🎉 See the Brex 2024 Year In Review →

Resources Home

Learn

How Credit Card ...

Resources Home

What is credit card fraud?

Credit card fraud can be a nightmare scenario for any individual and business.
Find out how it works and what you can do if you’re a victim of credit card fraud.

What counts as credit card fraud?

Credit card fraud is the most common type of identity theft. With an estimated 1.5 billion credit cards in the U.S. alone, it’s no surprise that millions of people fall victim every year.

Some criminals use lost or stolen credit cards to commit fraud. Others make illegal transactions without ever having the credit card in their possession. Card-not-present fraud only requires the criminal to know basic card or account details to access the victim's funds.

How credit card fraud works

Any business, no matter what size, will have a large surface area for credit card theft and fraud. Here are some of the ways it can happen:

Lost or stolen cards

Criminals can obtain credit cards by either finding them after they have become lost or stealing them from someone’s possession.

The thief may not be able to use the lost or stolen card at a point of sale device, which requires a PIN. But the fraudster can use the card details to make purchases online.

Card-not-present fraud

This type of fraud does not require the criminal to have a physical credit card. Instead, they will obtain basic details, such as the account holder's name, the credit card number, and the expiration date. With this information, they can commit fraudulent activity by mail, via the phone, or online.

Counterfeit, doctored, or faked cards

Devices known as skimmers can illegally obtain credit card details. These machines capture information from the credit card's magnetic strip, which the criminal can then encode into a counterfeited, faked, or doctored card. It might be hard to detect the difference between a regular card reader or ATM and one with a skimmer attached to it. (Make sure you feel the card reader to see if it’s loose or abnormal, just in case.)

Application fraud

Rather than stealing existing credit card details, a criminal may instead apply for new credit in someone else's name. They do this by using the victim's personal information, such as their full name, date of birth, address, and Social Security Number. They may even steal supporting documentation to substantiate their application.

Account takeover

After gaining personal information, a fraudster can then contact their credit card company and pretend to be the account holder by presenting information like previous purchases, passwords, and card details. This is sometimes referred to as “social engineering.”

They will do this to register a change of address and then report the card as lost or stolen to get a new card sent out through the mail.

Intercepting cards in the mail

If a credit card company sends out a new or replacement card via post, then a criminal may be able to intercept the package or steal it from the account holder’s mailbox. This is why most card issuers will use unmarked letters and packaging when sending cards.

How to identify credit card fraud

Credit card fraud is the most common type of identity theft. With an estimated 1.5 billion credit cards in the U.S. alone, it’s no surprise that millions of people fall victim every year.

The most effective way to protect yourself from credit card fraud is by taking preventative measures wherever possible.

Keep your credit card secure and only enter your card details on reputable online stores. Never share them with sources you can’t verify over the phone.


But even if you take all the necessary steps to avoid becoming a target of fraud, remain vigilant by regularly checking for any suspicious activity. You can detect fraud by:

  1. Reviewing monthly credit card statements in detail to identify any unauthorized transactions.
  2. Regularly checking your credit report to see if anything appears unfamiliar, such as new credit searches and inquiries, the opening of new accounts, or the registration of unknown addresses.
  3. Reviewing bills and invoices to ensure you are not receiving correspondence and collection notices for unfamiliar accounts. You can also use your credit report to check if you are on any collection agencies’ lists, as most report debts to credit bureaus.

Many credit card companies offer additional protection in the form of identity theft monitoring services. These services alert you to any changes in your credit report, suspicious activity on your credit account, or instances of your stolen information appearing on the internet.

What to do if you become a victim of credit card fraud

Contact the credit card company right away

Make the call as soon as you notice anything suspicious or you realize that your card has been lost or stolen. Your credit card provider will then launch an investigation to verify the fraudulent activity and remove any unauthorized transactions.

Compromised cards will be canceled to halt criminal activity, and you will be issued a new card and account number to reinstate secure access to your account and funds.

Update your security details

Change any PINs, online passwords, or security information that you believe may have become compromised.

Get in touch with a credit bureau

Contact one of the major credit bureaus — Experian, Equifax, or TransUnion — to set up a security alert on your credit report. Other bureaus will be made aware of the alert and you will receive a copy of your report.

Check your bank statement

Check through your monthly statements regularly and notify the bank if you see any unfamiliar transactions.