How Credit Card Frauds Are Caught (2024)

Jason SteeleUpdated September 19, 2022

Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

What Is Credit Card Fraud?

Credit card fraud is the unauthorized use of your credit card or account information to make purchases. There are two main types of credit card fraud:

In-person (or card-present) fraud. This is when someone steals your physical credit card or creates a counterfeit card with your account information and uses the card in person at a store.
Remote (or card-not-present) fraud. This occurs when someone uses your credit card account information to make a purchase from a remote location, such as online, over the phone, or by mail.

The increasing use of EMV chip cards has made it harder for criminals to engage in credit card skimming, a scam that involves adding a device to a credit card scanner that transmits the card data to a nearby mobile device. The data is then used to make a counterfeit card.In the digital age, credit card scams often happen via phishing. This is when thieves try to get account information (including your security code (or CVV) from you via email or over the phone. For example, you might get an email that looks like it's from your financial institution. It might direct you to a website where you will be asked for your card information. Or, the message may ask you to click on a link that then adds spyware to your phone or computer.Credit card fraud also commonly happens via hacking, which is when a business that stores your card information gets hacked and your card information is stolen in a data breach.Recommended: How Credit Cards Work

How Are Credit Card Frauds Caught?

Once you alert your bank or credit card issuer about unauthorized transactions, they will typically block the card, send you a new one, and begin a fraud investigation.This type of investigation typically involves contacting the merchant that charged your card to get more details about the transaction, including a timestamp, IP address, and location data. If it was made in person, they may ask for relevant security camera footage. They will also look for patterns, which can often help identify a thief. They may then file a police report for further investigation.

How Often Do Credit Card Frauds Get Caught?

Unfortunately, less than 1% of credit card cases are solved by the police. Unless a family member stole your card information, it’s fairly rare that credit card thieves are caught.One reason is that many fraudsters use anonymous services and advanced technology that make it difficult to track them down. Another problem is that victims of credit card fraud typically don’t bother to report it to the police. They simply report it to their bank. While the bank will launch an internal investigation, they might not make a police report if the amount is not high, since they likely have insurance to cover the loss.Even if the bank does report the fraud to the police, it may not go anywhere. Due to limited resources and the smaller amounts typically stolen in fraud cases, police generally don’t dig very deeply into these cases.

How Do Credit Card Companies Investigate Fraud?

In most cases, credit card fraud investigations are handled by the card’s issuing bank, not the card network (such as Visa or Mastercard). Once a customer makes a complaint, the bank will likely closely examine the transaction details. It will gather any relevant information to determine if fraud took place and, if so, who will pay for the fraud.This type of investigation will usually include looking at:

Transaction timestamps This reveals when the buyer made the purchase.
IP address If the IP address doesn’t match that of the cardholder, it can suggest fraudulent activity
Geolocation data This can help pinpoint where the buyer was located when they made the purchase.
Buying patterns Here, the bank is looking to see if the purchase appears outside of the cardholder’s typical pattern. For example, is this something they would typically purchase?
Account activity The bank will look at whether the charge was a single incident or if there were several unauthorized transactions tied to the cardholder’s account.

If the bank determines that the charge was fraudulent, they may choose to contact the authorities. If there are signs suggesting a larger pattern — particularly if it crosses state lines — they may choose to report it to the U.S. Federal Bureau of Investigation (FBI). Generally, however, the bank will handle the situation through their internal fraud team.In cases of fraud, the cardholder’s liability is limited to $50 for a credit card transaction by law. Many banks, however, offer zero liability if the unauthorized charge is reported within 30 days.Recommended: How Credit Card Payments Work

What Fraud Protection Measures Do Credit Card Issuers Provide?

Preventing fraud is important to credit card companies, as the investigation and disputed charges cost them big money. That’s why credit card issuers often provide fraud protections such as:

EMV chips Unlike traditional magnetic swipe cards, these cards are embedded with a small gold- or silver-colored microchip that makes it harder to copy the information stored on the credit card.
Contactless credit cards Tapping a card or using a mobile device with a digital wallet at the point of sale can be safer than swiping or even inserting your card. Many cards come with contactless payment on the card and are compatible with the digital wallet on your smartphone.
Virtual card numbers These are temporary card numbers that can be created online or through an app that safeguard your real card information.
Card lock This is a feature that allows you to freeze your credit card account from your online account or mobile app so no one is allowed to use it. Card lock prevents anyone from making new purchases, while recurring automatic transactions, like subscriptions, go through.

How Long Does It Take to Catch a Credit Card Theft?

It can take anywhere from a few weeks to several months to investigate credit card theft. During this time, the bank will be in touch with the merchant who made the charge to the card to get more information about the transaction in question.

What to Do if You Are a Victim of Credit Card Fraud

There are a few steps to take if you believe you are a victim of credit card fraud.

Contact your credit card issuer right away. As soon as you notice your card is missing or you see an unauthorized charge, get in touch with your card issuer. They can cancel your card (preventing any further charges) and send you a replacement.
Change your account passwords. Unless your card was lost or stolen, you can’t be sure how the thief got your credit card information. For this reason, it can be a good idea to change passwords to any accounts where your card information was stored.
Add a fraud alert to your credit reports. This will bolster the verification process if someone applies for credit using your identity. When you request an alert with one of the three major credit reporting bureaus, they will notify the others.
Lock (or freeze) your credit report. If you notice multiple credit cards or financial accounts being used without your knowledge, you may want to contact the major credit bureaus to request a credit freeze or lock. This prevents new creditors from accessing your credit report, and, in turn, anyone from opening an account in your name. (However, you’ll need to remember to remove the lock if you want to apply for a new account.)
File a complaint with the Federal Trade Commission (FTC). The FTC will refer your complaint to the relevant authorities and offer resources to get you back on track. Typically, filing an FTC complaint means you don’t need to file a police report.

Recommended: Consequences of False Credit Card Disputes

Avoiding Credit Card Fraud

There are several simple measures you can take to prevent credit card fraud from occurring. These include:

Keeping your wallet and cards secure. Make sure your wallet is safely tucked inside your bag or front pocket, and always check that your card is in your wallet when you come home.
Keeping close tabs on your account. Rather than wait until your monthly credit card statement is issued, it’s a good idea to frequently check activity on the account by going online or using your credit card’s app. This way, you’ll be able to spot (and resolve) any problems right away.
Not carrying all your credit cards at the same time. If your wallet gets stolen, you may forget to call one of the credit card issuers to report the theft.
Never giving your account information to someone who contacts you. If someone calls, emails, or texts you claiming to represent your bank or credit card company, refrain from giving out any personal information. Simply call your bank or issuer directly to see if the query was legitimate.
Setting up account alerts. You may be able to set up alerts for your credit card account, such as getting a text for any online (or “card not present”) transaction, or any transaction that exceeds a certain amount. This can help you spot unauthorized transactions and dispute them right away.
Using a secure connection. Information can be stolen over public Wi-Fi. When shopping online, it’s better to use a personal device and a private Wi-Fi connection.

The Takeaway

Credit card fraud is an unfortunate fact of life. Fortunately, credit card companies and merchants have put a number of safety measures in place, and they will investigate fraud if it does happen. More good news: You likely won't be responsible for any unauthorized charges if you report the card stolen or dispute unauthorized transactions in a timely fashion.When choosing a credit card, it can be a good idea to look for security features like the ability to freeze your account, purchase protections, fraud monitoring, and credit score monitoring. With Lantern by SoFi’s online credit card marketplace, it’s easy to shop around and compare multiple credit card offers matched to your qualifications all in one place.

Frequently Asked Questions

Can I track someone who used my credit card online?

What is the best way to investigate fraudulent transactions on my credit card?

About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

FAQs

How Credit Card Frauds Are Caught? ›

How Do Banks Investigate Fraud? Bank investigators will usually start with the transaction data and look for likely indicators of fraud. Time stamps, location data, IP addresses, and other elements can be used to prove whether or not the cardholder was involved in the transaction.

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Do credit card fraudsters get caught? ›

Some estimates say less than 1% of credit card fraud is actually caught, while others say it could be higher but is impossible to know.

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Can the bank find out who used my credit card? ›

Can they track who used my credit card? Yes. Tracking who used a credit card is often possible, especially if the fraud involved physical transactions at identifiable locations or digital transactions with traceable IP addresses and device information.

How do police catch credit card thieves? ›

There are several ways in which police investigate credit card fraud, including: If the fraud occurred in a brick-and-mortar store, visiting the store and talking to cashiers. Looking through CCTV footage and photo evidence. Tracking credit card transactions and where they originated.

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Who pays when a credit card is used fraudulently? ›

The bank that issues the credit card will cover most credit card fraud issues, but sometimes the bank rules that it is merchant credit card fraud, making the merchant responsible. Small business owners using outdated swipe payment terminals may have to make up for the difference.

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How did someone use my credit card without having it? ›

Card-not-present fraud can occur when a criminal obtains a cardholder's name, billing address, account number, three-digit CVV security code, or card expiration date. These details can be stolen electronically without obtaining the physical card.

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What happens if you lie about credit card theft? ›

Filing a false credit card dispute should never be done; it is credit card fraud and can have consequences like fines, court fees, jail time, blacklisting, and hurt your credit scores.

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Do banks actually investigate unauthorized transactions? ›

Typically, the bank has a team of investigators responsible for investigating suspicious activity that comes up. At a high-level, it involves detecting instances of potential fraud and escalating these cases to investigators who can determine whether it was fraud and, ideally, what type of fraud has occurred and how.

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What happens if you falsely dispute a credit card charge? ›

What happens if you falsely dispute a credit card charge? Purposely making a false dispute is punishable by law and could lead to fines or imprisonment.

Can credit card use be tracked? ›

The smart chip is not a locator system, so the physical location of a credit or debit card cannot be tracked. Also known as an EMV chip, this smart chip embedded on your card creates dynamic data for every transaction, which makes it less likely for criminals to steal or clone your information.

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Can you track someone who used your credit card online? ›

Unlike in-person (or card-present) fraud, there is usually no witness or security camera footage to track or identify the person using the card, so finding the culprit can be significantly more challenging. The first thing you must do once you spot a suspicious transaction is contact your bank.

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What happens if I lost my credit card and someone used it? ›

If there is unauthorized use of your card before you report it missing, the most you will owe for unauthorized charges on the card is $50. Many cardholder agreements say you are not responsible for any charges in this circ*mstance.

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How do I find who charged my credit card? ›

Go online and try searching the merchant name exactly how it's recorded in your statement to see if you can identify who they are. This can help if the merchant name is abbreviated or if they're using the name of their parent company.

Get More Info Here ›

What happens when someone uses your card fraudulently? ›

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.

What is the punishment for credit card scamming? ›

The penalties for credit card fraud in California can vary depending on the circ*mstances and severity of the case. On the low end, it is a year in county jail and a $1,000 fine. On the high end, it is punishable by up to three years in county jail and a $10,000 fine. Credit card fraud is also a federal offense.

Is it a crime to use a credit card you found? ›

Is using someone else's credit card for your own purposes illegal? Yes, it is indeed unlawful. Under federal and state law, fraudulently using someone else's credit card or making purchases with their account without permission could have serious legal consequences.

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Can you go to jail for using a credit card you found? ›

Penal Code § 484g PC makes it a crime to use a credit or debit card to obtain goods, services or money when you know the card to be fake, forged, expired, invalid, or belonging to someone else. This offense can be charged as a misdemeanor or a felony and carries a penalty of up to 3 years in jail.

What is the sentence for credit card scamming? ›

shall be fined not more than $10,000 or imprisoned not more than ten years, or both.

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Can cloned cards be traced? ›

While it is possible to trace clone card transactions, it is always better to prevent fraudulent activities from happening in the first place. To prevent the use of clone cards, various measures can be taken.

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What happens if you buy something with a stolen credit card online? ›

You, the consumer, typically aren't liable for credit card fraud, but someone pays the tab. So who foots the bill when a thief uses your credit card or its number to illegally buy stuff? The short answer is it's typically the merchant where you bought something or the bank that issued the credit card.

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