Credit Card Fraud Vs. Identity Theft — How to Know the Difference
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Credit card fraud and identity theft. These are two terms you have probably heard before and, if you’ve been unlucky, two crimes you may have fallen victim to yourself.
However, credit card fraud and identity theft aren’t the same. Both may involve the theft of information which belongs to you, but one is much easier to stop and to recover from.
Here’s a look at how credit card fraud and identity theft are different. Plus, I’ll throw in some tips on how to recover from these crimes if the bad guys ever get their hands on your personal information.
Credit Card Fraud
Have you ever had a credit card issuer contact you regarding a suspicious transaction you didn’t authorize? Have you ever checked your credit card statement to discover charges you didn’t make? If you can answer yes to either of these questions, you have probably been a victim of credit card fraud.
The FBI defines credit card fraud as “the unauthorized use of a credit or debit card, or similar payment tool (ACH, EFT, recurring charge, etc.), to fraudulently obtain money or property. Credit and debit card numbers can be stolen from unsecured websites or can be obtained in an identity theft scheme.”
Technically, credit card fraud can be classified as a type of identity theft. Yet it isn’t really the same as having your identity stolen.
Sure, it can be troublesome to find out someone stole your credit card information. It can be upsetting to learn that a thief used your account to pay for unauthorized purchases. Credit card theft, however, is typically much easier to stop and to recover from than other forms of identity theft.
See below for tips on how to handle credit card fraud if it happens to you.
Identity theft is a term often used to describe something much worse than a few unauthorized charges on your credit card account. According to the FBI, “identity theft occurs when someone assumes your identity to perform fraud or other criminal acts.”
How do criminals get the information needed to assume your identity? The FBI explains that crooks can get your personal information from a variety of sources including by:
- Stealing your wallet
- Rifling through your trash
- Compromising your credit or bank information
- Approaching you (in person, by telephone, or on the internet) to ask for the information
When someone steals your personal identifying information (e.g., name, address, Social Security number, date of birth, etc.) and uses that info to open fraudulent accounts in your name, this is called true name fraud. When most people say their identities have been stolen, true name fraud is what they are really referring to.
Unlike credit card fraud, true name fraud is a crime that can continue to haunt you for years. Trying to recover from identity theft can be a much bigger ordeal than simply changing your credit card number to stop a thief. Thankfully, there are federal laws designed to protect victims of identity theft.
See below for tips on how to recover from identity theft if it happens to you.
Recovering from Credit Card Fraud
If your credit card is used without your permission, my first piece of advice is to not panic. You are actually well protected from fraud liability courtesy of federal law.
In fact, as long as you report fraudulent charges promptly, you might not be held responsible for them.
Here’s a look at the two federal laws that protect you from credit card and debit card fraud.
- The Fair Credit Billing Act (FCBA)
The FCBA caps your liability for fraudulent credit card transactions to a maximum of $50. Just don’t drag your feet. You must report any unauthorized charges to your card issuer within 60 days to enjoy this protection. As a matter of customer service, all four of the major credit card networks currently have zero-liability fraud policies. This means if you report fraudulent transactions to your card issuer promptly, you’ll probably never pay a dime out of pocket.
- The Electronic Funds Transfer Act (EFTA)
The EFTA caps your liability on debit card fraud to no more than $500 ($50 if you report the fraud within two business days). In addition to higher liability caps, debit card fraud can be more painful for another reason. Unlike credit card fraud, your personal money is stolen when debit card fraud occurs. As a result, the funds in your bank account might be tied up and unavailable to use while your bank investigates any unauthorized activity.
You can see above, debit card fraud protections aren’t quite as strong as credit card fraud protections. This is one reason I’m an advocate of choosing credit cards over debit cards as your payment method of choice (as long as you can commit to pay your balance in full each month).
Recovering From Identity Theft
If someone steals your credit card information, you can report the fraud to your card issuer and the account will be shut down. As long as that thief can’t access your new card number (hint: update your online passwords frequently to be extra safe), the ordeal will be over.
The same isn’t true when your personal identifying information is stolen.
You can’t exactly change your Social Security number and your date of birth to prevent crooks from using your information for their own personal gain. Yet you can make it a lot harder for bad guys to profit using your personal data.
- Place fraud alerts on your credit reports with Equifax, TransUnion and Experian.
The Fair Credit Reporting Act (FCRA) gives you the right to place free fraud alerts on your three credit reports. When you place a fraud alert, it tells lenders they must first contact you to confirm your identity before opening any new credit accounts in your name.
- Freeze your three credit reports.
With a fraud alert, a lender is supposed to ask your permission before opening a new account in your name. This leaves a little room for potential human error. With a credit freeze, on the other hand, new lenders cannot access your reports unless you allow your reports to be seen. (This is accomplished by “thawing” your reports in advance with a PIN code or password.)
- Check your credit reports frequently for signs of fraud.
The FCRA gives you the right to expect only accurate information to be included on your credit reports. It’s up to you, however, to verify that your reports are indeed error- free. If you haven’t claimed your three free credit reports from AnnualCreditReport.com in the past 12 months, that’s a great place to start. Beyond that, I recommend checking your credit reports every month as an added measure of safety.
- Report identity theft promptly.
If you become a victim of true name fraud, report fraudulent accounts to the three credit reporting agencies promptly. You can visit the Federal Trade Commission’s IdentityTheft.gov to make a report. Once completed, send your identity theft report to Equifax, TransUnion and Experian. Per the FCRA, the credit reporting agencies must block fraudulent information from your credit reports within four business days of receiving your identity theft report.
Being Proactive Is the Key
Regardless of whether you’re a victim of credit card fraud or identity theft, it’s crucial to be proactive. You can’t expect your card issuer or the credit reporting agencies to detect fraud on your behalf (though sometimes you might get lucky).
Make a habit of checking your credit card statements and your three credit reports each month for errors, mistakes, and fraud. If you discover suspicious activity, remember that you’re protected by federal law, as long as you report the issue promptly.
Featured photo by Oonal / Getty Images.
Welcome to The Points Guy!
Earn 90,000 bonus miles after you spend $3,000 in purchases within the first three months of card membership. Plus, earn a $200 statement credit after your first Delta purchase within the first three months. Offer ends 7/28/21.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Limited Time Offer: Earn 90,000 Bonus Miles after spending $3,000 in purchases on your new Card in your first 3 months and a $200 statement credit after you make a Delta purchase with your new Card within your first 3 months. Offer expires 7/28/2021.
- Limited Time Offer: Plus, get a 0% intro APR on purchases for 12 months from the date of account opening, then a variable 15.74%-24.74%. Offer expires 7/28/2021.
- Accelerate your path to Medallion Status, with Status Boost®. Plus, in 2021 you can earn even more bonus Medallion® Qualification Miles (MQMs) to help you reach Medallion Status.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA Pre✓®.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees