Canadians swipe credit cards every day to make purchases and pay for services. While the vast majority of these transactions are legitimate, some are not. Credit card issuers go to great lengths to protect your identity and financial information, but credit card fraud still occurs. The best way to protect yourself is to be armed with the knowledge of how you can prevent credit card fraud, as well as what to do if you become a victim of it.
What is credit card fraud?
Credit card fraud is the unauthorized and illegal use of someone else’s credit card, and you see it happen in a few different ways:
- The stealing or counterfeiting of a person’s credit card
- The use of a person’s credit card information, such as the card number, online banking password or Personal Identification Number (PIN), or
- Fraudulent applications for credit cards using someone else’s personal information (identity theft).
How to prevent credit card fraud
The best way to prevent credit card fraud as a cardholder is to protect both your card and your card information. You can protect the physical card by always maintaining possession of it. For example, you should never leave your card unattended in a public place where it can be stolen.
To protect your credit card information, a number of steps can be taken:
- Sign any new credit cards as soon as you receive them
- Cut up old credit cards
- Never divulge your online banking password or PIN to anyone
- Don’t choose passwords or PINs that someone could easily guess, such as your birthday, address or phone number
- Choose unique passwords and PINS that you have not previously used for other accounts
- Never give out your credit card number over email
- Never give out your credit card number over the phone to someone you don’t know
- Always review all transactions on your credit card statement
- Call your credit card company immediately, if you believe you inadvertently disclosed your card number, password or PIN to someone suspicious
- Don’t make purchases from online retailers you’re not familiar with
- Always take home receipts and carbon copies of purchases from restaurants, gas stations and other retailer
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What to do if you’re a victim of credit card fraud
If your credit card is lost or stolen, or if you spot unauthorized transactions on your account, you must call your credit card issuer immediately. They will cancel the card in order to prevent any further fraudulent usage and mail you a replacement with a new number. It is crucial that you report suspicious transactions as soon as possible, not only to prevent more fraud from happening, but also to protect yourself from being liable of the charges. By the terms of most credit card agreements, you generally only have between 30 and 60 days after the statement date to dispute any transactions.
Other steps you can take if your credit card is stolen or used fraudulently include:
- Reporting the theft of your credit card to the police
- Calling credit-reporting agencies to report the theft or fraudulent usage. They will put a note on your credit report, which can protect your credit score if there are unauthorized transactions
- Documenting all conversations you have with both the police and credit card issuer when reporting credit card fraud. This helps establish that you cooperated fully and made all reasonable attempts to assist both the authorities and card issuer in their investigations
Are you liable for fraudulent purchases made with your credit card?
The good news is that credit card issuers generally do not hold cardholders responsible for any unauthorized transactions. As long as you report suspicious activity on your credit card promptly, and cooperate fully with the card issuer, you should not be required to pay for anything you did not authorize yourself.
With that being said, there are a few situations in which you may be held liable for unauthorized transactions. First, if you give your card to someone, such as a friend, who is not authorized to use it, the credit card company will not reimburse you for any charges to the account. Second, if you either give out your PIN or choose a PIN that could be easily guessed, such as your birthday, you may also be liable. Finally, if you do not dispute unauthorized charges on your credit card statement within a certain timeframe (usually 30-60 days), the card company may hold you responsible for them.
Further ways to protect yourself from credit card fraud
1. Consider purchasing identity theft protection
Some banks and credit-reporting agencies now offer what’s known as identity theft protection insurance. This coverage, which tends to cost around $20 a month, offers compensation in the event that you are the victim of identity theft. In particular, the insurance will usually pay for the cost of fully restoring your identity, including any legal expenses. Lost wages suffered as you deal with having your identity stolen may also be covered.
2. Be safe and be aware
Protecting yourself from credit card fraud is really just a matter of common sense. Never lend out your card to anyone, and never give out your card’s information to anyone whose identity you can’t verify. Always monitor your monthly statements to see if any purchases weren’t made by you. Finally, immediately report any unauthorized transactions. If you do all of this, there’s really no need to worry. You usually won’t be held liable for fraudulent transactions, so it’s not something to lose sleep over.
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