The credit card industry has always been targeted by hackers and thieves. Unfortunately, the most common scams have changed right along with technology. According to a 2020 identity theft study from Javelin Research, scammers have mostly graduated from counterfeiting credit cards to more significant crimes like identity theft and savings account takeover. The next year could even bring about even more complicated scams like synthetic identity fraud and takeovers of investment accounts instead of just checking and savings accounts.
While nobody knows for sure what the future holds, it’s safe to say financial scams cause headaches and financial losses, and will likely continue doing so for years to come.
Still, you don’t have to be a victim if you’re careful. The experts at Javelin Research say a large part of reducing fraud is making sure consumers adopt safer methods to protect their sensitive data while they manage their finances. To help in that respect, read on to learn more about some of the biggest credit card scams to watch out for in 2021, as well as how you can protect yourself.
Credit card interest rate reduction scams
Credit card interest rate reduction scams take place when a caller implies their company has special relationships with card issuers that can help secure lower interest rates. The Federal Trade Commission (FTC) says consumers who receive a call like this “should listen to them with extreme skepticism, and delete them.”
Why? Because by and large, robocalls promising to lower your interest rates are always fraudulent.
No matter what a company claims, nobody can do anything for your interest rate that you cannot do for yourself. If you want a lower interest rate from your card issuer, the FTC recommends calling in and asking for one.
According to the FTC, individuals who are suckered into paying third-party companies to get them a lower interest rate never see the promised savings and struggle to get refunds. Not only that, but giving one of these companies your credit card information leaves you open to other types of scams, like them using your credit card number to make fraudulent purchases.
According to Chris McHargue, principal financial services industry consultant for fraud at SAS, phishing schemes have been around for a long time and remain a significant problem. While phishing can take on several different forms, it usually occurs when a fraudster contacts the target victim by phone or, increasingly, online via some social engineering scheme in order to extract card, account or banking credentials or other personal details.
The original contact may look like an email from a company you use, or you might get a phone call that sounds legitimate but asks you to give your personal information or credit card details.
McHargue says this information is then used to commit fraud over the internet, using card details for e-commerce transactions or banking credentials to move money via online banking. “They may even open credit card accounts in the victim’s name,” he says.
These types of schemes often target senior citizens who may be less familiar with technology and thus more vulnerable.
New account fraud
Robert Siciliano, a cyber and social identity protection instructor at ProtectNow, says another type of scam to watch out for involves new account fraud. This type of fraud could see a jump in 2021 due to the pandemic, he says, adding that more people have lost wages and are stuck at home jobless and desperate.
New account fraud takes place when someone uses another person’s Social Security number and personal information to open a credit card or another type of financial account. This is often the first step in identity theft, and it can lead to victims spending thousands of dollars and countless hours trying to find a resolution and recover loss funds.
Account takeover fraud
The experts at Javelin Research also say that account takeover is on the rise. With this type of crime, a hacker gets a hold of your personal information or your log-in information and uses it to access and take over your accounts. From there, they might change your address and contact information in order to make it difficult for you to lock them out.
According to Javelin Research, account takeover fraud is one of the hardest types of fraud to identify because of the “multichannel account access and the desire to reduce friction in the consumer experience.”
In other words, your accounts may be more susceptible to this type of fraud if you don’t personally take extra precautions to make your accounts more difficult to access, such as multi-factor authentication.
Experts say you should also look out for person-to-person fraud involving credit cards and other accounts you have. For example, a thief may contact you via email or text and ask you to send them money via an app like Zelle or PayPal for a product or service, then not deliver what they promise. In other cases, someone might contact you pretending to be a family member, but their main goal is getting you to send them money using your credit card and any number of online person-to-person payment platforms.
A “charity” might even call you asking for a donation only to request your credit card details over the phone. But instead of collecting your donation, they use your information and credit card number for nefarious purposes.
Synthetic identity scams
Finally, don’t forget to watch out for synthetic identity scams, which take place when a thief uses fabricated credentials to create a fake identity and open new accounts in their name. LifeLock, an identity theft protection company, says this type of fraud can still affect regular consumers, since criminals often use fragments of real identities to create a fake one, such as partial Social Security numbers or addresses.
Lifelock explains that if an identity thief uses your actual Social Security number to create a fake profile and open new accounts, it could damage your credit score and make it difficult for you to recover or open new accounts.
How to protect yourself from credit card scams
While there are numerous credit card scams to watch out for, there are just as many ways to avoid them. These tips can help you avoid being a victim of credit card scams and other types of fraud:
- Sign up for free credit-monitoring services. Credit-monitoring services provide methods to monitor and alert you of any activity on your credit report. And note that AnnualCreditReport.com lets you look at your credit reports from all three credit bureaus for free once a year, which is a good way to stop fraud early on. Additionally, the three bureaus are offering free credit reports on a weekly basis through April 2022 due to the pandemic.
- Routinely check your bank statements. “You may find charges for $.01 or very low dollar amounts,” says McHargue. “This is a common tactic used by fraudsters to validate your account.” Once scammers confirm the card details work, and that the charge went undisputed, they then use them for larger charges.
- Freeze your credit. When you freeze your credit report with each of the credit bureaus, nobody can open new accounts in your name—not even you.
- Set up alerts on your credit accounts. Setting up alerts means you’ll be notified when a purchase is made on an existing account. If you didn’t make the purchase, you can notify your bank and take steps to cancel it and secure your account right away.
- Be careful using public internet access. Nishank Khanna of Clarify Capital says unsecure internet connections will put you at risk of having your personal information stolen. “Some especially cunning thieves may capture your information by generating a pop up on your screen for you to input your card information or stealing your saved card information off your computer,” he says. If you’re frequently using public internet access, it makes sense to pay for a virtual private network (VPN).
- Set up multi-factor authentication. Credit card accounts and other financial accounts with multi-factor authentication can protect you from fraud. You’ll have an extra step when you log in, such as retrieving a code via text or email, but this makes your accounts more secure.
What to do if you think you’ve been scammed
The good news about most types of credit card fraud is that consumers are typically not on the hook. Thanks to protections in the Fair Credit Billing Act (FCBA), consumers are limited to $50 in liability for fraudulent charges, although most credit cards come with $0 fraud liability policies.
Khanna says that if you think you’re the victim of a credit card scam or your information has been compromised, you’ll want to notify your card issuer as soon as you can. A customer representative has the power to freeze your account or cancel your card entirely.
“Your lender will typically launch an investigation and reimburse you for any lost funds,” he says.
Still, just canceling your card may not be enough since your information may have been compromised as well. As a result, you should keep a close eye on your credit reports to ensure nobody is fraudulently claiming your identity and opening up fake accounts, he says.
If you find fraud on your credit reports, the Consumer Financial Protection Bureau (CFPB) recommends placing a fraud alert on your credit reports from all three bureaus. You can also consider freezing your credit reports with Experian, Equifax and TransUnion, which you can do for free.