Reports of identity theft and credit card fraud have skyrocketed in recent years. To best protect your credit, it’s important to understand the main sources of credit card fraud in the U.S. and how they have changed over time. When armed with the facts, you can turn the fear of fraud into knowledge that can keep you safe from becoming a victim.
This annual study highlights the growth of credit card fraud from various sources, the cost of fraud to consumers, businesses, and the government, and tips to stay safe from fraud.
- Government documents and benefits fraud jumped 3,883% between Q1 and Q4 2020 according to the FTC. With over 235,000 reports in Q4 alone, this type of fraud overtook credit card fraud as the most common type of identity theft. The data coincides with a year stricken by a pandemic and filled by those affected by unemployment.
- The same FTC report shows credit card fraud continues to be one of the fastest-growing forms of identity theft. Reports of credit card fraud jumped by 107% from Q1 2019 to Q4 2020. To put this rapid growth in perspective, the number of card fraud reports between Q1 2017 and Q1 2019 grew by only 27%. The opening of new credit card accounts was the second-most reported type of credit card fraud in 2020, with 393,000 cases reported. This is an increase of 60% from 2019’s 246,000 cases reported.
- Using funds recovered in fraud cases, the FTC returned $483 million to victims of fraud and identity theft in 2020, an increase of 108% from 2019’s $232.2 million. In total, the FTC has returned an astonishing $11.1 billion since July 2018 to consumers who were victims of some type of fraud. The FTC cannot always get back every dollar lost by victims, and cannot always get money back in every lawsuit they file with fraudsters. Even with refunds, consumers can find themselves footing part of the bill when it comes to fraud and scams.
The Cost of Fraud
Fraud and identity theft are not only costly to the victims, but also to banks and payment networks that issue refunds to consumers. Government agencies, such as the FTC, also expend significant resources to investigate and litigate fraudulent companies so that victims can recover some or all of their money.
The amount of money lost by victims can vary greatly depending on the method of fraud, the creditworthiness of the victim, and even the age of the victim. In 2020, victims aged 80 and over only accounted for only 18% of reported cases that involved a dollar loss, but lost an average of $1,300 per case, the highest average of any age range.
The highest percentage of total fraud reports, 18%, came from those aged 60 – 69. This age range lost a total of $290 million to fraud and identity theft in 2020 alone, the highest total for any age range. Aging populations should continue to stay alert as they shop online or answer the phone.
The cost to fraud victims is not only the immediate financial loss — victims of fraud and identity theft could also be stuck dealing with inaccurate credit reports and tarnished credit scores, loss of time dealing with creditors and agencies while trying to clear their names of fraud, and frustration in having to place additional security measures on credit reports to prevent further damage.
Mitigating the cost of fraud
When fraudulent charges appear on your credit card, you can file a dispute with your card issuer. Fraud on credit cards is regulated by the Fair Credit Billing Act (FCBA) and caps the liability for cardholders at $50. Most credit card issuers go above and beyond by offering zero liability for the cardholder, meaning the issuer will refund the entire amount of a fraudulent charge.
This differs from fraud reported on a debit card, which could leave the cardholder on the hook for more money. Debit card fraud is regulated by the Electronic Funds Transfer Act, and fraud victims could be liable for between $50 and $500 of the fraud amount, depending on how soon they report the fraud. Many banks will also go above and beyond by covering 100% of fraud, but it’s important to know the difference between debit and credit cards when it comes to fraudulent transactions, because these situations may be handled differently.
Staying Safe From Fraud
The FTC’s data demonstrates the importance of following best practices to keep your identity and card information safe. With new accounts making up such a large percentage of credit card fraud reports, it’s important to guard the information that can be used to open a new account, including your:
- Social Security number
- Annual income
- Cost of rent or mortgage
- Other personal information such as date of birth, credit freeze PINs, etc.
Going beyond protecting yourself from new account fraud, it’s important to be aware of common scams to capture your existing payment information to be used fraudulently.
Card skimmers on websites and in person can give a thief your card number and information, allowing it to be used for online purchases or cloned onto a physical card. Phone scammers may pretend to be a government agency or even your bank, demanding payment information to settle a debt or asking for your card information to “secure your account.” Even if the caller ID says it’s a legitimate agency, you shouldn’t give out information to anyone over the phone, especially on an unsolicited phone call.
Scammers may also send fake emails to you in order to get your login information to important sites such as your bank or an online store like Amazon. If you can, turn on two-factor authentication and never give a security code out to another person.
The most prevalent types of fraud from 2020 and in 2021 include:
- Social Security scams
- Imposter IRS scams
- COVID-19 vaccine and relief scams
- Phishing scams
- Fake check scams
- Healthcare.gov posers
- Job offer scams
- Rent or mortgage relief scams Harnessing Modern Security Technology
The FTC announced and released a new fraud reporting tool in October 2020. If you experience any type of fraud or identity theft, please report it to the FTC.
Some card issuers are offering modern solutions to online card security. Virtual credit cards, also called virtual account numbers, are unique credit card numbers that you can use to protect your actual account information. When you use your credit card number online, a virtual credit card can prevent a thief from getting your actual card information. Even better, some virtual card numbers are one-time-use, so even if a thief were to obtain the card number, it wouldn’t be a carte-blanche to rack up debt in your name.
The following issuers offer virtual credit cards:
- Capital One
- Apple Card
With online fraud so prevalent, tools such as virtual card numbers can help keep you safe. You can also use a payment service such as PayPal, which pays the merchant directly and offers fraud protection on many transactions. If a transaction ends up being fraudulent, you can dispute it with PayPal, and the fraudulent merchant won’t have access to your actual payment information.
Monitoring your credit
Whether you’ve already been a victim of identity theft or you just want to be proactive about staying safe from fraud, it’s a good idea to keep an eye on your credit. You can obtain one credit report from each bureau once per year for free thanks to the Fair Credit Reporting Act. When checking your reports, look for errors or accounts that you don’t recognize.
A handful of credit card issuers and other services offer free credit scores. If you notice any unexpected changes in your credit scores, you can look into your reports further to see if any fraud has occurred.
Education is fundamental
First, while security technologies are evolving, fraud tactics are responding in kind, as highlighted by ever-growing fraud numbers. Learn about fraud as it evolves over time. The red flags that signal fraud will change as security measures advance and identity thieves change their tactics to keep up.
Staying educated also means you should be taking advantage of the security features offered by your financial institutions. Check with your card issuer to see if they offer features you’re missing out on, such as two-factor authentication at login or a virtual credit card number. Finally, it’s important to know when something’s wrong by knowing what your accounts should look like. Check your account statements often and pull your credit reports on a regular basis.
Online fraud is a real threat
Data trends show a high amount of online fraud, which may necessitate a change in approach to how consumers navigate the web as a whole. As you learn about the newest online fraud techniques and understand how to spot them, you might consider changes to your behavior online. Choosing secure, unique passwords is a good start. Stick to well-known sites that you trust, and remember that if a deal seems too good to be true, it just might be.
Ranked: Identity Theft Reports by State and Percentage Increase From 2019
|State||2020 Reported Cases||Percentage Change From 2019||State||2020 Reported Cases||Percentage Change From 2019|
|Rhode Island||12,621||1002.27%||New York||67,202||84.93%|
|North Dakota||1,266||182.59%||New Mexico||3,454||65.42%|
The Short Version
- The highest percentage of total fraud reports, 18%, came from those aged 60 – 69
- When fraudulent charges appear on your credit card, you can file a dispute with your card issuer
- Fraud on credit cards is regulated by the Fair Credit Billing Act (FCBA) and caps the liability for cardholders at $50