What is Fraud Protection? A Look at How Credit Card Issuers Keep Cardholders Safe

If you’ve ever experienced credit card fraud, you’re not alone. You are part of the 60% of Americans who have experienced the same thing. Even though fraud is relatively common, it would be even more widespread if it weren’t for the fraud protection tactics that credit card issuers use.

Every day, credit card providers work tirelessly to keep your card information safe — and prevent fraud. Keep reading to learn more about what your credit card company is doing to protect you from fraud — and what you can do to help.

These days, there isn’t just one type of fraud you have to watch out for. There are multiple ways that criminals can steal your financial information and use it against you. Understanding how credit card fraud happens can help you be more vigilant about preventing it.

Types of Card Fraud

There are two main types of credit card fraud: card-present fraud and card-not-present fraud.

Card-present fraud happens when the actual credit card is physically stolen and used to make purchases. It can also occur if a thief clones the card and stores its information on a duplicate card.

You might think this is the easiest way to have your card details stolen, but according to research from Security.org, this type of fraud is not very common. Only about 7% of fraudulent transactions happen because of lost physical cards.

Card-not-present fraud is when a credit card’s information, including the 16-digit card number, CVV, expiration date, and zip code, is stolen and used for online or phone transactions. As long as scammers have that information, they can use your card to purchase almost anything.

Common Techniques Used by Hackers

These days, there are many ways for a hacker to steal your credit card details. 

Phishing is one of the most common scams. This often involves receiving an email or text from a supposedly reputable source and being asked to log into your account. If you click the link and input your details, the hacker will now have your login information.

You may also get scam phone calls pretending to be from your bank or credit card issuer. They may ask you to verify your card information and provide other personal details, such as your Social Security Number. They can use this information to access your credit cards or even open new ones. 

If you accidentally download malware on your computer, the virus can use keylogging software to track your keystrokes. If you input your credit card information, the keylogger will steal it.

Tap-to-pay has made credit cards much easier to use, but unfortunately, the RFID signal that enables contactless payment can also be stolen. Hackers can walk around with RFID signal stealers and take your information without you even realizing it.

Skimming is another popular way for credit card hackers to steal your information. They can use a skimming device that copies your credit card details so they can make purchases on that card – even without having a physical copy of it. When swiping or inserting your card, jiggle it for a few seconds. If something comes loose, it might be a skimming device.

Impact of Credit Card Fraud

Credit card fraud has happened to about 60% of cardholders — with about 45% having experienced multiple instances of fraud. In 2024, the median fraudulent charge was about $100, a sharp increase from $79 in 2022.

Addressing credit card fraud after it has occurred can be challenging. Data shows that the charges went through for about half of customers, but funds were later returned. However, the money was not refunded for about 4% of those surveyed. This can be very unsettling, especially if the scammers made a lot of charges. 

Replacing your card can be an enormous pain, even if you reverse the charges. If recurring charges are set on the card, you’ll have to update your payment information manually on every site.

Another huge problem is that if you experience credit card fraud, more personal information is often compromised. For example, the hacker may have enough information to open new accounts in your name. This can cause further issues and require more time and energy, making you feel as if your personal privacy is, well, no longer private.

Your credit card may look like a simple piece of plastic, but it’s much more complex. There are many components within a credit card designed to protect you from hackers and scammers. 

It’s entirely possible that you don’t even know how much your credit card works to keep you — and your money — safe. Here are some of the most well-known security measures that credit card issuers take:

EMV Chip

Most consumers can remember the days before credit cards had chips. While swiping your credit card was faster than inserting it, the process wasn’t as safe. Magnetic stripes are much more liable for fraud than EMV chips, the current gold standard for safety.

EMV chips — those tiny metallic rectangles in your credit card — create special transaction codes that are almost impossible to replicate. The harder it is for a scammer to steal your information, the lower your chances of having your card stolen. Even if a merchant lets you swipe your card, you should always use the chip. 

Tokenization

When you shop with your credit card, the merchant uses your credit card’s unique details to process the transaction. Anyone stealing this information can also use your credit card to make fraudulent purchases. 

That’s where tokenization comes in. This process creates a unique token or digit used instead of your card’s number and other important info. 

• Substitute Data: Replaces card details with a unique identifier (token) during transactions.
• Limited Use: Tokens are transaction-specific, reducing the risk of misuse.

This token is only available on a one-time basis, so it doesn’t help the hacker if they steal it. 

Two-Factor Authentication (2FA)

Two-factor authentication is one of the most popular ways that credit card issuers try to prevent fraud. Many apps that let you make purchases also require two-factor authentication to reduce the possibility of fraudulent charges.

Two-factor authentication requires you to provide a second type of verification to prove that you’re the one making the transaction. This usually involves sending a unique code to your phone or email address. You can input that code to unlock the account and ensure the transaction goes through.

Some consumers find two-factor authentication annoying and burdensome, especially for every purchase. That’s why some accounts let you opt out of two-factor authentication. However, even though it can be more time-consuming, it’s best to keep it turned on. 

No one likes being duped — including credit card providers. When they encounter a fraudulent charge, they will often contact you first to determine if you’re responsible for the transaction. Sometimes, if they can’t get a hold of you, they will cancel the card automatically.

Here are some ways that credit card issuers are working to combat fraud and save you time, money, and energy.

Fraud Detection 

Credit cards are constantly tracking and evaluating your spending. They know what’s a typical transaction for you — such as dropping $200 at the grocery store every week — and what’s abnormal — buying a new $2,000 laptop. These special algorithms create personalized alerts. Buying a large-ticket item can trigger a fraud alert if you never spend above a certain amount.

When you spend outside of the norm, that’s when credit card issuers can put a stop on the transaction and contact you. If you don’t respond immediately, they can deny the purchase. You’ll often have to call them back and let them know if it was you who made the purchase or not.

Sometimes, credit cards can be wrong and ping a legitimate transaction. However, their systems are fairly sophisticated and can spot when you’re shopping out of the norm. This is one reason you should always notify your credit card company if you’re about to travel outside the country – that way the issuer knows it’s you and not someone who stole your credit card.

Consumer Education

Many credit card issuers will send emails and publish articles on common scams and how consumers can avoid being the victims of fraud. Read through the emails sent from your bank or credit card provider so you can learn how to protect yourself. 

Card issuers may also share information about new features that can enhance security and your overall card experience. You can redirect those emails to your primary inbox to avoid missing anything.  

Hackers are getting smarter every day and often learn how to get around security procedures. If you don’t up your game, you can feel behind the bad guys. It’s like relying on checks when everyone has moved on to Venmo and Zelle. You can learn how to protect yourself in a changing world by staying up to date.

Zero Liability Policies

The Fair Credit Billing Act passed in 1974, states that consumers are only responsible for up to $50 in fraudulent credit card charges. However, some credit cards have expanded that protection and do not hold the cardholder liable for fraudulent purchases. 

The following cards have a zero-liability policy:

• Visa
• Discover
• American Express
• Mastercard

However, that doesn’t mean you can report fraudulent transactions months or years after they happened. There is usually a 60-day time limit for reporting fraudulent transactions. If you report the transaction outside that time limit, getting your money back will be much more complicated.

To dispute a transaction, you will have to contact the card issuer. Most have online forms you can fill out, but you can also call customer service. It may take them several days or longer to review your report. If they state that you are responsible for the charges, you may be able to file an amendment. 

If you still feel like your case isn’t being resolved responsibly, you can try to reach out to your state’s consumer protection agency or the federal Consumer Financial Protection Bureau. They may be able to offer more assistance. 

No matter how hard your credit card provider works to protect you, there are things you can do to protect yourself. Keep reading for more action items to ensure you’re maximizing your financial digital safety.

1. Regularly Review Your Statements

You should review your credit card statements regularly to spot any irregular transactions. Remember, you may only have 60 days to dispute fraudulent transactions, so you should review your statement every month at a minimum. 

If your eyes glaze over a whole month’s worth of transactions, it may also be helpful to review them weekly or bi-weekly.

If you share a credit card with someone else, you should also have them look at the transactions. It might be a good idea to do it together so you can discuss anything that looks suspicious. 

Statements are issued at the same time every month so that you can set a calendar reminder on your phone.  

You should also review your debit card even more frequently, because there’s a stricter time limit on when you must report fraud. This is another reason it helps to use a credit card for most of your transactions since they’re more lenient about reporting fraud. Set aside time once a week to look at your debit card transactions and confirm everything is OK. If you’re worried about fraud, you can even check your debit card daily to ensure nothing is wrong.

2. Set Up Alerts

Ensure that your credit card issuer and bank have your correct contact information so they can notify you about any strange transactions. Also, if you get a phone call or text from your bank, look at it immediately. This is especially important for debit cards because the window to file a fraud report is considerably shorter.

Sometimes, you can even set a certain dollar limit on transactions for them to call you about. For example, purchases over $100 may require phone or text authorization. Contact your card issuer and ask how to set this up.

If you have banking apps on your phone, consider removing your saved password from them. That way, no one can log in to your account if your phone is ever lost or stolen. You can do this on laptops, tablets, or other portable devices.

3. Use Secure Websites

Before buying something online, check to see that the website’s URL has HTTPS in it, not just HTTP. HTTPS means there is an extra layer of security, and it has become the gold standard since 2018. 

Also, beware of using public wifi, like at the airport or coffee shop, when giving out your credit card information. Public wifi is not nearly as secure as private wifi, and you’re much more likely to have your information stolen than if you’re on private wifi.

Yes, it can be annoying to avoid certain sites while you’re on public wifi, but you’ll thank yourself later. 

4. Create Strong Passwords

When you shop online, you should be careful about using the same passwords. It’s always best to use a unique, strong password for every online account you have.

Keeping strong passwords can prevent you from having your account hacked. Don’t recycle the same strong password — that makes it weaker because it’s more likely to be stolen.

You can use a service such as LastPass to store your passwords so you don’t have to remember dozens of different passwords.

5. Keep Your Cards Safe

One of the best ways to prevent credit card fraud is to keep your physical cards safe. Make sure they’re secure in your wallet or purse.

Also, don’t easily give out your personal information, such as your PIN or zip code. 

You should also be aware of which cards are in your wallet. For example, if you have seven cards in your wallet and you lose one, it could take you time to notice. Write down which cards you are carrying and keep this record somewhere safe. Consider limiting which cards are in your wallet. 

Choose a wallet that holds your cards firmly — this can also prevent someone from stealing them. You can even buy a special wallet that blocks RFID scanners, which can also effectively prevent fraud.

6. Notify Your Bank Immediately If Something’s Amiss

Once you think fraud may have occurred, you should call your bank immediately and tell them to put a hold on your card. 

If you share a credit card account with someone else, ask them immediately if they made the purchase. If they didn’t, you should contact the credit card issuer immediately. They can freeze the card and send a replacement immediately. If it’s a card you use frequently, you can ask them to expedite shipping. 

If you left the card somewhere, it may make more sense to cancel it and request a new one. Even if you think you can get the card back, you never know how long it will take — and if someone may use your information.

7. Freeze your Credit

If you’re worried about your personal information being stolen, you can freeze your credit to prevent theft. Freezing your credit doesn’t stop your credit card details from being out there, but it stops anyone from opening a new account in your name.

You must freeze your credit with all three credit bureaus — TransUnion, Experian, and Equifax. The credit bureaus don’t communicate, so you have to freeze your credit separately.

Freezing your credit is completely free. You can also thaw your credit at any point if you’re ready to apply for a loan or credit card.

Credit cards typically have better fraud protection than debit cards. If a fraudulent transaction happens on your debit card, you may be responsible for the entire transaction amount. Also, the window to report fraud is much smaller. If you report the fraud within two days, your maximum liability is only $50, but if you wait between two and 60 days, your maximum liability is $500.

Try to choose a card with a zero liability policy for fraud. This ensures that no matter what happens, you won’t be liable for fraudulent charges you report promptly as long as you stay on top of your transactions.