9 Credit Card Scams & How to Avoid Them
How to spot the red flags that indicate a scam and protect yourself against credit card fraud.
Credit card fraud is on the rise in Canada. And if you’ve ever experienced the unique mix of panic and dread that comes from spotting an unknown transaction on your credit card statement, you’ll know just how upsetting it is to be a victim of fraud. In this guide we’ll look at common credit card scams, how to spot them, and how to avoid becoming a victim.
9 common credit card scams
1. The scam: Phishing
Scammers use lots of sneaky tactics to get their hands on your credit card details, and phishing is one of the most common. It starts with an unexpected email or message that looks and sounds like it’s from your bank or some other authority such as a toll provider or the CRA.
The message usually claims that you need to take urgent action for some reason, such as to prevent an unauthorized transaction on your credit card or claim a tax refund. It also includes a link to a fake website designed to get you to input your sensitive credit card information. In other cases, clicking on the link could install malware on your computer or phone that spies on your device and steals all your passwords.
How to avoid it:
- Don’t click links in unsolicited emails or text messages claiming to be from your bank or a government agency.
- Check that web addresses start with “https://” to make sure any website you visit is secure.
- Check the domain name to make sure web addresses are spelled correctly.
- Keep your antivirus software up to date and run regular scans.
2. The scam: Fake e-commerce sites
In this scam, fraudsters set up a fake online store and use it to steal your personal information and credit card details. These fake websites look quite professional and convincing, and they often have offers too good to refuse. But the store doesn’t exist and there’s no product inventory to speak of—it’s all just a front to trick you into handing over your credit card information.
How to avoid it:
- Be wary of online stores with prices that sound too good to be true.
- Check that web addresses start with “https://”.
- Check the domain name to make sure web addresses are spelled correctly.
- Research the online shopping platform to make sure it’s a legit, registered business, and read customer reviews of the platform before you start shopping.
- Look for the hallmarks of a legit business, including a physical address, phone contact details, and important documents like terms and conditions, a privacy policy, and policies on refunds and returns.
3. The scam: Skimming and shimming
Fraudsters install devices on payment terminals, ATMs and even fuel pumps. These devices are designed to capture your card details when you make a purchase or withdraw cash. Scammers also use tiny pinhole cameras or a keypad overlay to reveal your PIN.
Shimming is a more recent variation on skimming scams and features a thin device inserted inside the ATM or payment terminal. But the end result is the same: your credit card information ends up in the wrong hands.
How to avoid it:
- Inspect ATMs and payment terminals closely before using them. Keep an eye out for anything crooked, damaged or just doesn’t look right.
- Check that the keypad hasn’t been tampered with.
- Cover the keypad when entering your PIN.
- Use indoor ATMs in well-lit, monitored areas that are less likely to have been tampered with.
- Pay with your credit card yourself rather than handing it over to the cashier to process the transaction.
- Walk inside the gas station to pay instead of paying at the pump.
- Add your credit card to your mobile wallet so you can pay by tapping your phone.
4. The scam: Impersonating your bank
Scammers contact you claiming that they are from your bank’s fraud department. They use high-pressure tactics to try to convince you that there’s something wrong with your account—for example, that your account has been hacked or that there’s a fraudulent charge on your credit card.
The scammers then try to convince you that you need to take urgent action to secure your account, and that usually involves handing over your card details and PIN. In other cases, they might ask you to download software to solve a security issue.
How to avoid it:
- Hang up the phone.
- Don’t click links in unsolicited emails or messages and don’t provide any information to an unsolicited caller.
- Remember that your bank will never ask for your PIN, password or a one-time passcode over the phone.
- Contact your bank independently through their official website or app, or use the phone number on the back of your card, to verify the security of your account.
5. The scam: Mail theft
This scam is a bit more old-fashioned than some others, but it’s still effective. Scammers can go through your mailbox to get their hands on your new or replacement card and use it to make unauthorized purchases. Alternatively, they can go through your mail or trash to access credit card statements and other documents containing sensitive personal information.
How to avoid it:
- Secure your mailbox with a lock or get your mail sent to a PO box.
- Pick up new or replacement cards in person at your nearest bank branch.
- Shred or destroy documents that contain your personal details or any banking/credit card information before disposing of them.
6. The scam: Impersonating the CRA
No one wants to get on the wrong side of the CRA, and it’s that fear this scam plays on. Scammers contact you pretending to be from the CRA and claim that you owe money to the tax man. They use high-pressure tactics and threats, including everything from fines to potential arrest, unless you take urgent action to repay what you owe. In other cases, they might claim that you’re eligible for a tax refund, but you first need to provide your personal details and credit card information so your refund can be processed.
In a variation of this scam, the bad guys pretend to be debt collectors and demand immediate payment. They target people with high levels of debt too, which helps to add a sense of legitimacy to their approach.
How to avoid it:
- Know what the CRA will never do, such as contact you via WhatsApp or text message, make aggressive threats or ask for your personal or financial details in an email.
- Watch out for fake websites impersonating the CRA. Keep an eye out for incorrect URLs or missing information.
- If you’re unsure whether an email is from the CRA, don’t click on any links in the email.
7. The scam: Lower interest rate
This scam is designed to lure you in with the promise of a better deal. It usually starts with an unsolicited call or social media ad claiming to be from your card issuer or one of their competitors. They offer you a much lower interest rate than you get on your current credit card, but with just one catch: you need to pay an upfront fee to access the lower rate. Unfortunately, this is almost always a scam.
How to avoid it:
- Remember that if a deal sounds too good to be true, it usually is.
- Be wary of any unsolicited contact.
- Watch out for high-pressure sales tactics that try to create a sense of urgency.
- Never pay an upfront fee.
- If you want a lower interest rate on your credit card, do your own shopping around—it won’t cost a cent.
8. The scam: Debt relief
This tactic is very similar to the lower interest rate scam above, but in this variation it involves the promise of debt relief and credit repair. Scammers target people who carry a large amount of credit card debt and contact them promising to settle or greatly reduce the amount of debt they owe. And yep, you guessed it: you’ll need to pay an upfront fee first.
How to avoid it:
- See all the tips above for avoiding the lower interest rate scam.
- If you’re struggling with credit card debt, find out where you can get free credit counselling in Canada.
9. The scam: Data breach
Scammers can get their hands on your credit card details by hacking into your computer or the systems of companies that have your sensitive payment information. For example, they could target your mobile phone provider or your gym, then use the information they gather to commit credit card fraud.
How to avoid it:
- Never use public Wi-Fi networks.
- If an organization informs you of a data breach, inform your bank or card issuer immediately.
- Monitor your account for any suspicious activity.
- Update your passwords.
- Contact the credit bureaus to freeze your credit and stop scammers opening new accounts in your name.
Are these credit cards in Canada scams or legit?
Capital One Guaranteed Secured Mastercard
It’s legit. Although we would normally warn people against companies that “guarantee approval,” the Capital One Guaranteed Secured Mastercard is real. It has a few basic conditions though; for example, you have to be at least 18 or 19 and you can’t be legally prohibited to access credit.
Walmart Rewards Mastercard (by Fairstone Bank of Canada)
It’s not a scam, but it’s not the best card. Walmart advertises earning “3% in reward dollars,” which means your earnings are locked into “Walmart Reward Dollars.” These can only be redeemed in strict $5 increments at Walmart. Also, the 3% rate applies only to the pre-tax total, so the true return is slightly lower than 3%.
What is credit card fraud?
Credit card fraud is when someone uses your credit card, or your credit card details, to make an unauthorized purchase.
People who commit credit card fraud use either your physical card or your card information to:
- Make a purchase in-store, online or over the phone.
- Withdraw cash at an ATM.
In Canada, credit card fraud is a punishable crime.
What to do if you’re a victim of credit card fraud
If you think you’ve been a victim of credit card fraud, here’s what you need to do:
- Contact your card issuer. Get in touch with your credit card issuer immediately to tell them what has happened, and write down who you speak to and when.
- Keep a record. Write down the full details of the fraud—what happened, and when and how did you notice it had occurred? Be sure to keep any paperwork you have related to the fraud.
- Report it. Report the fraud to your local police, and provide any documents that could help them investigate the fraud. You can also report it to the Canadian Anti-Fraud Centre online or over the phone.
- Contact the credit bureaus. Contact Equifax and TransUnion, the two credit bureaus in Canada, and ask them to put a fraud alert on your credit report. You should also request a copy of your credit report to review for any other signs of fraud.
- Monitor your statement. Keep checking your credit card statements for any other fraudulent transactions.
Do police investigate credit card theft in Canada?
Yes, the police do investigate credit card theft in Canada. Generally speaking, your card issuer and local police department investigate fraud, while large-scale and organized crimes are handled by the RCMP.
However, it’s usually only serious crimes that result in a police investigation. If you only lost a couple of hundred dollars, which most financial institutions refund to you anyway, there may not be an investigation. However, making a formal statement to the police could contribute to an investigation into a larger case of credit card fraud, and it’s an important step to take if you’re a victim of fraud.
What happens if you lie about credit card fraud?
Lying about credit card fraud is itself a type of first-party fraud.
One common example of this is chargeback fraud, which is when you make a legitimate purchase with your credit card, but then falsely claim you didn’t actually authorize the purchase and request a chargeback from the issuer. This is sometimes called “friendly fraud.” Alternatively, you might claim that an item you purchased never arrived and request a refund, when in actual fact the item has been delivered.
Intentionally lying about credit card fraud is a criminal offence. But it’s worth noting that mistakes can happen. You may have reported credit card fraud in error because you didn’t recognize a transaction. If this is the case, notify the card issuer, the police and everyone else you mistakenly reported the fraud to that the transaction was not actually fraudulent.
Is identity theft the same as credit card fraud?
Identity theft and credit card fraud are two different things, but they can sometimes overlap.
Credit card fraud involves stealing someone’s credit card or credit card information to complete an unauthorized purchase.
Identity theft is the process of stealing someone else’s personal information, such as their birth date, Social Insurance Number (SIN), credit card information or bank account information. The personal details are then used to commit fraud or other crimes. For example, a scammer might try to open new bank accounts or credit cards in your name, take out loans and run up debts.
Like credit card fraud, identity theft is also a punishable crime in Canada.
Bottom line
Credit card fraud is far too common in Canada. You can protect yourself by identifying the red flags that could indicate a scam, and by following some common-sense security tips when using your credit card in-store and online. Finally, if you do fall victim to a credit card scam, make sure you notify your card issuer and the police as soon as you become aware of the fraud.
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