Understanding Fraud
Risks of Fraud
Credit card fraud can take a variety of forms:
- Thieves may use your credit card information to make unauthorized charges to your account. It can happen if your credit card or the information on your card is stolen.
- Account takeover is another form of credit card fraud. In this case, the thief learns enough personal information about you to ask your card issuer to change the account’s billing address. Then the thief reports the card lost or stolen and requests a replacement card, which is used for fraudulent charges.
- Application fraud refers to someone opening a credit card account in another person’s name. The thief may gather enough of your personal information to open an account or may create counterfeit documents to open the account. This type of credit card fraud can be particularly difficult for victims to detect.
How Fraud Happens
Thieves employ many methods to obtain your credit card or personal information:
Credit Card Scams
Debt Relief Offers
Scam artists may target people with high credit card debt and falsely promise to negotiate with your creditors to settle or otherwise reduce the amount you owe. Some promise to reduce your credit card interest rate. They often charge a large, upfront fee, but then fail to help you settle or lower your debts. Sometimes they don’t provide any service at all.
Red flags for these kinds of scams include:
- requiring payment of a fee before they settle your debts
- guaranteeing they can eliminate your unsecured debt
- promising to stop all debt collection calls and lawsuits
- not supplying free information about their services unless you provide personal and financial information, such as credit card and bank account numbers
Advance Fees
Advance-fee loan scams may be promoted in ads and websites that guarantee loans or credit cards, regardless of your credit history. They target people with bad credit histories who may be turned down—or think they’ll be turned down—by legitimate lenders like banks and credit unions. They may guarantee that you can get a credit card, even if you have bad credit, no credit or a bankruptcy.
Tip-offs that an offer is a scam:
- The lender isn’t interested in your credit history. If they say they won’t check your credit history, but want personal information such as a Social Security Number or account number anyway, it’s likely a scam. They may use the information to debit your account.
- Fees aren’t displayed clearly or prominently. Legitimate lenders clearly specify what fees you’ll pay and collect them after the loan is approved.
- A loan or credit card is offered by phone. It’s illegal for companies doing business by phone in the United States to promise you a loan or credit card and ask you to pay for it before they deliver.
- The lender isn’t registered in your state. Find your state Attorney General's office at the National Association of Attorneys General website and see if they’re registered.
Credit Protection
Crooks may use scare tactics and false information to try to sell you credit protection insurance that you don’t need. Your best defense is to be aware of your rights:
- Under federal law, you’re not liable for any charges if you report your card missing before someone else uses it. If it has been used, your liability is limited to $50 as long as you report the problem promptly.
- Many cards offer additional protection, free of charge. For example, Navy Federal credit cards come with a zero liability policy, which means you’re not responsible for any unauthorized charges if you report a problem as soon as you discover it.
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