Credit card fraud is an unfortunate fact of life, with hundreds of thousands of Americans falling victim each year.1 This multibillion-dollar crime became even more common during the first year of the COVID-19 pandemic. It's expected to grow as people continue to rely on online shopping and social media, creating many opportunities for scammers to snag their personal information.
We wanted to understand credit card fraud in the U.S. from the consumer’s perspective, so we surveyed more than 1,000 American credit card holders to understand their experiences. As cybersecurity experts, we were excited to explore the security measures they use to keep their accounts safe. Here’s what we learned.
Key findings:
- Nearly half of all American adults have had a fraudulent charge on their credit or debit cards, amounting to around 127 million people. More than one in three credit or debit card holders has experienced card fraud more than once.
- The median charge was $62, equating to approximately $8 billion in attempted fraudulent charges on Americans’ credit and debit cards.
- Almost 40 percent of card holders do not have email or text alerts from their credit card company or bank enabled. Around 81 percent of victims without these notifications had to take additional action to reverse fraudulent charges, compared to just 19 percent of those with alerts enabled.
Credit Card Scammers Have Attempted to Steal Billions of Dollars From Americans
Given that the majority of adults in our study had experienced credit card fraud in the form of unauthorized charges appearing on their accounts, fraud prevention remains critical for the financial health of both consumers and businesses.
Our research also revealed that the median fraudulent credit card charge was $62. Conservatively, this equates to approximately $8 billion in fraudulent charges among all American consumers, based on our analysis and data from the Federal Reserve Bank of Atlanta.2
Unfortunately, credit card fraud has also become even more common since the start of the pandemic. Reports of credit card fraud increased by 44 percent between 2019 and 2020 according to the Federal Trade Commission (FTC).3 The FTC also estimated that there has been $38 million dollars in reported credit card fraud tied directly to COVID-19.4
“Scammers are smart. They’ll take notice of any new trends, like stimulus checks, unemployment payments, and general consumer financial trends, and capitalize upon them with phishing scams, identity theft, or other types of cybercrime,” said Hari Ravichandran, founder, and CEO of Aura, an identity theft and fraud protection company.
Most Credit Card Holders Have Had Multiple Fraud Attempts
Credit card fraud is unfortunately a common experience, and our study showed no significant statistical differences based on where people live: urban, suburban, and rural dwellers are all equally likely to experience fraudulent charges.
Multiple fraudulent charges are common, with more than one in three people saying they’d experienced two or more episodes of bogus activity on a credit or debit account.
| How many times have you had a fraudulent charge on a credit card? | |
|---|---|
| 0 | 42% |
| 1 | 23% |
| 2 | 17% |
| 3 | 9% |
| 4+ | 9% |
Among those who have experienced credit card fraud, many incidents were quite recent, with nearly one in four people saying they’d noticed fraudulent activity in the past six months and 69 percent indicating it was within the past two years.
When it comes to dollars and cents, the median loss amount was $62, though one in five people said scammers attempted to steal more than $300 during their most recent incident of fraud.
| What was the approximate amount of your most recent fraudulent charge? | |
|---|---|
| <$50 | 35% |
| $50-$99 | 22% |
| $100-$199 | 14% |
| $200-$299 | 9% |
| $300-$399 | 5% |
| $400-$499 | 3% |
| $500-$999 | 8% |
| $1000+ | 4% |
Tracking account activity can prevent losses
According to our research, almost 70 percent of fraud victims noted their most recent fraudulent charge within hours of its occurrence. Today, most banks and credit card companies have systems that can detect suspicious charges and alert account holders of potential fraud before transactions are processed. Around 61 percent of credit and debit card holders in our study had enabled email or text alerts from their card servicers that would help them act quickly on fraud attempts. These individuals were more likely to block transactions before money was taken from their accounts.
Victims with fraud alert notifications enabled were more likely to prevent money from being taken from their accounts.
| Fraud alert notifications enabled | Fraud alert notifications not enabled | |
|---|---|---|
| Fraudulent charge was blocked | 55% | 19% |
| Fraudulent charge wasn’t blocked | 45% | 81% |
Note: respondents were asked about their most recent incident of attempted fraud
More than half of victims who receive text or email alerts were able to take quick action to prevent the transaction from coming out of their account. On the other hand, 81 percent of victims without these alerts enabled had the transaction deducted from their account and had to take steps to have the funds returned.
Men were more likely to have text or email alerts enabled on their credit or debit accounts. Sixty percent of men received these alerts, compared to 52 percent of women. Men were also more likely to notice fraud charges within minutes compared to women.
Today, banking apps and mobile fraud alerts are essential tools in keeping your financial accounts safe and secure. “Use an app or platform that monitors your transactions and set thresholds so you’re notified when a transaction is over a certain amount, “ said Ravichandran. “Request your bank to approve any transaction over a certain amount, and check your credit statements weekly, if not daily, for any fraudulent activity.”
Preventing Credit Card Fraud
Of course, if you can prevent credit card fraud in the first place, you never have to worry about how long it takes for funds to be returned to your account. The good news is that many Americans practice smart credit or debit account security practices, although there’s room for improvement.
The most common good security practice uncovered in our research was reviewing credit card statements; 71 percent of people said they do this, followed by multifactor authentication or face ID (64 percent), and email/text alerts for credit and debit accounts (61 percent).
However, too many consumers have poor security habits when it comes to their credit and debit accounts. Sixty-two percent use the same password for more than one online account, while 60 percent use the same credit cards for autopay and everyday spending, and 55 percent use public Wi-Fi connections.
Percent of people practicing good and bad credit habits, by experience with credit card fraud
| Good habits | All respondents | Non-fraud victims | Fraud victims |
|---|---|---|---|
| Review credit card statements | 71% | 66% | 74% |
| Use multi-factor authentication or face ID to access credit card accounts online | 64% | 61% | 66% |
| Subscribe to email/text alerts for my credit and debit cards | 61% | 59% | 62% |
| Use an online password manager | 37% | 35% | 39% |
| Subscribe to credit monitoring service | 28% | 23% | 32% |
| Bad habits | |||
| Use same password for more than one online account | 62% | 63% | 62% |
| Use the same credit cards for autopay and everyday spending | 60% | 55% | 63% |
| Use public wifi connections | 55% | 54% | 56% |
| Store credit card info in your browser or websites | 49% | 45% | 51% |
In some cases, previous fraud victims have better habits than those who haven’t had a fraudulent credit charge in the past. Fraud victims are more likely to review credit card statements, use multifactor authentication, and subscribe to credit monitoring, though they may have started implementing these good habits in order to prevent future fraud.
And in many cases, fraud victims were more likely to engage in risky behavior. For example, they are more likely to use the same credit cards for autopay and everyday spending, which can expose them to added fraud, and they’re slightly more likely to store card info in web browsers, which aren’t always secure.
Simple steps for fraud prevention
For many people, preventing credit card fraud means making big shifts in their behavior, but there are many tools that can help you keep your accounts safe. Here is our best advice for preventing credit or debit card fraud:
Be wary of any unsolicited messages: This extends to your email, phone, and text messages. Scammers are sophisticated, and even savvy consumers can fall for communications that include company logos of brands they trust. Typically, the giveaway is that the sender will ask for some personal information, which a store, financial institution or other company would not need from you if you were already a customer.
“Most scams are based around a sense of urgency: the idea that if you don’t act now to do something like change your password or confirm your credit card number, something bad will happen. If you’re feeling pressured to act in a situation, ask yourself why, and then re-evaluate the legitimacy of the action you’re being asked to take. A reputable seller will never request credit card details or sensitive personal information like your social security number via email or phone,” Ravichandran said.
Watch out for skimming: Skimming is the term for when your card number is copied during a normal transaction and then used to create a counterfeit card or make online purchases. One of the most common tactics for skimmers today is to attach a device to a point-of-sale terminal, such as a fuel pump or ATM., usually making them invisible to the consumer.5 To prevent gas pump skimming, use pumps closer to the store or attendant station, as these are less likely to have skimmers attached, pay inside, or run the purchase as a credit transaction that doesn’t require you to enter your PIN. With ATMs, fraudsters will often place a device over the original card reader, and you can inspect the area for anything that looks damaged, crooked, or loose. If possible, enter the bank or use a human teller to withdraw cash.
Use your phone to make payments: Apple Pay and Android Pay both use technology that prevents merchants from storing your payment information, and by enabling touch ID, face ID, or password protection, you can ensure that only you can make a purchase.
Don’t use the same account for bills and everyday shopping: Many consumers use their credit cards for recurring bills in order to take advantage of credit card points, travel miles, and other benefits. While this is an excellent way to get more bang for the buck when it comes to money you’re already spending each month, the additional transactions on any card give scammers another chance to get your information. So, consider using one card for recurring payments like utility bills and other monthly expenses and a different card for shopping.
Try a masked credit card: Virtual credit cards are new tools that conceal your true account numbers while shopping online by providing you with single-use codes, and it works very similarly to your plastic credit cards. Ravichandran said, “Consumers can use their virtual card online to prevent fraud, keep their real card protected from breaches and scammers, and easily set limits on their card to control unauthorized usage.”
Virtual or masked credit cards are offered by many major credit card companies and banks, such as Capital One, Citibank, and Amex.
Recap
Our research shows that credit card fraud remains a significant problem in the U.S., with nearly 60 percent of adults being victimized. That’s millions of Americans affected each year.
Unfortunately, this type of fraud is only continuing to rise with a 44 percent increase between 2019 and 2020 alone. Just about anyone can fall victim. That’s why you need to turn on your fraud alert notifications to catch these crimes before funds are removed from your accounts and prevent further damage.
Taking preventive measures are essential too. Make sure you monitor your credit card statements regularly, use multi-factor authentication, check your credit reports, and subscribe to alerts. Additionally, using masked credit cards to shop online can hide your real account numbers and prevent any unauthorized use. Whatever you do, stay alert and report suspicious activity right away.
FAQs
How is credit card fraud prevented?
You can prevent credit card fraud by shopping on secure sites, using masked credit cards, keeping your physical card secure, and only providing your number over the phone when you have verified who’s on the other line.
How often do credit card frauds get caught?
Some studies suggest that less than 1 percent of credit card fraud is caught. However, it’s impossible to know for sure.
How did someone use my credit card without having it?
There are several ways scammers steal credit card numbers. Some include phishing scams, data breaches, taking over payment forms, intercepting hotspots and public Wi-Fi, and more.
What is the average sentence for credit card fraud?
The average sentence for credit card fraud varies depending on the state you’re in. For more information, check with your local laws and law enforcement offices.
Is credit card fraud a financial crime?
Yes, credit card fraud is considered a financial crime.
References
- https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2020/csn_annual_data_book_2020.pdf
- https://www.atlantafed.org/-/media/documents/banking/consumer-payments/survey-of-consumer-payment-choice/2020/tables_scpc2020.pdf
- https://public.tableau.com/app/profile/federal.trade.commission/viz/IdentityTheftReports/TheftTypesOverTime
- https://public.tableau.com/app/profile/federal.trade.commission/viz/COVID-19andStimulusReports/ContactPaymentMethods
- https://www.fbi.gov/scams-and-safety/common-scams-and-crimes/skimming
