The Unlawful Use of a Credit Card

A thief may use your credit card unlawfully.

Your credit card offers great convenience for shopping, but it also leaves you vulnerable. It can be used unlawfully if you lose it or someone steals your account information. Your financial liability is capped at a low amount, but you'll pay a big price in inconvenience and possible credit report damage.

Types

There are several types of unlawful credit card use. If you lose your wallet or purse, the finder may have enough information to make online or in-person purchases with your credit cards. Your address is on your driver's license, and you may also be carrying your Social Security card and other identifying documents. This unlawful use is considered theft.

Someone might find out your credit card number and enough other information to make online purchases in your name. This is also illegal use. It typically happens if someone looks over your shoulder in a store or steals statements from your trash.

Your credit card can be "skimmed" by a store clerk with a small machine, Creditcards.com explains. This can also happen if you use it in a rigged gas pump or automatic teller machine. The machine copies the magnetic strip information, which is transferred to a dummy card. All purchases are charged to your account.

Detection

You may not detect unlawful use of your credit card right away because you don't know your information has been stolen. Your bank will close the account immediately if you call them after losing your purse or wallet. However, you will have no idea that your card has been skimmed or that someone else has spied on you and gotten enough information to use your account unlawfully. You won't find out until your bank notices a trend of potentially fraudulent use or you find odd charges on your statement, the Federal Trade Commission (FTC) warns.

Liability

You are not liable for fraudulent charges if you report a lost or stolen card before a criminal uses it. Your liability is limited to $50 by the federal Fair Credit Billing Act if the thief makes unlawful charges before you realize there is a problem, the FTC explains.This is true even if he spends several thousand dollars. Many banks waive the $50 charge as a goodwill gesture.

Effects

Your financial liability for unlawful credit card use is limited, but you will suffer some other effects. You may have transactions turned down because the thief has maxed out your credit limit without your knowledge. Any automatic payments for utilities and other bills set up on the card may be rejected, incurring late payment fees and hurting your credit rating. You will have to comb through your statement carefully to find all the fraudulent charges, and they may continue to come through for a month or two.

Prevention/Solution

Your credit card cannot be used unlawfully if you guard it against loss or theft and keep your account information confidential. Shield your credit card whenever you take it out of your purse or wallet. Closely watch store clerks, restaurant clerks or anyone else who handles it and do not let them remove it from your sight, Creditcards.com advises. Avoid automatic teller machines and gas pumps with odd-looking or loose card readers. Shred credit card statements and divide the paper among several different trash bags. Never give your account information to any telephone caller or in response to an email, no matter what is offered.

Eva Norlyk Smith, Ph.D., of the online Credit Card Guide recommends checking your monthly statement carefully, or creating an online account so you can monitor card use more frequently.

References

• Cardcards.com: Skimming 101
• Federal Trade Commission: Credit, ATM and Debit Cards
• Credit Card Guide: Fall-out from Credit Card Fraud Continues for Years

Resources

• Federal Trade Commission: Avoiding Credit and Charge Card Fraud
• Scambusters: What to Do if Your Credit Card or Wallet is Stolen
• Federal Trade Commission: About Identity Theft