Do credit card companies actually investigate

By Matt Mayerle
Modified on May 8, 2023
Do Credit Card Companies Actually Investigate

When applying for and opening new credit card accounts, it is important to feel secure that the financial product will not cause more trouble than it is worth. Additionally, you want to be able to trust that the credit card company you are obtaining your card from is trustworthy and reliable. Credit card fraud and scams are still incredibly common so when you are deciding which credit card companies you want to work with, you want to be sure they will actually do what they can to protect you from scammers and follow through on the fraud investigation process if you are targeted.

While technological updates have greatly improved the security of credit cards, scammers have done what they can to keep up with the improvements to security made by credit card issuers. With credit card fraud still active in the United States, it is important for customers to be able to trust their card issuer to carry out the necessary credit card fraud investigation process.

What Is Credit Card Fraud?

The most basic definition of credit card fraud is someone using your credit card or your account details in order to make purchases with your credit line without your permission or knowledge. However, credit card fraud can also be broken down into two categories:

In-person Fraud

In-person credit card fraud, also known as card-present fraud, happens when someone steals your actual card, creates a counterfeit credit card with your account information on it, or utilizes your information for an unauthorized transaction in a store. 

Remote Fraud

Remote fraud, also known as card-not-present fraud, refers to every other way someone might be able to fraudulently use your credit card account to make purchases such as online shopping, etc.

How Credit Card Companies Handle a Credit Card Fraud Investigation

If you notice unauthorized credit card transactions, you should be able to easily report them to your credit card issuer. Many credit card companies have a special point of contact to investigate unauthorized transactions and if not, you can go through the normal customer support phone number. 

Once you are able to report the unauthorized transaction, the credit card issuer will work alongside you to determine whether it is a case that requires a credit card fraud investigation rather than a simple mistake. To move forward in a fraud investigation process after a cardholder disputes certain transactions, credit card issuers must first confirm that they are fraudulent charges and not simply a merchant accidentally overcharging or failing to deliver a product. With a situation like that, you may be able to get a chargeback process from the merchant, but a fraud investigation process through the card issuer would not be necessary.

The Fraud Investigation Process

After a fraudulent charge is noticed or a fraud claim is made, the credit card issuer will likely cancel your card and send you a replacement before starting the fraud investigation. Some companies might issue you a refund immediately but if they don’t, you are still not responsible for the disputed transactions throughout the investigation.

The bank fraud investigation process can take up to 90 days. During the investigation, the issuer might contact the merchant who charged your card and you for more details that they might need. Card issuers and merchants will also be on the lookout for “friendly fraud” which is a term for when a cardholder completes a purchase and then disputes it as fraud when it wasn’t. 

According to the federal Fair Credit Billing Act (FCBA), all victims of credit card fraud have a limited liability of no more than $50 for fraudulent transactions. But credit card companies like American Express, Mastercard, Visa, and Discover limit your liability even further to $0 on all consumer credit cards. 

Do Credit Card Companies Provide Fraud Protection Features?

When it comes down to it, it is better to prevent credit card fraud than to be forced to deal with it after the fact. As a consumer, it is wise to find credit card issuers who are up to date with all the latest preventative measures to protect you from credit card fraud. When deciding which credit card to apply for, be on the lookout for these fraud protection features:

EMV Chips

Credit cards with EMV chips are now the standard for most issuers. EMV chips have been widely adopted by companies because they give cards an extra layer of protection compared to swiping the magnetic strip. However, EMV chips are still susceptible to card shimming which is when a special device gets attached to the card reader by scammers. When inserting a card with an EMV chip, most modern shimming devices can still copy the card’s information.

Contactless Cards

A contactless credit card can be even safer than swiping the magnetic strip or inserting the EMV chip. With a contactless card, you can tap the card against the reader or use a mobile device with a digital wallet to complete a transaction. Contactless payments are incredibly safe and many popular credit cards from large issuers now offer them regularly. 

Virtual Card Numbers

Some card issuers might also allow you to create a virtual credit card number to utilize when you are shopping online so that you can keep your card’s actual details private.

What To Do if You Are a Victim of Credit Card Fraud?

If you see suspicious activity on your debit cards or credit cards, there are several actions you should take when you think you might be a victim of credit card or identity fraud.   

Contact Your Credit Card Company

The first thing you will want to do when you notice suspicious activity on your account is to contact the credit card issuer. They can put a credit freeze on your card so that you are protected from any further fraudulent charges. After you report fraud to the issuer, you will be able to dispute the charges with their consumer services department.

Lock Your Credit Report

Next, you will want to contact the credit bureaus to lock or freeze all of your credit reports. Locking your credit reports will protect your score from fraudulent changes that don’t reflect your creditworthiness. However, freezing your credit reports will also prevent new creditors from accessing your report, so it is important to thaw the freeze when you apply for a new account. 

A freeze to your credit report is not always necessary and it can be beneficial to avoid it as it can be a headache to undo. Some situations are resolved easily enough with a fraud alert on your report, so it is a good idea to determine which is best for your circumstances.

Put a Fraud Alert to Your Credit Report

If you determine that a fraud alert should be sufficient, placing one on your credit report can be done easily online. Experian offers a fraud center on their website which will allow you to create an alert that they will pass on to the two other major credit bureaus. With a fraud alert, new creditors will still be able to access your credit report but will just need to take extra steps to verify your identity before opening a new account in your name. 

Report to the Federal Trade Commission

If you believe that identity theft has occurred in the process of your credit card fraud, it is crucial that you report all the information you have to the Federal Trade Commission (FTC). Doing this will allow them to investigate further to ensure you don’t experience any future negative consequences of the fraud. The FTC may be able to identify the culprit or prevent this particular scam from happening again to others. 

Quick Tips for Responsible Credit Usage

Apart from knowing what to do when faced with credit card fraud, there are other responsible credit habits that you should practice to ensure your credit report stays healthy and you avoid problematic or overwhelming debt. Here are some tips to follow for a positive relationship with credit usage:

Check Your Free Credit Reports Often

One of the best ways to keep a close eye on your credit health and make sure there isn’t any fraud occurring in your finances is to check your credit report regularly and often. Checking your report often can help you catch errors early on and ensure that any inaccurate information on your credit is not due to fraudulent charges or identity theft.

You can dispute issues on your credit report relatively quickly and easily with the three credit reporting bureaus. Checking your credit report with consistency allows you to make disputes before they have a chance to negatively affect your credit score, particularly when you are applying for important financial products.

Aim for Low Credit Utilization

A healthy relationship with credit will keep you from getting to the point where you have an overwhelming amount of debt. To do this, you will want to keep your credit utilization low at all times. Your credit utilization ratio contrasts your available credit to your used credit. You want to aim to have a credit utilization rate of 30% or below to have a good credit score. But if you want to go the extra mile, pay off your credit card balances in full regularly.

Pay Off Your Outstanding Balances

If you can afford to, consider paying off your full credit card balances at the end of every month. Not only will this allow you to maintain a very low credit utilization rate, as mentioned above, but it will also make it, so you save a significant amount of money on interest charges. Above all, only using credit up to the point where you still have enough money to pay off your full balance at any given time ensures that you never build up problem debt.

Keep Older Accounts Open

If you no longer wish to use an account anymore and are considering closing it, think twice. Closing an old credit card account could reduce your available credit considerably and decrease the length of your credit history, both of which are central to your credit score calculation. Consider leaving the account open for a while instead. If the issuer requires that you maintain a balance, simply turn on an automatic payment for a small bill with that credit card and schedule to pay off that balance directly after. Then you can hide the card somewhere in your house so you aren’t tempted to spend with it. 

Make All Your Payments on Time

Stop making your credit card and installment loan payments late. Late payments have a significant negative impact on your payment history in your credit report which accounts for 35% of your credit score calculation. All late and missed payments will damage your credit score and incur late fees and charges that will increase your overall balance. If you find that you are someone who often forgets to pay your bills on time, set up an automatic withdrawal from your checking account so that you can forget about while never being late again.

How Do Credit Card Companies Investigate Fraud? | Experian

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