounts even if they have your card information
  • Use Virtual Cards: Some banks offer virtual credit card numbers for online transactions. These numbers are valid for a single use or a short time, providing an extra layer of protection
  • Regularly Monitor Statements: Review your credit card statements regularly for any unauthorized or suspicious transactions. Report any discrepancies to your card issuer immediately
  • Enable Transaction Alerts: Set up transaction alerts on your credit card accounts. You'll receive notifications for any transactions, helping you detect fraud quickly.

2. Lost or Stolen Card Fraud

Lost or stolen card fraud is one of the oldest and most straightforward types of credit card fraud. When a credit card is stolen or lost, the unauthorized possessor can use it for fraudulent transactions until the cardholder realizes the card's absence and reports it to the issuer. This type of fraud can be financially devastating for victims, especially if they delay reporting the loss.

To protect against lost or stolen card fraud, individuals should promptly notify their card issuer and local authorities if they misplace their card or suspect it has been stolen. Moreover, regularly monitoring credit card statements for unusual transactions can help detect fraudulent activity early on.

Example: You're at a crowded coffee shop, and you accidentally leave your wallet on the table while taking a call outside. By the time you return, your wallet is gone. A thief quickly uses your credit card to make purchases at nearby stores and online shops.

How to Know if You're Being Scammed:

  • Unexplained Missing Items: If you realize your wallet or purse is missing, especially in a public place, it's crucial to act quickly
  • Unauthorized Transactions: Regularly review your credit card statements and online accounts for any unfamiliar or suspicious charges
  • Unusual Notifications: If you receive notifications about transactions you didn't make, it could be a sign that your card has been compromised
  • Inaccessible Cards: If your card is unexpectedly declined or not working, it could indicate that someone else is using it.

How to Avoid Lost or Stolen Card Fraud:

  • Stay Vigilant: Always keep an eye on your belongings, especially in crowded areas. Avoid leaving your wallet or purse unattended
  • Report Loss Immediately: If you realize your card is lost or stolen, contact your card issuer immediately to report it. Many issuers have 24/7 hotlines for this purpose
  • Set Up Alerts: Enable transaction alerts on your card accounts. You'll receive notifications for any transactions, helping you detect unauthorized activity promptly
  • Secure Your Cards: When not in use, keep your cards in a secure place, like a wallet with RFID protection or a designated cardholder
  • Use Digital Wallets: Consider using digital wallets like Apple Pay, Google Pay, or Samsung Pay, which offer added security through biometric authentication
  • Monitor Accounts: Regularly check your credit card statements, online banking, and mobile app for any unusual activity
  • Emergency Contact: Keep a list of emergency phone numbers, including your card issuer's customer service, in a separate place

3. Skimming

Did you know that skimming at physical payment terminals continues to be a concern, with the number of compromised ATMs and point-of-sale devices increasing by 57% in 2021?

Skimming is a physical form of credit card fraud that targets payment terminals such as ATMs, gas pumps, or point-of-sale (POS) devices. Criminals install skimming devices over legitimate card readers, which surreptitiously capture the card's magnetic stripe data when customers use their cards. Additionally, criminals may use hidden cameras or keypad overlays to record PINs.

The stolen card data is then used to create counterfeit cards or conduct unauthorized transactions. Skimming can be challenging to detect, as the tampered devices often look genuine. To minimize this risk of falling victim to skimming, individuals should use ATMs and payment terminals located in secure and well-monitored areas. Covering the keypad when entering a PIN can also provide an extra layer of security.

Example: You stop at an ATM at a convenience store to withdraw cash. Unbeknownst to you, a criminal has attached a skimming device to the card reader. As you insert your card and enter your PIN, the device captures your card information and PIN. Later, the thief uses this data to create a counterfeit card and make unauthorized withdrawals.

How to Know if You're Being Scammed:

  • Unusual Attachments: Inspect card readers and ATMs for any unusual attachments, overlays, or loose parts. Skimming devices may appear inconspicuous but can be detected upon close examination
  • Hidden Cameras: Look for hidden cameras positioned to capture your PIN as you enter it. These cameras may be strategically placed near the keypad
  • Inconsistent Card Entry: If your card doesn't slide into the reader smoothly or feels different than usual, it could be a sign of tampering
  • Unauthorized Transactions: Regularly review your bank statements for unfamiliar or unauthorized transactions.

How to Avoid Skimming:

  • Choose Secure ATMs: Use ATMs located in well-lit, secure areas, such as inside bank branches. Criminals are less likely to tamper with machines that are difficult to access discreetly
  • Inspect the Card Reader: Before using an ATM or card reader, visually inspect the card slot and keypad for any unusual attachments, such as additional card readers or overlay devices
  • Cover Your PIN: Shield the keypad with your hand or body while entering your PIN to prevent hidden cameras from capturing it
  • Use Contactless Payments: Whenever possible, use contactless payment methods like tap-to-pay or mobile wallets. These methods are less susceptible to skimming
  • Report Suspected Skimming: If you suspect an ATM or card reader has been tampered with, notify the bank or business immediately. Your alertness could prevent other individuals from falling victim

4. Phishing Scams

Phishing scams are cyber-attacks where fraudsters use deceptive emails, messages, or websites to trick individuals into revealing their credit card information and other sensitive data. Phishing emails often come from trusted entities, such as banks, online retailers, or government agencies, and prompt recipients to click on malicious links or provide personal information.

Once victims unknowingly share their credit card details, scammers can use this information for fraudulent purposes. To avoid falling victim to phishing scams, individuals should exercise caution when clicking on links in emails or messages and verify the authenticity of websites before entering any sensitive information.

Example: You receive an urgent email from what appears to be your bank, informing you of suspicious activity on your account. The email instructs you to click a link and provide your credit card details to verify your identity. You comply, thinking you're preventing fraud, but in reality, you've just fallen for a phishing scam. The scammers now have your card information and can use it for fraudulent purposes.

How to Know if You're Being Scammed:

  • Urgent Requests: Be wary of emails that create a sense of urgency, asking you to take immediate action by clicking on a link or providing personal information
  • Mismatched URLs: Hover your mouse over any links in the email without clicking. Check if the URL matches the legitimate website. Phishing emails often use deceptive URLs
  • Requests for Sensitive Information: Legitimate institutions won't ask for sensitive information like passwords or credit card details via email
  • Generic Greetings: Phishing emails often use generic greetings like "Dear Customer" instead of addressing you by name
  • Misspellings and Poor Grammar: Look for spelling and grammar mistakes in the email, as scammers may not be fluent in the language.

How to Avoid Phishing Scams:

  • Verify the Sender: Before clicking on any links or sharing personal information, verify the sender's identity. Contact the institution directly using official contact information obtained from their official website
  • Don't Click Suspicious Links: Avoid clicking on links in emails unless you're sure of their legitimacy. Instead, manually type the website's URL into your browser
  • Check for HTTPS: Ensure the website's URL starts with "https://" and has a padlock icon in the address bar, indicating a secure connection
  • Use Two-Factor Authentication: Enable two-factor authentication on your accounts whenever possible. This adds an extra layer of security
  • Use Anti-Phishing Software: Install reliable anti-phishing software or browser extensions that can help identify and block phishing attempts
  • Educate Yourself: Learn to recognize the common signs of phishing emails and scams. Regularly update yourself about new phishing tactics
  • Be Skeptical of Requests: Be cautious when asked to provide personal information, especially if it's not a typical request from the institution

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5. Application Fraud

Application fraud involves criminals using stolen or fabricated information to apply for a credit card in someone else's name. They may also manipulate existing applications by providing false data. Once approved, fraudsters can make purchases or access credit using the fraudulently obtained credit card.

To protect against application fraud, credit card issuers should implement rigorous identity verification processes, such as requesting additional documentation for high-risk applications. Consumers can also safeguard themselves by regularly reviewing their credit reports for any unauthorized credit inquiries or newly opened accounts.

Example: A criminal obtains your personal information through a data breach. Armed with your details, they apply for multiple credit cards in your name. You're unaware of these applications until you start receiving statements for cards you never applied for. The fraudster uses these newly approved cards to make purchases, leaving you with the debt.

How to Know if You're Being Scammed:

  • Unfamiliar Accounts: Regularly review your credit reports for any unfamiliar accounts or inquiries. These could indicate that someone is applying for credit in your name
  • Unexpected Credit Notifications: If you receive notifications about new credit accounts or applications you didn't initiate, investigate further
  • Denial of Legitimate Applications: If you apply for credit and are unexpectedly denied, it could be a sign that your identity has been compromised
  • Unsolicited Credit Offers: Be cautious of unsolicited credit offers, especially if they come from unknown sources or seem too good to be true

How to Avoid Application Fraud:

  • Monitor Your Credit Reports: Regularly check your credit reports from all three major credit bureaus for any suspicious activity. Look for accounts or inquiries you don't recognize
  • Use Strong Passwords: Create strong, unique passwords for your online accounts to prevent unauthorized access to your personal information
  • Freeze Your Credit: Consider placing a credit freeze on your accounts, which restricts access to your credit reports and prevents fraudsters from opening new accounts in your name
  • Be Cautious Online: Avoid sharing sensitive personal information on social media or public platforms. Fraudsters can use this information to impersonate you
  • Review Statements: Routinely review your financial statements for any unfamiliar or unauthorized transactions. If you spot anything unusual, contact your bank or credit card issuer immediately
  • Report Suspicious Activity: If you suspect that you're a victim of application fraud, report it to the relevant financial institutions and credit bureaus as soon as possible

6. Account Takeover Fraud

Account takeover fraud occurs when criminals gain unauthorized access to an individual's credit card account through hacking, data breaches, or social engineering tactics. Once inside, they can change account details, such as contact information or passwords, and make unauthorized transactions or drain the account's funds.

To prevent account takeover fraud, individuals should use unique and strong passwords for their online accounts, enable two-factor authentication wherever possible, and be cautious about sharing personal information online.

Example: A hacker gains access to your email account through a phishing email. They use the information in your emails to reset passwords for your online banking, email, and social media accounts. With control over your accounts, they make unauthorized transactions and drain your funds.

How to Know if You're Being Scammed:

  • Unauthorized Account Activity: If you notice unfamiliar transactions, password changes, or other account activities, it could indicate an account takeover
  • Suspicious Emails: Be cautious of emails claiming password changes or account access, especially if you didn't initiate these actions
  • Password Reset Requests: If you receive unexpected password reset emails for your accounts, it could be a sign of unauthorized access
  • Locked Out of Accounts: If you're suddenly locked out of your accounts or unable to log in, someone may have gained unauthorized access

How to Avoid Account Takeover Fraud:

  • Use Strong, Unique Passwords: Create strong passwords for your accounts, and avoid using the same password across multiple platforms. Consider using a passphrase or password manager
  • Enable Two-Factor Authentication: Whenever possible, enable two-factor authentication (2FA) for your accounts. This adds an extra layer of security by requiring a second form of verification
  • Secure Your Email: Since email is often used for password resets, secure your email account with a strong password and 2FA
  • Monitor Account Activity: Regularly review your account statements, emails, and notifications for any unauthorized activities
  • Check Account Settings: Periodically review your account settings and security features. Make sure your contact information and security questions are up to date
  • Beware of Phishing: Be cautious of phishing emails that attempt to trick you into revealing your login credentials. Verify the authenticity of any request before taking action
  • Secure Devices: Ensure your devices have updated operating systems and security software to prevent malware or unauthorized access.

7. Pretexting

Pretexting is a technique where fraudsters create a false scenario or pretext to extract credit card information from unsuspecting victims. They might pose as a trustworthy individual, such as a bank representative, customer service agent, or even a co-worker, to gain the victim's trust. Through social engineering, they manipulate victims into revealing their sensitive information.

To protect against pretexting, individuals should be wary of unsolicited communications and verify the identity of individuals requesting sensitive information, especially over the phone or email.

Example: You receive a phone call from someone claiming to be from your bank's fraud department. They inform you about a potential security breach and ask for your account details to verify your identity. Believing them to be legitimate, you share your information, only to realize later that it was a scam.

How to Know if You're Being Scammed:

  • Unsolicited Calls: Be cautious of unexpected calls, especially if they request sensitive information or personal details
  • Pressure to Provide Information: Scammers often create urgency or pressure to obtain your information quickly. Be skeptical if you're rushed to provide sensitive data
  • Verify the Caller: Ask for the caller's name, department, and contact information. Hang up, then use official contact information from the organization's website to call back and verify their identity
  • Verify the Purpose: Before sharing any information, ask why it's needed and how it will be used. Legitimate entities usually have clear reasons for requesting information

How to Avoid Pretexting:

  • Don't Share Sensitive Information: Never share personal or financial information over the phone, especially if the call is unsolicited
  • Call Back Safely: If someone claims to be from a legitimate organization, hang up and call back using official contact details to verify their identity
  • Use Privacy Settings: Limit the amount of personal information you share on social media and other public platforms
  • Be Cautious of Unsolicited Calls: Be skeptical of calls requesting personal information, even if they seem to be from a reputable source
  • Train Your Employees: If you're a business owner, educate your employees about pretexting and the importance of verifying identities before sharing information

8. Interception of Mail

In some cases, criminals intercept pre-approved credit card offers or physical credit card statements from the victim's mailbox. By gaining access to this sensitive information, they can apply for new credit cards or use the existing ones for fraudulent purposes.

To minimize the risk of interception of mail fraud, individuals should consider opting for digital statements whenever possible. Additionally, if they suspect their mail has been tampered with or stolen, they should report it to the postal authorities and their credit card issuer immediately.

Example: A thief targets your mailbox and steals a pre-approved credit card offer. Using the information on the offer, they apply for the credit card in your name and start making unauthorized purchases.

How to Know if You're Being Scammed:

  • Missing Mail: If you notice important mail, such as credit card statements or pre-approved offers, is consistently missing from your mailbox, it could be a sign of interception
  • Unfamiliar Accounts: If you receive notifications about new credit accounts you didn't open, investigate immediately
  • Unauthorized Transactions: Review your credit card statements for any unfamiliar or unauthorized transactions

How to Avoid Interception of Mail:

  • Opt for Digital Statements: Whenever possible, opt for digital statements and communication from your financial institutions to reduce the risk of mail interception
  • Use a Locking Mailbox: Consider using a locking mailbox to prevent thieves from accessing your mail
  • Monitor Your Mail: Regularly check your mailbox for any missing or suspicious mail. If you suspect mail theft, report it to your local postal authorities
  • Shred Sensitive Documents: Shred any documents containing personal or financial information before disposing of them
  • Secure Incoming Mail: If you're away from home, ask a trusted neighbor or friend to collect your mail to prevent it from piling up and becoming a target
  • Freeze Your Credit: Consider placing a credit freeze on your accounts to prevent unauthorized individuals from opening new credit accounts in your name
  • Report Suspicious Activity: If you suspect your mail has been intercepted or your information compromised, report it to your local postal service and financial institutions

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How can Credit Card Fraud impact your Financial Health| Bright Money

The Impact of Credit Card Fraud on Your Financial Health

The Nilson Report estimates that global losses due to credit card fraud exceeded $27 billion in 2020.  The effects of credit card fraud go beyond the immediate financial loss, impacting victims' credit scores, eroding trust in financial institutions, and imposing significant costs on merchants and card issuers. Some of the significant impacts include:

1. Financial Loss

Credit card fraud inflicts direct financial losses on victims, leaving them liable for unauthorized charges, while merchants face revenue loss and penalties due to chargebacks.

2. Damaged Credit Scores

Credit card fraud can devastate credit scores, causing overdue balances, loan difficulties, and higher interest rates for victims.

3. Loss of Trust and Damage to Reputation

Consumer distrust in banks and retailers is reduced by credit card fraud, which has an adverse effect on customer retention, revenue, and reputation.

4. Increased Costs for Card Issuers and Merchants

Fraud puts financial burden on credit card issuers and merchants, increasing consumer costs and business complexity.

5. Regulatory Compliance and Legal Issues

Regulatory, legal, and reputational risks associated with credit card fraud include compliance issues, sanctions, and potential legal action.

6. Economic Impact

The knock-on effects of credit card theft may include inflation, increased costs, redirected law enforcement resources, and weakened public safety initiatives.

How to prevent Credit Cad Fraud | Bright Money


Credit card fraud is a pervasive and evolving threat that affects individuals, businesses, and financial institutions worldwide. As responsible users of credit cards, it is crucial to remain vigilant and adopt best practices to protect our valuable financial information.

By understanding the numerous types of credit card fraud and following preventive measures, we can minimize the risks of falling victim to such crimes. Remember, staying informed and proactive is the first line of defense against credit card fraud.

So, let's make informed choices, secure our credit cards, and empower ourselves against the ever-present threat of credit card fraud.

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Recommended Reads:

1. How To Choose the Best Credit Card for you?

2. How To Pay off Credit Card Debt?


  1. Are credit cards secure for online transactions?

A: Credit cards can be secure for online transactions if individuals follow best practices. Look for "https://" and a padlock icon in the browser's address bar when making online purchases. Avoid sharing credit card details through email or messages and use secure payment gateways.

  1. How can I detect suspicious transactions on my credit card statement?

A: Regularly review your credit card statements for any unfamiliar or unauthorized transactions. If you notice any suspicious activity, such as unrecognized charges or repeated small amounts, contact your card issuer immediately.

  1. What should I do if I receive a suspicious email or message requesting credit card information?

A: If you receive a suspicious email or message asking for credit card details, do not respond or click on any links. Instead, directly contact the organization through their official website or their customer service number to verify the request's legitimacy.

  1. Can credit card fraud be a result of data breaches?

A: Yes, data breaches are a common source of credit card fraud. When hackers infiltrate large databases containing credit card information, they can sell or use the stolen data for fraudulent purposes.

  1. How can businesses protect customer data from credit card fraud?

A: Businesses can safeguard customer data by using encryption to secure sensitive information, implementing strong access controls, and regularly updating their security measures. Adhering to PCI DSS standards is essential to protect customer credit card data.

  1. Are there any technological advancements to prevent credit card fraud?

A: Yes, advancements in technology have led to innovative fraud detection and prevention systems. AI and machine learning algorithms can analyze transaction patterns and identify unusual activities, helping prevent fraudulent transactions in real-time.

  1. What is the role of EMV chip technology in reducing credit card fraud?

A: EMV chip technology, which stands for Europay, Mastercard, and Visa, provides an additional layer of security for credit card transactions. This chip generates a unique transaction code for every transaction, making it challenging for fraudsters to clone the card.

  1. How To stay updated on the latest credit card fraud trends?

A: Stay informed by following reputable news sources, subscribing to financial security newsletters, and visiting websites that provide updates on the latest credit card fraud trends and prevention tips.

  1. Can credit card fraud affect my credit score even if I am not liable for the fraudulent charges?

A: Yes, credit card fraud may have a negative influence on your credit report, particularly if it results in late payments or unpaid amounts. Although you may not be liable for the fraudulent charges, resolving the issue promptly is crucial to protect your creditworthiness.

  1. What is the future outlook for credit card fraud prevention?

A: As fraudsters develop new tactics, the fight against credit card fraud continues to evolve. The future outlook includes the integration of biometric authentication, enhanced data analytics, and improved collaboration between stakeholders so as to stay one step ahead of the criminals.


Technical Writer
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