How Your Credit Card Can Fight Back Against Fraud

We’ve all heard the saying that money can’t buy happiness, but try telling that to scammers. Unfortunately, fraud is on the rise, but what do credit card issuers do to protect their users from this alarming trend? Let’s talk about it.

Major card issuers implement fraud-fighting tactics as a method of preventing fraud. Here are the most commonly used ways that consumers should be familiar with.

EMV Chip - Most card issuers are releasing plastics with an EMV chip embedded into the card. This chip allows for storing encrypted data, making it extremely difficult to clone. In addition, it works by generating a unique code associated with that single purchase rather than transmitting the card details via the mag stripe. 

AI Fraud - Automated fraud detection is commonplace amongst financial institutions and card issuers. This service filters transactions through a series of triggers to help identify attempted fraud and stop it before a loss occurs. In addition, these tools can assist in recovering funds on behalf of the institution.

Security Code – Do you ever wonder what the three or four-digit code is on the back of your card is for? This is your card’s built-in security feature. Transactions where the card details are entered manually or stored and verified will often request the security code on the back of the card before the transaction can be processed.

3DS - 3D Secure is a cooperative effort between the merchant, network, and issuer that uses a PIN or password to authenticate the user – one-time codes are assigned to a purchase when an attempt seems suspicious.

Fraud Alerts – I cannot speak more highly of automated fraud and purchase alerts. These customizable notifications alert you when a transaction meets your trigger criteria, which can include purchases exceeding a specific dollar amount, purchases made when the card is not present, and international purchases. In addition, large issuers offer their own alerts.

Credit Card Freeze – If you have a card, you probably have an app, or at least you have access to lock the use of your card. Use your institution’s credit and debit card lock feature to prevent card use between your purchases. In most cases, this is as simple as toggling a button.

Credit Report Freeze – Okay, I admit this is not specifically a fraud measure for credit cards, but it is an effective tool to help prevent identity theft. Placing a freeze on your three credit reports is easy and free. Best of all, when you want to apply for credit, you can pause the freeze long enough for the creditor to pull the report, then put it back in place immediately, leaving you in complete control over any inquiries to your credit. If an attempt is made to pull credit with the freeze, it will not go through, leaving scammers with no recourse to applying for debt in your name. Just make sure you remember to unfreeze it before you apply.

While nothing is ever completely foolproof, you can rest assured that your credit union, bank, or issuer is doing what it can to help fight against fraud. The methods used will continue to evolve as fraud tactics do the same. Your best bet is to become aware of what your cards offer and how you can work with your institution to strengthen your fraud defenses.

Do you have questions about the items discussed in this post? I want to hear from you. Leave a comment below or email me.

 Krista Kyte is a personal finance blogger and personal banker with over 20 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that help consumers reach and maintain financial security and start living the life they’ve always wanted.