Using a credit card for your daily purchases is convenient, but it comes with certain risks. Retail data breaches have set many consumers on edge, with 69% reporting that they frequently or occasionally worry about getting hacked, according to a 2014 Gallup poll.
Getting informed about credit card fraud is the best way to conquer the fear. Here’s what you need to know to keep your plastic secure and your mind at ease.
1. Credit cards are a very safe way to pay.
Credit cards offer a panoply of safeguards that make them possibly the safest way to pay for goods and services. Technology plays a part, with ever-evolving encryption strategies making it harder for crooks to access your credit card data. But federal law also puts strict limits on consumer liability for fraudulent purchases. So unlike with cash or debit, a lost or stolen credit card doesn’t represent an actual loss of funds.
What’s more, credit card fraud isn’t nearly as common as media reports might lead us to believe.
“Fraud is not out of control,” says Mark Nelson, senior vice president of risk products and business intelligence at Visa. Nelson adds that global fraud rates are “at near historic lows,” and that even when a widespread data breach occurs, only 2% to 5% of card data collected will go on to be used in fraudulent transactions.
Bottom line: It’s unlikely that your credit card information will be compromised, and even if it is, the risk that you’ll be victimized by fraud is remote.
2. Every time you swipe, your transaction is being assessed for fraud.
You may not know it, but the payment network that your card operates on is scrutinizing every transaction made with the card to determine the likelihood that fraud is occurring.
“Every time the consumer uses a Visa card, we analyze up to 500 different data points to help determine if [the purchase] is suspicious or not,” Nelson says. This involves examining everything from geographic patterns in where you make purchases to your personal transaction history, and it happens in “a matter of milliseconds,” Nelson says.
The same goes at MasterCard. “In most cases, these systems are running without the consumer ever even knowing,” says Carolyn Balfany, senior vice president of product delivery, EMV for MasterCard. Balfany describes complex fraud-detection system analyzing the data, and notes that MasterCard is looking at both your individual transaction history and patterns of fraudulent activity across multiple accounts to determine the riskiness of your transactions.
Both Nelson and Balfany made it clear that although payment networks are involved in fraud detection, they leave it to issuing banks to alert consumers to possible fraud. That’s why you’ll hear from your issuer — as opposed to Visa or MasterCard — if there’s a questionable purchase on your account.
3. EMV is just one piece of the security puzzle.
EMV credit cards will start becoming the norm in the United States in October. These “smart” cards are often touted as a silver bullet against fraud, but while effective in some cases, they’re far from a total solution.
EMV provides strong protection against the most common variety of fraud, known as counterfeit fraud, Balfany says. This type of fraud occurs when hackers break and “skim” credit card data from retailers’ terminals. Typically, they go on to sell credit card numbers on underground markets.
But EMV won’t protect against the physical theft of your credit card or fraud that occurs online. “Payment security is about a series of ‘and’ statements, not ‘or,’” Balfany says. Her message: EMV and other strategies are needed to keep us truly safe. Many of these are coming, so EMV may not be the pinnacle of increased credit card security — it’s likely just the beginning.
4. It’s wise to be extra vigilant with certain types of transactions.
When it comes to counterfeit fraud, one of the easiest ways for fraudsters to collect consumers’ credit card information is by installing skimming devices at unattended payment terminals. Anywhere that you use your card without a store clerk present, you should be especially careful.
“We see continued skimming of cards at gas pumps and ATMs,” says Doug Johnson, senior vice president of payments and cyber security at the American Bankers Association. The risk of having your credit card information compromised at one of these locations is still low, so the convenience you’re losing by going into the gas station or bank to transact probably isn’t worth changing your routine.
But it pays to take a quick peek at a pump payment terminal or ATM before dipping your card. If you see something unusual — like a piece of plastic installed over the terminal, for instance — don’t use your card and tell a gas station or bank employee immediately.
5. Using your credit card online is generally safe — but don’t get complacent.
Just like with in-store card purchases, online transactions are getting safer. Advancements in how credit card payment information is protected as it passes through e-commerce channels is part of the reason, with tokenization as one of the gold standards in keeping your data safe.
Tokenization substitutes your card number for a unique number that’s almost impossible for crooks to unmask. “Tokenization not only limits exposure, but also enables more rigorous identification features, such as a fingertip or picture of your face, (as opposed to a pin number or signature),” Wired reports.
However, don’t get careless about giving out your credit card information online. You should only shop with reputable sites, and look for the signals that the site is secure before typing in your payment digits. Not sure how to tell? Look for “https” in a site’s URL.
6. You are never liable for unauthorized charges.
The Fair Credit Billing Act states that consumers are responsible for paying a maximum of $50 in the event that fraud safeguards fail and unauthorized activity shows up on their accounts. But a NerdWallet analysis concluded that every major credit card issuer in the United States provides for zero liability, meaning that if you have a card from one of these banks, you won’t have to pony up for fraudulent purchases at all.
It’s a hassle to unravel the work of a credit card crook, but at least you won’t be out any money.
7. You can play an active role in your own credit card safety.
Credit card issuers and networks are working hard to keep you safe from fraud, but you can also take steps to keep yourself safe. “Consumers should leverage their Internet banking platforms,” says Johnson, of the American Bankers Association. He recommends checking online credit and debit card accounts frequently, and reporting suspicious activity if you spot it.
Johnson also says it’s important to keep your credit card in your possession whenever you can; he doesn’t advise giving a card to friends or family members to make a purchase on your behalf.
Nelson from Visa says that setting up transaction alerts can help consumers become aware of fraudulent activity quickly. Text and email messages that tell you when and how your card is being used can give you an early warning that something might be amiss.
Finally, be smart when sharing information online. Never provide credit card information over social media or email, and only shop with secure sites. You’re probably not the target of a fraudster right now, so do all you can to avoid turning yourself into one.
Image via iStock.