Credit card fraud is a form of identity theft that involves an unauthorized taking of another’s credit card information for the purpose of charging purchases to the account or removing funds from it. Federal law, by way of 15 U.S.C. §1643, limits cardholders’ liability to $50 in the event of credit card theft, but most banks will waive this amount if the cardholder signs an affidavit explaining the theft.
Credit card fraud schemes generally fall into one of two categories: application fraud and account takeover.
Application fraud refers to the unauthorized opening of credit card accounts in another person's name. This fraud may occur if a perpetrator can obtain enough personal information about the victim to completely fill out the credit card application or is able to create convincing counterfeit documents. Once the application is successfully processed, the perpetrator will use the new credit card to take out large quantities of cash, leaving the person whose identity was stolen to pay the debt. Application fraud schemes are serious because, while the victim is not responsible for the fraudulent debt, the victim may not learn about the fraud until it has already damaged their credit score or until after they’ve already made debt payments. Because applying for credit cards requires a credit check, regularly requesting your annual credit report from one of the three credit bureaus can help victims of application fraud detect the fraud early on.
Account takeovers typically involve the criminal hijacking of an existing credit card account, a practice by which a perpetrator obtains enough personal information about a victim to change the account's billing address. The perpetrator then subsequently reports the card lost or stolen in order to obtain a new card and make fraudulent purchases with it.
Another common method used to achieve an account takeover is called “skimming.” Skimming schemes occur when businesses' employees illicitly access customers’ credit card information. These employees then either sell the information to identity thieves or hijack the victim's identities themselves.
Technological advances have also created avenues for credit card fraud. With the rise of online purchasing, perpetrators no longer need a physical card to make an unauthorized purchase. Additionally, electronic databases containing credit card data may be hacked or crash on their own, releasing customers' credit card information. These electronic database hacks put the security of many accounts at risk at once.
Federal Fraud Statutes
- 18 U.S.C. § 1341, Mail Fraud
- 18 U.S.C. § 1343, Wire Fraud
- 18 U.S.C. § 371, Conspiracy
- 18 U.S.C. §§ 1001-1036, Fraud and False Statements
- 18 U.S.C. § 1344, Bank Fraud
- 18 U.S.C. §§ 2325-2327, Telemarketing Fraud
Federal Judicial Decisions
U.S. Circuit Courts of Appeals: Recent Decisions Dealing with Credit Card Fraud
New York State Judicial Decisions
NY Court of Appeals: Recent Decisions Dealing with Credit Card Fraud
[Last updated in July of 2022 by the Wex Definitions Team]