Protecting Your Credit Card from Fraud and Theft

Quick answer

• Regularly monitor your credit card statements for unauthorized charges.
• Secure your physical cards and never share your PIN or card details unnecessarily.
• Set up transaction alerts with your credit card issuer for immediate notification of activity.
• Report lost or stolen cards immediately to minimize potential fraud losses.
• Use strong, unique passwords for online accounts linked to your credit cards.
• Be cautious of phishing attempts that try to trick you into revealing sensitive information.

What to check first (before you act)

Credit report accuracy

Before making any changes, it’s wise to ensure your credit report is accurate. Errors can affect your credit score and may mask fraudulent activity. Obtain free copies of your credit reports from the three major bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. Review them carefully for any accounts you don’t recognize or suspicious transactions.

Utilization and balances

High credit utilization (the amount of credit you’re using compared to your total available credit) can negatively impact your credit score. If you notice unusually high balances on accounts you don’t recognize, it could be a sign of fraud. Understanding your current utilization is a baseline for improvement.

Payment history

Your payment history is the most significant factor in your credit score. Fraudulent activity can lead to missed payments if you’re unaware of unauthorized charges. Checking your payment history helps you identify any discrepancies that might indicate a problem.

Recent inquiries

Too many recent credit inquiries can lower your score. While this isn’t directly related to card theft, it’s a good practice to monitor for unauthorized applications for credit in your name, which can be a consequence of identity theft.

Time horizon

How long you’ve had accounts open and your overall credit history are important factors for your credit score. Fraud can disrupt this by leading to account closures or new, unwanted accounts. Understanding your current credit timeline provides context for any necessary actions.

Step-by-step (credit improvement workflow)

1. Obtain Your Credit Reports

• What to do: Request free credit reports from Equifax, Experian, and TransUnion via AnnualCreditReport.com.
• What “good” looks like: You have up-to-date and accurate reports from all three bureaus.
• Common mistake: Waiting until you suspect fraud to check your reports.
• How to avoid: Make it a habit to check your reports at least annually.

2. Review Reports for Unrecognized Accounts or Activity

• What to do: Scrutinize each report for any accounts, transactions, or personal information that doesn’t belong to you.
• What “good” looks like: All information on your reports is accurate and reflects your financial activity.
• Common mistake: Skimming through the report without paying close attention to details.
• How to avoid: Take your time and compare the information against your own records.

3. Dispute Any Errors or Fraudulent Items

• What to do: Contact the credit bureau that issued the report containing the error and the creditor involved to file a dispute.
• What “good” looks like: The incorrect or fraudulent information is removed or corrected on your credit report.
• Common mistake: Not disputing errors promptly, allowing them to persist.
• How to avoid: Follow the dispute process outlined by the credit bureaus immediately after discovery.

4. Secure Your Physical Credit Cards

• What to do: Keep your credit cards in a safe place. Shred old cards before discarding them.
• What “good” looks like: Your cards are always accounted for and protected from unauthorized access.
• Common mistake: Leaving cards unattended or easily accessible.
• How to avoid: Be mindful of where your cards are at all times, especially in public.

5. Set Up Transaction Alerts

• What to do: Contact your credit card issuer to enable real-time alerts for purchases, balance changes, or login attempts.
• What “good” looks like: You receive instant notifications for any activity on your accounts.
• Common mistake: Assuming your issuer offers alerts without confirming.
• How to avoid: Proactively ask your card provider about available alert systems.

6. Monitor Your Credit Card Statements Regularly

• What to do: Review your monthly statements thoroughly for any unfamiliar charges, no matter how small.
• What “good” looks like: You are consistently aware of all transactions made on your cards.
• Common mistake: Only glancing at the total balance without checking individual charges.
• How to avoid: Dedicate time to examine each line item on your statement.

7. Report Lost or Stolen Cards Immediately

• What to do: If a card is lost or stolen, call your credit card issuer’s fraud department without delay.
• What “good” looks like: The compromised card is canceled, and you are protected from further fraudulent charges.
• Common mistake: Waiting to report a lost card, fearing embarrassment or hassle.
• How to avoid: Understand that prompt reporting is crucial to limit your liability.

8. Use Strong, Unique Passwords for Online Accounts

• What to do: Create complex passwords that are different for each online financial account. Consider a password manager.
• What “good” looks like: Your online financial accounts are secured with robust, unique credentials.
• Common mistake: Reusing the same password across multiple sites.
• How to avoid: Use a mix of upper and lowercase letters, numbers, and symbols, and change them periodically.

9. Be Wary of Phishing Scams

• What to do: Never click on suspicious links or provide personal information in response to unsolicited emails, texts, or phone calls.
• What “good” looks like: You can identify and avoid attempts to trick you into divulging sensitive data.
• Common mistake: Trusting communications that appear to be from legitimate institutions without verification.
• How to avoid: Independently verify any requests for information by contacting the institution directly through official channels.

10. Enable Two-Factor Authentication (2FA)

• What to do: Activate 2FA on all financial accounts that offer it.
• What “good” looks like: An extra layer of security is in place, requiring more than just a password to access your accounts.
• Common mistake: Skipping 2FA because it seems inconvenient.
• How to avoid: Recognize that the minor inconvenience is well worth the significant increase in security.

What affects your score (plain language)

• Payment History: Paying your bills on time is the biggest factor. Late payments can significantly lower your score.
• Credit Utilization Ratio: This is the amount of credit you’re using compared to your total available credit. Keeping this low, ideally below 30%, is beneficial.
• Length of Credit History: The longer you’ve had credit accounts open and in good standing, the better it looks.
• Credit Mix: Having a variety of credit types (like credit cards and installment loans) can be positive, showing you can manage different kinds of debt.
• New Credit: Opening many new accounts in a short period can signal risk to lenders and temporarily lower your score.
• Public Records: Bankruptcies, liens, and judgments can severely damage your credit score.
• Number of Accounts: While not a primary factor, managing a reasonable number of accounts responsibly is generally viewed positively.
• Inquiries: Applying for new credit results in a “hard inquiry,” which can slightly lower your score. Too many in a short time can be a red flag.

What NOT to do while improving credit: Avoid closing old, unused credit cards unless there’s a compelling reason (like a high annual fee you can’t justify). While it might seem like a way to simplify, closing older accounts can reduce your average account age and increase your credit utilization ratio, both of which can negatively impact your score. Also, resist the temptation to open multiple new credit cards just to increase your available credit; focus on responsible management of existing accounts first.

Common mistakes (and what happens if you ignore them)

| Mistake | What it causes