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Advice

Here's how credit card fraud happens and tips to protect yourself

While there's no way to prevent credit card fraud, you can familiarize yourself with common methods of fraud and how you can protect yourself.

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Credit card fraud can happen if someone physically steals your card or virtually hacks your account, and it can be a serious headache to resolve.

If you're a victim of fraud, you may incur unauthorized charges that can result in steep bills. And if your credit card balance increases drastically, you may risk damage to your credit score.

Thankfully, there are actions you can take now to ward off fraud and spot potential unauthorized use of your card early. The key to safeguarding your credit card information from fraudsters is to stay proactive and on top of your accounts.

To help you identity fraudulent activity and stop it in its tracks, here are some common types of credit card fraud and ways to protect against them.

How credit card fraud happens

Credit card fraud occurs when an unauthorized person gains access to your information and uses it to make purchases. Here are some ways fraudsters get your information:

  • Lost or stolen credit cards
  • Skimming your credit card, such as at a gas station pump
  • Hacking your computer
  • Calling about fake prizes or wire transfers
  • Phishing attempts, such as fake emails
  • Looking over your shoulder at checkout
  • Stealing your mail

Unfortunately, there is no fool-proof way to stop hackers from making such attempts, and fraudsters seem to always find new ways to tap into your information. But you can limit your chances of becoming a victim, or minimize the damages from fraudulent activity that's already occurred on your accounts. Below, we explain how.

How to protect yourself from credit card fraud

Most credit cards today come with sophisticated security features, and you can also turn to free credit monitoring services as an easy way to keep an eye out.

The easiest actions you can take include opting for a card with $0 liability protection, monitoring your accounts closely, signing up for transaction alerts and securing your personal information.

Choose a credit card with $0 liability on unauthorized charges

The Fair Credit Billing Act (FCBA) protects you against credit card fraud and limits your maximum liability to $50. Some card issuers expand that law by offering $0 fraud liability on unauthorized charges, which means you won’t be held liable for any amount of fraudulent purchases.

Here are some cards that provide $0 liability on unauthorized charges:

Monitor your credit accounts

Regularly check that the transactions listed on your credit card statements and online accounts were made by you or any authorized users. If you notice anything suspicious, contact your card issuer right away to dispute the transaction.

You may also want to consider signing up for a credit monitoring service, such as IdentityForce® and CreditWise® from Capital One, which can provide you with an early notice of potential fraud. This can help you take steps to protect your personal information.

IdentityForce® UltraSecure and UltraSecure+Credit

IdentityForce® UltraSecure and UltraSecure+Credit
On Identity Force's secure site
  • Cost

    2 months free on all annual plans UltraSecure: $8.99/mo, $89.90/yr UltraSecure+Credit: $19.99/mo, $199.90/yr

  • Credit bureaus monitored

    Experian, Equifax and TransUnion

  • Credit scoring model used

    VantageScore

  • Dark web scan

    Yes

  • Identity insurance

    Yes, up to $1 million

Terms apply. To learn more about IdentityForce®, visit their website or call 855-979-1118. 

Learn more: Here's our full breakdown of the 6 best credit monitoring services of 2020

Sign up for transaction alerts

Manually monitoring your account and signing up for credit monitoring are both good ways to track changes to your account. However, you can add another layer of protection by creating alerts with your card issuer. You can set up alerts for a variety of transactions, including ones that exceed a certain limit, purchases made internationally, balance transfer requests and other actions.

Secure your information

Before you complete any purchase, whether it’s online, in store or over the phone, make sure your information is secure. For online transactions, check that the website says “https” at the beginning of the URL and that you’re not using public wifi. When you pay in store, make sure you don’t leave your card visible to other consumers. And prior to telling a phone rep your credit card number, be sure that you initiated the call.

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Information about the Bank of America® Travel Rewards Credit Card and Chase Freedom® credit card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

To learn more about IdentityForce®, visit their website or call 855-979-1118.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.