Credit Card Fraud and Identity Theft Aren’t the Same, but We Hate Them Both

Angry businessman in cafe on the phone
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Honest Abe

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I’ll admit it. I got suckered.

I got phished and fell for it.

It was about 10 years ago, and these scams weren’t commonplace just yet. I responded to what looked like an email from my bank verifying my PIN.

Dumb move. My rent money was taken out of my account at an ATM in Romania. Seriously. Luckily, my bank was great about handling it, and it was all resolved.

I told everyone that I had been a victim of identity theft and even went on the local TV station to talk about it. Phishing scams were a relatively new concept back then.

I was wrong. It wasn’t identity theft. It was credit card fraud.

Potato? Potahto? Actually, no. Credit card fraud and identity theft are two different crimes, and the difference is significant. Here’s what you need to know.

Credit Card Fraud Is a Form of Identity Theft

Technically, credit card fraud is one type of identity theft. Legal Dictionary defines credit card fraud as “the unauthorized use of an individual’s credit card or card information to make purchases, or to remove funds from the cardholder’s account.”

That means some shady character has gained access to one of your accounts through a stolen card, account number, PIN or anything else that lets them access your account.

Those card skimmers at the gas pumps are a prime example of how credit card fraud occurs. The skimmers steal your card information when you swipe your card for fuel, then the fraudster sells that information on the darknet or uses it to take or spend money from your account.

A simple way to remember the difference between credit card fraud and identity theft is that credit card fraud involves one account getting compromised.

How to Prevent Credit Card Fraud

There’s no surefire way to prevent all credit card fraud unless you want to go back to only using cash or trading chickens. There are, however, some ways to minimize your risk.

  • Keep your credit cards in a safe place. Keep them in a wallet or purse that’s close to you at all times outside of your home.
  • Shred your credit card bills and unwanted bank statements. Basically, shred anything with your account numbers on it.
  • Do not give your card or account information over the phone unless you initiated the conversation. If you called your favorite store, fine, but if the store called you, how do you know it’s legit? You don’t.
  • If you’re worried about gas pump skimmers, first look for the small seal that shows that the pump panel has not been opened. Then use the “credit” option on your debit card. Never type in your PIN. Even safer, prepay inside the store for your gas.
  • Never give out information via email. Phishing scams are everywhere. Keep in mind that your bank or credit card company will never ask you for your PIN. Also, that prince in Nigeria does not actually have millions of dollars for you. Don’t give him anything.

What to Do if You’re a Victim

If you discover that one of your bank or credit card accounts has been compromised, take action right away. The sooner you react, the better chance you have of saving your money.

  • If you have a card that lets you freeze it easily from your phone or a computer, do it right away.
  • Keep a close eye on your statements for the account in question. You’ll want to look for any new charges you did not make.
  • Call your bank or credit card company and let it know about the issue.
  • Report the theft to the police. They likely won’t do much to help, but having that report could help you get your money back from your bank or credit card company. In any case, it won’t hurt.
  • Change your online passwords. You don’t know exactly what information the bad guys have. You want to change your passwords occasionally anyway. (But not too often.)
  • Call one of the three national credit reporting agencies, Experian, Transunion or Equifax, and file a fraud alert. If you do this with one of the companies, it will automatically alert the others. No need to call all three.
  • File a complaint with the Federal Trade Commission. Like the police report, this can help as you try to clean up the mess.

Identity Theft Goes Beyond a Single Account

While credit card fraud is the compromising of one account, identity theft occurs on a broader scale. Identity theft is defined by Legal Dictionary as “the act of stealing another person’s personal identifying information in order to gain access to his financial resources, or obtain access to other benefits, such as money, credit, or insurance benefits.”

In other words, the bad guys have your personal information and can use that to gain access to your accounts, open new accounts or even take out loans in your name.

Or perhaps someone uses your identity to conceal their illegal actions. Maybe they need medical help and don’t have insurance, but you do.

There’s even a problem in the U.S. with child identity theft.

Scary stuff.

If you are getting phone calls or bills in the mail about debts you know nothing about, don’t simply dismiss them. Look into the charges and see if someone is using your information.

How to Prevent Identity Theft

Identity theft uses your personal information against you. That means you need to take steps to protect that information from others who might want to use it for their own gain. Here are a few tips.

  • We recommend using a free site like Credit Sesame to keep tabs on your finances. It’ll send you an alert by email or text if someone tries to apply for credit in your name. Plus, it offers $50,000 of identity theft insurance and fraud assistance if someone does steal and use your information.
  • Protecting your Social Security number is crucial. Keep your Social Security card in a safe place and don’t carry it with you. If you happen to lose it, the card could easily fall into the wrong hands. Also, only give out that number when it’s absolutely necessary.
  • Never respond to unsolicited requests for your personal information. Whether it’s a phone call or email, always be wary. If your bank contacts you asking for information, politely decline. Then, call your bank directly and let it know about that phone call or email. Same for any other contacts.
  • Shred all unneeded documents that may have your Social Security number or other personal information on them. When in doubt, shred it.
  • Be smart with your online passwords. Keep them varied and difficult to guess.
  • Order a copy of your credit report. The law requires each of the three credit reporting agencies to provide you with one free copy of your report each year. Look for any old accounts that could be removed or ones you do not recognize.

What to Do if You’re a Victim

The steps to prevent and repair identity theft are largely the same as those for credit card fraud, but there are a few added measures.

  • Find and close any new accounts opened in your name. When you report the fraud to a credit bureau, it should be able to tell you what new accounts have been opened.
  • If you think your Social Security number was compromised, report it to the Social Security Administration.
  • If your driver’s license was stolen or compromised, report that to your nearest Department of Motor Vehicles. You may need to get a new one.
  • Suddenly have a police record for no reason? You may have to clear your name of wrongdoing. It won’t be fun or easy, but you can’t ignore it. Call your local law enforcement agency to start the process. You may want to seek counsel from a lawyer first.
  • Keep a close eye on your mail for any other solicitations for payment. School loan notices, medical bills, even letters from the IRS could be signs that you have more issues to address.

The easiest way to get started is to go to identitytheft.gov and report your identity theft case. The site will walk you through all of the steps you need to get the situation fixed.

Protect Your Identity and Your Credit Score

It’s a scary time for these kinds of crimes. We’ve become an increasingly digital society, and our information is out there for the taking. I mean, when one of the three major credit bureaus leaks your information, you know things are bad.

What can you do? Your best bet is to simply keep close tabs on your accounts and passwords, and be smart when you shop online.

If you really want to protect yourself, you can pay a credit monitoring company to alert you if anything looks amiss. Some of them can also help you recover from identity theft.

Credit card fraud and identity theft happen. They’re not the same thing, but they both suck. A bit of diligence now can save you a lot of headaches later.

Tyler Omoth is a senior writer at The Penny Hoarder who loves soaking up the sun and finding creative ways to help others. Catch him on Twitter at @Tyomoth.

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Honest Abe

Disclosure:

Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.