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Updated on Monday, May 2, 2016
Credit card fraud regularly steals the headlines and scares us. From big data breaches (like Home Depot and Target) to regular warnings from credit card companies, fraud seems to be constantly around us and in the news. However, a recent national survey conducted by MagnifyMoney, along with Google Consumer Surveys, shows that although the incidence of fraud is indeed high, most people who experienced fraud have never lost a dime. Credit card companies are promising $0 liabilities for fraud, and according to our survey, they seem to be delivering.
Here are the key findings:
- 22.1% of consumers have experienced credit card fraud.
Account take-over is the most common form of fraud. 93% of all fraud is account, not identity take-over.
- 96% of consumers never had to pay a dime. The credit card company took care of the fraud an absorbed any financial loss.
- Consumers were very satisfied with the service received during the fraud. 94.2% of consumers polled said that the service was excellent (72.9%) or good (21.3%).
Although fraud does occur frequently, the financial impact on consumers is limited.
Nick Clements, the Co-Founder of MagnifyMoney (and a former Risk Director who ran fraud departments of credit card companies) noted:
The risk of credit card fraud continues to increase, and consumers need to remain vigilant. However, our approach to fraud needs to change. We need to recognize that fraud will probably happen to us at some point, and preventing fraud completely is out of our hands. All it takes is a crooked bartender or a breached megastore and we are at risk. More importantly, we need to focus on early detection and reporting of fraud to our credit card companies. Because of the $0 liability promised by most credit card issuers, a fraud that is reported on time should cost the consumer nothing. Our effort should be focused on early detection and rapid reporting of any credit card fraud. The good news: there are plenty of tools out there (most of them free) that can help consumers detect fraud early and avoid financial loss. Despite the many grim headlines, credit card fraud should not be one of our biggest worries.
The Difference Between Account and Identity Take-Over
An account take-over occurs when a fraudster steals the details or the actual plastic of an account that is already open. The fraudster will then use that information (or card) to start making purchases. This is the easiest type of fraud to fix: just close the account and re-issue the card with a new number. And that represents 93% of all fraud committed, according to this survey.
A more difficult type of fraud to deal with is identity take-over. This occurs when your Social Security and other personal information is stolen, and the fraudster starts opening new accounts in your name that you don’t know about. You can try to prevent that type of fraud by ensuring that you protect your Social Security number. You can detect that type of fraud by signing up for a credit monitoring service and keeping a regular eye on your credit report. If you do end up becoming an identity theft victim, you should use IdentityTheft.gov, a government website, to manage the process. (Note: If you sign up for a credit monitoring service, you would likely have access to an identity theft case management team who will help you through the process).
Account take-over is the most common form of fraud. But it is also the easiest to resolve.
- Identity take-over is much more difficult to deal with, but does not happen as often. You need to pro-actively monitor your credit to ensure you are aware of a potential breach.
Chip & Signature: And Who Does It Help?
Millions of Americans have been receiving new credit cards with chips, for increased security. In our survey, 86% of Americans now have some or all of their credit cards with chips. However, chips exist to protect the banks rather than the consumers. The fraud liability is with the banks, not the people using the credit cards (so long as the consumer reports any fraud on time). Chips will help to reduce some fraud in physical stores. But it is not useful for online and mobile commerce, where the physical plastic is not used.
In addition, there have been many complaints about the increased transaction time of chip cards. 20% of those surveyed complained that chip cards are “painfully slow.”
What Can A Consumer Do?
MagnifyMoney has published a free Credit Monitoring and Identity Theft Guide. This guide can help you create a strategy to reduce the risk of identity theft happening, to identify fraud as soon as it does happen and to make it as easy as possible to resolve any fraud that does happen on your account.
And make sure you check you statements regularly. In our survey, 34.3% of consumers found out about the fraud by looking at their statement. With more and more people signing up for e-statements, it is too easy to ignore the details. But consumers need to stay vigilant and remember: so long as they catch it and report it quickly, they should have nothing to worry about.
This survey was commissioned by MagnifyMoney and conducted by Google Consumer Surveys. 3,496 people nationally were questioned via the internet and their mobile phones. Of those sampled, a nationally representative sample of 594 people who had experienced credit card fraud were given the questions referenced in this article. You can read more about the methodology of Google Consumer Surveys here.