5 Exploitative Credit Card Scams You Need to Know
Credit cards are valuable to many Americans, as they provide opportunities to build credit and make important purchases when short on cash. However, they’re also the most prominent payment method used in financial fraud and scams. Nearly 200 million Americans own at least one credit card and more than 83,000 of those lost a combined $183 million during the first nine months of 2023 as a result of credit card fraud.
There are many things people can do to protect themselves against credit card fraud, including only sharing card numbers on secure websites (those with a padlock icon near the URL), avoiding public Wi-Fi, and registering for identity theft protection. It’s also helpful to know about the most common types of scams, five of which are listed below.
Skimming
While many of the most common credit card scams involve a fraudster targeting individuals via phone or email, skimming is one that involves point-of-sale (POS) devices, meaning credit card holders should be cautious when using their card in public, especially at unattended payment terminals, i.e. ATMs and gas pumps. Scammers install what’s known as a skimmer, an electronic accessory that records credit card information, on these POS devices. The transaction goes through, but the scammer then has access to the card holder’s information.
Skimmers look as though they’re part of the POS device, so they can sometimes be hard to detect. However, they’re usually easy to remove, whereas official equipment is sturdy. To avoid skimming scams, carefully examine the POS device for visual clues, such as loose components, mismatched colors, unaligned graphics, or tough-to-press PIN pad buttons.
Overcharging
Credit card holders should be skeptical of any cold call or unsolicited text message or email in which the person on the other end is asking for personal information, especially if there has been no prior communication with that person or the company they allege to represent. This is the best advice to avoid various types of phishing scams, one of which involves a promise of a refund for an overcharge of products or services, usually from a common subscription service like Spotify or Netflix.
In an overcharging scam, the scammer contacts a target stating their card had been overcharged for these or other services and states they need their card number and other personal information to push through a refund. Be aware of callers who demand urgency in settling the matter and, in emails, look for grammar or spelling mistakes and compare the body of the message with prior legitimate emails from the company in question.
Interest Rate Reduction
According to the Federal Reserve Bank of New York, combined household debt in the US reached $17.5 trillion in the fourth quarter of 2023. Credit card debt for that period reached a record $1.13 trillion, in large part due to inflation and rising interest rates. Scammers are increasingly taking advantage of this fact, often cold calling people while posing as representatives from credit companies and promising to reduce their interest rates. More than 11,000 people fell victim to an interest rate reduction scheme by E.M. Systems & Services in 2021, with individual upfront charges ranging from $695 to $1,495.
Similar to the overcharge scam, fraudsters initiating interest rate reduction scams will stress urgency by noting their offer is only available for a limited amount of time. While some third-party debt relief businesses do offer this service, they generally don’t cold call consumers nor are they allowed to charge fees prior to reducing debt.
Donation
Fraudsters are also increasingly taking advantage of people’s generosity by leveraging trending issues for donation scams. In this type of cold call scheme, the scammer will typically read from a script that details the issue and explain why it’s important for the person on the other end to support their cause. They’re usually claiming to solicit donations for emergency response following natural disasters, displaced war victims, or children in need, and will ask for credit card information.
These scams can be difficult to detect as many real nonprofits also use cold calls as a means of soliciting donations. The easiest way to avoid these scams is to simply say no and hang up on the caller. Those who wish to make donations to the alleged cause should record information from the caller, including their name and phone number, and look it up on Google to see if it is authentic or has been connected to previous scams.
Arrest Phone Calls
Another common scam involves threats of jail time if the target doesn’t immediately pay off fines, taxes, or other debt. In some cases, scammers will even state there is a warrant out for the person’s arrest, hoping the threat will force them to act quickly and hand out personal information without thinking logically about the situation. In reality, federal agencies or law enforcement will never call people with threats of arrest. Simply hang up and ignore the call.
