Why Do People Stress Over Credit Card Fraud?

Filed Under: Credit Cards

I have an honest question I can’t wrap my head around — why do people selectively stress over credit card fraud when sharing credit card details with others? I assume it’s just one of those irrational things, but I’d love to know if I’m missing something…

Let me state upfront that all of the below is specific to US-issued credit cards, based on the consumer protection that’s in place here.

Credit card theft paranoia

I talk all the time to people who are concerned about credit card security. This comes in many different forms.

For example, I spoke to someone a couple of days ago who told me about how he will only use a debit card for purchases abroad. Why? As he explained, because if he used a credit card and it got stolen, someone could “access” his full credit line, while if he used a debit card, they could only “access” the couple of thousand dollars in that account.

Or there seems to be a selective fear over giving credit card information to service providers, especially those running small non-brick-and-mortar businesses. I’m sure many people who work online and take credit card information can relate to this, where someone is convinced you’re just trying to steal their credit card details.

Why these credit card fears are irrational

Let me simply share my perspective — it’s completely irrational to have concerns about credit card “security.” Don’t get me wrong, you should be smart about things and shouldn’t wear a shirt with your credit card number on it (because credit card theft is inconvenient, but that’s about it).

Short of that, paying by credit card is the safest way to pay, no matter how you share that credit card information.

Why do I find this fear of sharing credit cards to be so irrational?

Credit cards offer amazing fraud protection

At least in the US, credit card companies offer unrivaled fraud protection. If your credit card is stolen or compromised and you report it, you’re not on the hook for the purchase.

That’s infinitely more security than if you were paying in cash (where your money could be stolen) or if you pay with a debit card (where your balance could be drained).

I’ve had credit card fraud occasionally, and it has literally never cost me a single cent (though it can be inconvenient).

Not only that, but many credit cards have other built in purchase protection that covers you beyond just fraud.

Credit card fraud fear is so selective

What I also find interesting is the double standard when it comes to people being paranoid about their credit card details:

  • People have no problem paying with a credit card at a restaurant, and at least in the US the server generally walks away with your credit card, and could easily get a picture of it; I’ve never in my life seen anyone say “wait a second, when you walk away with that credit card how do I know you’re not going to steal the details?”
  • We’ve seen a countless number of data breaches at huge companies lately, including of credit card details, so there are so many ways your credit card details can be compromised
  • All kinds of businesses still use credit card authorization forms that require faxing or emailing details, which arguably has some security concerns than just outright giving someone credit card details

Bottom line

There are some things that keep me up at night. Whether or not my credit card will be compromised isn’t among those things.

At least in the US credit card fraud protection is fantastic, and you’re not on the hook for purchases in the event your card is lost or stolen and you report it.

While everyone should be careful with credit cards, there’s literally zero need to be stressed about your credit card details being leaked. You’re infinitely safer paying with a credit card compared to cash or a debit card, regardless of the circumstances.

You’re protected against fraud, you often get purchase protection, and hopefully you’re earning some great rewards as well.

Can anyone make sense of why some people are so paranoid about their credit card details? Is there anything I’m missing?

Comments
  1. Because it’s a pain when it’s compromised. Last time mine was comromised, I tallied up how much time it took me to deal with it. Over 5 hours. Updating all the auto-pays I have in place with various vendors; updating my bill payment (from bank to card) takes forever to log in to each site and update it. Even tracking it down takes a while — some services bill me annually or quarterly, so I had to go back through the last year of statements to find vendors.

  2. The only people who should be worried are the people foolish enough to use a debit card for transactions. That’s real money that, even though you will likely eventually get it back, is gone for a while and your regular bills will not get paid (if you’re like most Americans who live paycheck to paycheck). Can’t understand why anyone willingly uses one.

  3. Some card issuers are better than others when handling fraud. My Citi card number was recently compromised and it took Citi over two weeks to apply a credit against the charge to my account. I was even grilled by a Citi “investigator” about the fraud, which questions like, “Are you aware of the store the card was used it?” “How do you think your card number was compromised?” Which all made me paranoid that I’d end up having to fight with them on it.

  4. Irrational cognitive dissonance is to blame.

    Kinda like how some people will stress over maximizing credit card points values with the mental gymnastics related to transfer partners, while a decent 2%+ cash back card is really the best value for everyday spend.

    Kinda like how the r/churning readers obsess and obsess over the points game for a few extra bucks a year but could be making multiples more over a lifetime if they put half as much energy into improving their careers prospects.

  5. I would never email a credit card authorisation form. In that situation I call my number though. It’s seems daft to do something so insecure and yet, the IT security of major brands and websites is so much worse.

    Also never understood why in the US they still take your card away for payment. The rest of the world brings the machine to you or you get up to pay.

  6. I’m with Jim. I used to feel the same, but then my Prestige was compromised twice in one year. HUGE pain in the ass. And when I thought things were good and I switched over my recurring stuff (netflix etc), I got hit by a couple of quarterly/annual renewals which hit a couple of months later and were declined, which resulted in me temporarily losing my rental insurance without realizing it and having to deal with my gym who was trying to rack on fees for non-payment.

  7. I had fraud when I was in high school, I guess somehow my SSN was compromised. This led to me not being able to get approved for credit cards and student loans for a long time. I only found out about it when collection agencies were calling me, while the SSN matched, addresses/DOB did not. Eventually resolved (I was able to get bunch of good cards over the past few years), and now I have a fraud alert on my account, and it’s annoying since they have to call me in the next few days and I don;’t get auto approved online for cards after applying, it gives me peace of mind.

  8. @Jim, the hassle is real, but easily avoided.

    We use a 2% cash back card to pay recurring charges that never leaves the home safe. It’s never been compromised.

    When one of my day to day cards gets compromised, no big deal, just switch to option 2 until the replacement arrives.

  9. I always carry backup credit cards given that I’ve had fraud issues overseas while traveling. I completely agree that credit cards are the safest way to pay. And as for debit cards, I don’t carry one because I fear that any fraud would be my problem not the banks.
    I have a friend who is a checker at Costco and she says that debit cards are used at her store at a 3:1 rate over credit cards which I find strange.

  10. I’m noticing that banks now usually permit recurring charges to continue even if an account is closed for fraud.

  11. usually the people who worry about fraud are the ones still using debit cards and typing in their pin at every merchant that requests it haha.

  12. Someone seriously told you that they used their debit card so only their money was stolen and not their credit card, which steal’s the credit card company’s money? That person should be locked in an institution because that is so far outside the realms of sense that they shouldn’t be walking around amongst us.

  13. I have credit cards in Australia and Singapore – both corporate and personal. Have had fraud in both countries. In some cases they notified me before I knew about it. One of Visa cards in Singapore and my AMEX card in Australia send me an SMS every time there is a transaction on the account. At first I found it annoying – now I love it. I know instantly if there is fraud. Never had an issue getting the money back in any country.

  14. Some of the posts here show how people worry – for all the wrong reasons.

    Use a separate card for your auto pay if you worry about having to set those up again. Then another card for online, etc. Anyone with only one card is asking for trouble.

    Also very easy to set up your cards to get an email for every charge on the card so you know instantly when someone is using your card.

    Hell… even I posted my online card right here – it would not be a big deal. Stupid, but no big deal.

  15. Daniel wrote: “ I’m noticing that banks now usually permit recurring charges to continue even if an account is closed for fraud.”

    I noticed that too, after my card was compromised for the nth time. Asked Chase, and they confirmed that they do so—for six months. After that, even legacy recurring charges to the old number will be declined.

  16. I have to say Amex is the best/least inconvenient when it comes to fraudulent charges. They know which charges are recurring and allow them to continue charging your account (they refresh the card numbers with these merchants). Visa/MC offer similar services, but in my experience they don’t work very reliably.

  17. I agree with Gary. I manage 50 plus accounts at any given point. mine, my spouse and both side’s parents and in laws. I wouldn’t hesitate to email someone my credit card number. Fraud is bound to happen anyways and I get fair share of that from time to time. Most cases credit company will proactively detect the fraudulent charges from even getting approved. Be sure to setup fraud alert if they offer you one. I also use MINT site and app on my phone to constantly monitor all my charges… literally real time. any weird charges, I can quickly put a stop to it before they even post… if bank doesn’t detect them first. For those charges that actually get posted, all my experience has been smooth.. Citi Chase, amex… replacement card expedited right away, fraudulent charges marked off during investigation so I don’t have to pay and yes, now days, bank does allow recurring charges to be continue to be approved on old card number. And if card is in apple pay, it gets updated automatically.

    If you setup the fraud alert as bank asks you to and use third party apps like Mint to constantly monitor all your charges, there is really nothing to worry about.

    What worries me is the debit card… once the money is drained, it becomes hell to get them back.

  18. I used to manage a small business with online sales. On rare occasions people would email me their credit card numbers. It was a pain because I would not accept the numbers and refuse to accept payments with those numbers even if done securely online.
    People do not think, I think?

  19. It only takes one error to lose control of your card. I placed an order at Home Depot and paid online. When I picked up the item the clerk insisted on examining both my cc and drivers license and took them into an office. Soon after I was notified of hundreds of dollars of entertainment tickets/sports events charged to the same card.

  20. Precisely what @Jim said – It’s a giant pain in the ass to deal with the fallout, whether you have fraud protection or not.

    Reminds me of those folks who say, “Hit me, I don’t care – I have insurance”

  21. A couple points from a guy who spent the past 20 years in infosec, specialist in payments.

    – Never ever ever use a debit card in anything but an ATM. And wiggle it to see that it’s real.

    – your credit card number has already been leaked. Change passwords and pins regularly. All your base are belong to us.

    – use Mulvad VPN when traveling. I’m at Llao Llao in Bariloche, I never access anything that matters without a VPN. Like Mulvad.

    – use your credit card for everything you can. You get points and you get protection.

    – You will get burned if you really travel. Watch your accounts every few days (use a VPN) and be ready to call and dispute.

    So enjoy. I’m in South America for two months. I will be fine. I am aware and devious. Don’t be the sucker.

  22. I think some people conflate identity theft with credit card fraud you’re talking about. ID theft can be a super pain that can take months or longer to resolve and some think, “stolen credit card info equals ID theft.”

  23. What I do not understand is how Ben can be so blase about fraud – just because he personally is inconvenienced but it doesn’t cost him a penny.

    That’s total nonsense.

    Every instance of fraud costs the CARD SUPPLIER real money. And where does that money come from? YOUR POCKET for goodness sake. The CARD SUPPLIER cannot pay it an make a profit so they ADD THE COST BACK INTO THE COST OF THE CARD.

    It’s not paranoia to want to protect yourself from loss. And no matter what, if someone commits fraud on your card it will COST EVERYONE. Including you, Ben.

  24. For the same reason that they stress over “climate change” and coronavirus. Because most people are irrational and uninformed.

  25. @Azamaraal

    You are just like the debit card person in the story.

    I’ll go CAPS for just for you.
    You need to realize you are assuming you are NEVER a victim of fraud if you are PARANOID TO PROTECT YOURSELF. Which is not true.
    You also assume Ben is so blase about fraud HE IS GIVING OUT CREDIT CARD NUMBERS TO INTENTIONALLY INVITE FRAUD. Which is also not true.

    People lose stuff all the time. You either have good EQ and deal with it or have bad EQ and get paranoid about it.

    Using debit over credit shows how financially illiterate they are.

    Now losing credit card is a nuance. For someone who travels a lot with no fixed patterns, losing a card means not able to take advantage of x3 x5 bonus while on the road, especially on long international trips. It adds up if you are gone for many weeks.

  26. It’s not the cost, it’s the time and the bs you have to go through to set things right. Not to mention that once a card you use has been fraudulently used, your account is flagged for extra strong fraud watching. My chase credit card was stolen and, despite my Chase debit card not having an issue I get denied for the most stupid things every so often because all of my chase cards are on high alert from their fraud protection team now. And there’s nothing I can do to fix it.

  27. Lucky, credit card fraud protection isn’t free. You might not be directly paying for it, but the money for it comes out of the fees merchants pay to accept credit cards. And if there’s more fraud and costs go up, the card networks raise fees for merchants leading merchants to raise prices. We all pay for credit card fraud protection, but the cost is spread out over so many people that it looks like it’s free.

    A similar thing should be done for healthcare.

  28. @Azamaraal
    @Ray
    Every instance of credit card fraud costs somebody money, usually the vendor. The processing companies charge these back to those firms and there are few valid excuses. Most fraud involves phone or online orders. If a chip card is charged and the chip is not present in the credit card machine the vendor pays.Period. This applies even if the card is swiped instead of chip read.

    There are some extra personnel costs in processing these issues but that is minimal. We should be aware that these employees also are sharp and have lots of data at their fingertips. When I, as a vendor, had issues with a charge-back where I felt the customer was abusing the system, they verified the facts, found a pattern and cancelled his card.

  29. I’m not worried about the fraud itself, but I can get paranoid, trying to find out where the breach is from, and if any other info has been breached along with it. Then there is also the feeling you’ve been violated. Then it moves to pain in the arse of changing all the auto-pays, etc..

  30. @ Donato: Things have changed for worse for merchants since your time. Today, if you are a small mom and pop business, the cc fraud is so prevalent. If the card has no chip, you will be at high risk of charge back dispute. CC processors could careless about merchants’ predicaments. They mostly reject the explanation, despite the fact that you verify photo ID and name on cc. Unless you make copy of both for every transaction that has no chip card, then you can fight it. Or you still have the old carbon copy of the cc., like in the 1980s coupled with photo ID, then you will win. We must not have the misconception that the banks will eat the loss of cc fraud. The vendors will pay the price. The landscape of cc industry is highly pro- credit card holders. But I believe franchise businesses and big corporations have much higher leverage with cc processors. Third party payment is no longer acceptable at most businesses.
    As for monthly recurring payment or auto-pay, it will transfer to the new card and the service provider will continue charging you indefinitely after you cancel the compromised card, unless you request the discontinue of auto pay. Banks will reject your explanation that you did not see it in previous statements. It will take months to remove auto pay permanently so I do not go this route anymore.

  31. @globetrotter I think the info you provided is slightly incorrect: If the bank hasn’t issued a card with a chip, the issuing bank is responsible for fraudulent charges. If you’re a merchant and don’t have a chip reader and a card with a chip is presented (but you swipe), then you as the merchant are responsible.

  32. I had the same argument with your former writer James. He was moaning on about the credit card breach at BA because he had gotten caught up in it. He declared that the BA breach was far worse than the AC one around the same time. Yet the AC breach was actual passport details, serious stuff for which there is no fraud prevention! I rarely use debit cards due to the superior fraud prevention that cc issuers offer.

  33. I agree with many comments in this article in the annoyance to deal with the replacement card and dealing with the automatic charges there as well as the payments, especially when many cards or accounts have been compromised. In Europe or Asia the staffs will generally bring the credit card machine to the table which is much more of a trusted method of handling the transaction.

  34. Like many have said, most cc companies now update vendors of recurring charges with new card number in cases where old card was compromised. With text alerts, there’s no excuse these days to be so daft and worried about fraud.

  35. Wow, such thinly veiled content is charming. Quit shilling for your credit card benefactors, and quit trying (for your overlords no doubt) to get people to run up more credit card debt. I followed .

  36. Wow, such thinly veiled content is charming. Quit shilling for your credit card benefactors, and quit trying (for your overlords no doubt) to get people to run up more credit card debt. Unfollowed .

  37. The reason you are paying a …. 10%+ interest margin and about 1% extra on every purchase is due to fraud . Even if you always pay of your debt ontime due to positive cashflow from commissions on card sign ups (also paid by the same margins) there are lots of card holders induced by tempting access to credit marketed by us in this community , big credit default write-offs also need to be accommodated (involuntary credit fraud ) .

    Be that as it may; the real problem is that with one “secret” key the Static Primary account number (PAN) anyone can avail themselves the usage of your credit line and this cost we will al be paying for in the next bank rescue plan .

  38. In these comments, the most common answer to Ben’s question (“Why are so many people paranoid about their credit card details?”) is that it’s a huge hassle to deal with the fraud. But does that hassle outweigh the risk of carrying cash (you could get robbed, in which case you are will most likely never see the money again)? Does it outweigh the greater hassle of dealing with getting your bank to restore money stolen from your account via debit card fraud?

    Finally, like everyone else, I (and mrs snic) have dealt with instances of credit card fraud. In every single case, it has been almost completely painless – the bank cancels the card and sends a new one, often by overnight or 2 day express mail. So… what hassle?

    Credit cards are the perfect form of payment. Of course, their widespread use adds a few percent to the cost of everything, so there is a downside. But think of it as insurance against theft of your money. And if you play the game right, you get a good chunk of your premium back in the form of reward points or cash back.

  39. I’m with @Jim. Going through and changing all autopays are a major nuisance, especially while traveling. Now I try to keep all autopays on a card that is separate from the one I usually hand to merchants (including irresponsible US restaurants that still refuse to use table-side credit card readers, like they do everywhere else in the world). And I try to use Apple Pay or other wireless payment methods whenever possible.

    And It’s never truly seamless if you’re halfway around the world in the middle of, say, Volcanoes National Park in Rwanda or some other game reserve, or on a cruise ship for 3 or 4 weeks, where you can’t easily accept physical delivery of a new card or find decent enough WiFi to chat with your provider and find your old one has been locked down. You and I may have extra cards that we can use in such cases, but many people don’t. I really wish folks would stop making unwarranted, unsupported assumptions about others’ circumstances.

  40. I had 20K of fraud on my citi prestige and it took six months, a police report and a letter from a laywer before they removed the charges from my statement and stopped charging interest on it.
    Fraud is a real problem if and only if your bank sucks- like Citi does. Have cancelled all of my citi cards, and will never do business with them again.

  41. @Eskimo (God I hope you aren’t Canadian)

    I think you missed my point completely. Ben says that credit card fraud is no big deal.

    It is a very big deal. Just because the cost is spread around does not make it any less of a bad thing. Unfortunately the losses incurred by those who do not take care cost everyone.

    Too bad Americans have been so reluctant to adopt chip and pin on their cards. The USA is one of the last countries to enter the 21st century. This is the real lack of security that is responsible for most wasteful losses that could be avoided.

    With chip and pin the credit card machine is brought to you and nobody else gets to play with the card.

    The last country in the world to take credit card security seriously is the USA which is well demonstrated by Ben saying it is no big deal (to him personally).

  42. Sure, there are people who just don’t understand how credit cards work, fraud protections, etc. But I think it’s just a tremendous hassle for the majority of Americans who have at most maybe two cards in their wallet that are set up for literally all the payments you have to make. It takes a lot of time and is just plain stressful — even if you are ultimately made whole by the card issuer. I will also add that you will have a very different experience depending on which card it is and what the nature of the fraud is. I remember having my wallet stolen while travelling and before I could cancel cards a few hours later, there was already thousands in fraud. Amex was absolutely the best: called the hotel to handle payment directly and arranged to overnight a new card to the next hotel. Debit card was the worst; ultimately couldn’t get that all fixed until after getting home. Bottom line, dealing with fraud, ymmv.

  43. While taking care of fraudulent charges is typically a matter of a phone call or responding to a text or e-mail, this wasn’t always the case. (It still isn’t with some card issuers!) As others have mentioned, redoing autopay with merchants for the card takes some time, and so there is a nonzero cost, at least in time, when a card needs to be replaced. Ben, I believe you had a situation where you had to resort to using a card with a foreign transaction fee once due to waiting for a replacement card. Imagine having to place a large purchase on a 1x card because the category bonus card was cancelled.

    There are also other localities where the card issuer is almost downright adversarial with the cardholder when it comes to fraudulent charges. In chip-and-PIN countries, it’s often difficult to prove card fraud for card present transactions. It’s not a simple matter of calling the issuer, listing the transactions you made, and getting a new card shipped.

    So, I can understand those who are more reserved about using a credit card. I can’t explain the use of a debit card everywhere – especially in debit mode, as most using a debit card do from my observations – since that’s fighting to get money back in your account if someone makes a fraudulent transaction.

  44. @Azamaraal

    So what’s wrong if I’m Canadian or American.

    You are missing the point.

    Those are all the risk and cost of normal business. Having a chip and pin reader at your table is the very least of preventing fraud. It’s much easier to steal the data batch than writing down 1 card at a time. Chances are all your cards have been stolen by now, it’s just matter of when the thieves use your card. The real lack of security is companies keeping all your information. Sold to hackers running thousands of charges in seconds and disappear.
    Not one restaurant worker using your card and get caught few days later.
    Again you are assuming that every fraud was because the card holder is not safeguarding thier cards and everyone who safeguard their cards will never get hacked.

    Now your idea of what is a big deal is also messed up.

    Do you think pollution from car is a problem? (Canadian or not)
    But will you stop driving?
    Do you get paranoid when seeing cars?
    Do you complain about which will be the last country to use electric vehicles?

    I hope you didn’t build a doomsday bunker and stock it with 50 years of supply because of the Corona virus. Because you sound like a person who would do that. LOL, At least in your bunker you can have all the chips and pins you ever wanted.

  45. @ Ben — It doesn’t worry me one bit. However, debit card fraud does, so I NEVER use one. I may have made one or two debit card purchases in my life.

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