How Credit Card Fraud Happens And What To Do About It

What Is Credit Card Fraud?

Credit card fraud is a form of theft committed by using a victim’s existing credit card account or by stealing their data to open a new, fake account. Tactics range from skimming devices that clone magnetic stripe data to fraudulent e-commerce charges through Card-Not-Present (CNP) transactions.

In 2025, the research firm, Nilson Report, predicts that worldwide credit card fraud losses will reach nearly $404 billion over the next decade, highlighting the need for businesses to impose strict anti-fraud technologies.

Common Ways Fraudsters Obtain Credit Card Information

Fraudsters obtain credit card information through several common methods, including social engineering schemes such as phishing attacks, malware, and large-scale data breaches.

We’ll explore both established and emerging methods used by fraudsters in more detail below.

1. Phishing Websites

Phishing is a method used in credit card scams where fraudsters deceive cardholders into divulging sensitive information. They accomplish this by sending texts (smishing), voice calls (vishing) or emails, redirecting victims to fraudulent websites that are designed to capture sensitive financial data, such as card numbers and passwords.

Explore the advanced tactics employed in recent email phishing campaigns in the blog, “Trust Hijacked: The Subtle Art of Phishing Through Familiar Facades.”

2. Card Skimming and Shimming

Criminals place malicious devices over or inside card readers at ATMs, gas pumps, or point-of-sale terminals. These “skimmers“ copy data from a card’s magnetic stripe during a legitimate transaction. A more recent evolution, “shimming,“ involves inserting a paper-thin device into a card reader slot, which similarly targets chip cards.

3. Data Breaches

Hackers gain unauthorized access to the databases of retailers and service providers, stealing personal information, including names, passwords, and credit card numbers. After a breach, criminals traffic this stolen information on the dark web through specialized underground markets known as card shops.

4. Malware

Hackers obtain credit card information data through malware that can spy on your device or record keystrokes.

Keyloggers record every keystroke typed on a keyboard, capturing credit card numbers, expiration dates, and security codes as they are entered into websites or applications.

Spyware may monitor browsing activity or extract saved payment data from browsers or digital wallets. Some types of trojans are engineered to detect when a user accesses a payment page and then copy or transmit the entered data in real time.

5. Deepfake-Enhanced Fraud

Deepfakes are created using deep learning techniques and AI-generated audio or video to convincingly impersonate individuals. Criminals exploit this technology to trick victims into sending money willingly through Authorized Push Payment (APP) scams.

This makes it significantly more challenging for victims to verify a person’s identity before authorizing a payment. Our investigation into deepfake fraud reveals how fraudsters use AI-generated photos to bypass digital Know Your Customer (KYC) procedures for loan applications, including facial recognition and liveness detection.

6. Botnet Attacks

Criminals command botnets to automatically test large volumes of stolen card numbers. Botnet attacks are designed to overwhelm security systems by distributing fraudulent activity across thousands of geographically dispersed devices.

7. Advanced Social Engineering

In a pretexting scam, a fraudster creates a detailed and believable fabricated scenario to manipulate a victim into divulging sensitive information. An advanced social engineering scheme in the Middle East highlights the effectiveness of this tactic in deceiving customers. Our investigation highlights how fraudsters impersonated government officials and used remote access software to steal credit card information and One-Time Passwords (OTPs).

Learn how credit card fraud methods and phishing attacks are evolving in Group-IB High-Tech Crime Trends Report 2025.

Types of Credit Card Fraud

The types of credit card fraud include Card-Not-Present (CNP) fraud, account takeover, card testing, and application fraud. We’ll explore these and other types of credit card fraud in more detail below.

• Card-Not-Present (CNP) Fraud: A fraudster uses stolen card details for an online or over-the-phone purchase. The widespread adoption of secure EMV chip cards has made CNP 81% more likely to occur than in-person card fraud.
• Application Fraud: Criminals use stolen or fake identities to open new credit card accounts. The Federal Trade Commission (FTC) categorizes application fraud, also known as identity theft, as the most common form of credit card fraud, which can significantly damage the victim’s credit score.
• Account Takeover (ATO): In account takeover frauds, fraudsters gain control of a victim’s existing account by stealing login credentials, often through phishing scams. They later use these accounts for unauthorized purchases.
• Chargeback Fraud: A cardholder disputes a legitimate purchase, falsely claiming it was fraudulent to obtain a refund while keeping the product or service. Chargeback fraud accounts for nearly half of all e-commerce refund losses and costs merchants more than the original transaction value once fees, penalties, and lost inventory are added.
• Counterfeit Card Fraud: Criminals use stolen card data, often obtained via skimming or data breaches, to create fake physical “clone“ cards for in-person transactions.
• Card Testing Fraud: Before attempting a large purchase, fraudsters make a series of smaller transactions with stolen card details. They do this to verify that the card is active and has not been reported as stolen.

Real-World Examples of Credit Card Fraud

These real-world examples of credit card fraud illustrate how credit card fraud has evolved from targeted card skimming on individual checkout pages to AI-driven bot networks that test stolen cards at scale.

Operation NightFury and the GetBilling Takedown

In Operation NightFury, Group-IB collaborated with INTERPOL and the Indonesian Cyber Police to dismantle the GetBilling JS-sniffer group, which had infected over 200 e-commerce sites to steal customer payment data.

Leveraging data from Group-IB Threat Intelligence platform, which had been tracking this malware family for years, our digital forensics experts helped identify the suspects and their infrastructure, effectively shutting down their criminal network and restoring safety for countless online shoppers.

Automation and Card Testing Attacks

In Group-IB’s investigation into recent card testing attacks, our analysts observed automated card testing bots executing thousands of small transaction attempts on e-commerce sites, silently verifying stolen credit card credentials.

The highly automated nature of these operations makes it challenging for card owners and fraud detection systems to catch fraudulent transactions in real time, highlighting the need for multi-layered defenses.

Common indicators of such card testing attacks include sudden spikes in low-value declined transactions, identical device fingerprints, and unusually high API checkout activity.

What To Do if You Suspect Credit Card Fraud

If you suspect that you’ve been the victim of credit card fraud, follow these steps to minimize the financial and emotional impact of credit card fraud:

1. Contact Your Credit Card Company

Your priority is to report the fraud immediately to contain the damage and prevent further losses.

• Report the credit card fraud to your bank via phone, app, or web dashboard. Your issuer will cancel the compromised card and send you a replacement.
• Use your card’s lock feature for instant containment. This feature, typically found in your issuer’s mobile app or online dashboard, immediately blocks new transactions while allowing recurring payments to continue.
• Prevent criminals from opening new accounts in your name by placing a fraud alert. This also forces lenders to verify your identity before approving new credit.

2. Create Official Records

Create reports that you can share with banks and credit bureaus.

• File a police report. This document provides official proof of the crime for disputing fraudulent charges with your bank and other institutions.
• Report the fraud to your country’s national consumer protection or data privacy authority. They often provide recovery checklists and official reference numbers to help with investigations.
• Formally dispute every fraudulent entry with your bank. You have the right to have these inaccuracies removed from your record.

3. Monitor Your Credit Card Statements

After taking the initial steps, stay vigilant to catch unauthorized activities early and prevent identity theft.

• Regularly review your credit card statements for any suspicious activity you don’t recognize. Fraudulent charges made before you froze your card may still appear.
• Enable credit report monitoring through your bank or a third party. Instant alerts are sent via email or text for new credit applications or address changes.
• Change passwords. Start with your email and banking accounts, then update other key accounts that may have been compromised.

How Does Zero Liability Protection Work?

Zero liability protection works by ensuring you are not financially responsible for unauthorized transactions, provided you report them promptly. When disputing fraudulent charges, your most powerful tool is the zero liability protection offered by major card issuers.

To exercise this right, a cardholder initiates a chargeback, a formal process that disputes a transaction with the card issuer. In this process, the issuer investigates the transaction, removes fraudulent charges from your account, and shifts the liability back to the merchant or acquiring bank.

If the investigation confirms fraud, the cardholder bears no financial responsibility.

Credit vs. Debit Card Zero Liability Protection

The table below provides a breakdown of the key differences between credit and debit card zero liability protection, including liability, reporting requirements, and dispute processes.

Note: Liability limits and reporting timelines vary among financial institutions. Always verify your issuer’s policies and reporting requirements to ensure full fraud protection.

Scenarios That Can Void Zero Liability Protection

Actions such as negligence and delayed reporting can disqualify your zero liability protection.

• Negligence: Sharing your PIN, writing it on your card, or failing to report a lost or stolen card promptly can void your protection.
• Delayed Reporting: Failing to report fraudulent transactions within the required timeframes, especially for debit cards under Regulation E, can increase your financial liability.
• Business Card Exclusions: Some corporate or business cards may not automatically qualify for the same zero liability protections as personal cards, depending on the issuer’s terms.

Essential Steps To Prevent Credit Card Fraud

To effectively protect your company, you need a multi-layered defense that blends technology, rigorous internal processes, employee training, and proactive monitoring. Below, we outline essential steps your business should implement to minimize risks, secure payment systems, and ensure swift incident response.

1. Train Employees on Secure Payment Practices

Regularly conduct role-specific training sessions to educate employees about phishing attacks, safe payment terminal handling, and internal fraud reporting procedures. Incorporate cybersecurity modules within your learning management system (LMS) to help reinforce best practices.

2. Strengthen Payment Infrastructure

Secure your payment processing systems by implementing end-to-end encryption, EMV-compliant payment terminals, and robust tokenization practices. If you’re utilizing PCI DSS Level 1 Payment Gateway, refer to their comprehensive security guide to automate updates and patches.

Implement network segmentation to reduce your attack surface and the risk of lateral movement by isolating your card data environment (CDE) from other business operations. Eliminate stored Primary Account Number (PAN) wherever possible to effectively remove sensitive data from your environment.

3. Deploy Real-Time Monitoring

Monitor every transaction as it happens. Track spikes in purchase frequency, unexpected locations, and patterns that stray from your usual customer behavior. Feed this live data into machine-learning models trained on your historical approvals and chargebacks, so the system learns what fraud looks like for your business.

If something suspicious arises, the system can immediately decline the transaction, prompt additional verification, or escalate it to your team for manual review (often before the bank even completes authorization). Over time, as the model keeps learning, false alerts decrease, allowing your team to prioritize genuine fraud risks.

4. Vet Third-Party Vendors

A security breach at a vendor can compromise your business’s defenses. Establish rigorous vendor assessments focused on PCI compliance, cybersecurity certifications, and response capabilities. Vendors failing to meet your security criteria should be isolated or removed to safeguard your business environment.

5. Implement MFA and Least Privilege

Mandate Multi-Factor Authentication (MFA) for all personnel accessing sensitive payment information. Enforce strict least privilege access controls to limit employee access to payment data based solely on their responsibilities. Regularly update credentials and review access logs to address any exceptions and ensure continued compliance.

6. Conduct Regular Audits and Penetration Testing

Begin each quarter with a comprehensive security assessment and audit of your CDE. Document every issue in a structured remediation log, assigning clear ownership and timelines.

Conduct penetration testing to uncover vulnerabilities before attackers can exploit them. Report these findings to senior leadership to maintain transparency and secure ongoing investment in cybersecurity.

In the event of a cyberattack, leverage professional incident response services to provide immediate assistance and infrastructure restoration with minimal business disruption.

How Group-IB Protects Businesses Against Credit Card Fraud

Group-IB Fraud Protection helps businesses combat credit card fraud by creating unique profiles for each device accessing a system, distinguishing legitimate customers from fraudsters. Our fraud protection engine has a proven 96% detection rate in real time, flagging and intercepting fraudulent transactions at targeted merchants.

Here are some key ways it achieves this:

• Real-Time Detection: Utilizes machine learning and behavioral analysis to identify suspicious patterns and anomalies in real-time, preventing fraudulent transactions before they cause damage.
• Device Fingerprinting: Creates unique profiles for each device accessing a system, enabling identification of potentially compromised or fraudulent devices.
• Bot Detection: Blocks malicious bots attempting to exploit vulnerabilities or automate fraudulent activities.
• Phishing and Malware Detection: Identifies and prevents access to malicious websites and blocks malware infections, which can lead to credential theft and unauthorized access to sensitive information.
• Account Takeover Prevention: Detects signs of unauthorized account access and blocks attempts to change account details or make suspicious purchases.
• Mobile Security: Protects mobile apps and transactions, addressing the unique risks of mobile platforms.
• 3DS Page Protection: This feature employs sophisticated techniques to detect and prevent fraud, specifically during the Three-Domain Secure (3DS) authentication process, adding an extra layer of security against automated fraud attempts.

Explore how Group-IB Fraud Protection works in practice and why it stands out against other offerings. Or talk to our experts today to get started on a comprehensive anti-fraud solution.