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.

The Nilson Report projects that worldwide card fraud losses will total $407.6 billion over the next decade, underscoring the need for businesses to invest in strong anti-fraud defenses.

How 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.

Below, we’ll explore established and emerging methods fraudsters use in more detail.

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, and redirecting victims to fraudulent websites 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 retailers’ and service providers’ databases, stealing personal information such as 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 can obtain credit card information through malware that spies on your device or records keystrokes.

Keyloggers record every keystroke, capturing credit card numbers, expiration dates, and security codes as users enter them 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 much harder 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 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, believable scenario to manipulate a victim into divulging sensitive information. An advanced social engineering scheme in the Middle East shows how effective this tactic can be at 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): A fraudster uses stolen card details for an online or over-the-phone purchase. Card-not-present fraud dominates, accounting for roughly 84% of the total value of card fraud in the EU, according to the European Central Bank.
• Application fraud: Criminals use stolen or fake identities to open new credit card accounts in a victim’s name, which can significantly damage their credit score. According to the Federal Trade Commission, credit card fraud is the most commonly reported type of identity theft.
• 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: A cardholder disputes a legitimate purchase, falsely claiming it was fraudulent to obtain a refund while keeping the product or service. Also called friendly fraud, it makes up about 22% of all chargebacks in 2026, worth an estimated $8.1 billion globally, according to Juniper Research. Beyond the refunded amount, the cost to merchants exceeds the original transaction value once fees, penalties, and lost inventory are factored in.
• Counterfeit card: Criminals use stolen card data, often obtained via skimming or data breaches, to create fake physical “clone“ cards for in-person transactions.
• Card testing: Before attempting a large purchase, fraudsters make a series of smaller transactions with stolen card details. They do this to confirm the card is active and hasn’t been reported stolen.

Real-World Examples of Credit Card Fraud

These real-world examples illustrate how credit card fraud has evolved from targeted card skimming at 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 more than 200 e-commerce sites to steal customers’ payment data.

Using data from the Group-IB Threat Intelligence platform, which had tracked this malware family for years, our digital forensics experts identified 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 cardholders and fraud detection systems to detect fraudulent transactions in real time, underscoring 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.

How Credit Card Fraud Unfolds, From Theft to Cashout

Credit card fraud rarely happens in a single step. Stolen card data moves through a supply chain that runs from the criminals who steal it to the fraudsters who spend it. The process usually follows four stages.

1. Theft. Attackers harvest card data where it is entered or stored. The methods vary, from JS-sniffers (malicious code hidden on a checkout page that copies card details as they are typed) and point-of-sale malware to phishing and large-scale data breaches.
2. Trafficking. Stolen data is sorted and sold on card shops, the underground marketplaces that trade in compromised cards. Text records containing the card number, expiry date, and security code are sold for use in online fraud, while “dumps” (data copied from a card’s magnetic stripe) are sold to clone physical cards. Group-IB has collected information on almost 400 million compromised bank cards across more than 70 card shops.
3. Validation. Before spending, fraudsters confirm a card still works. They run card testing, pushing through small transactions, often with bots, to check which stolen cards are active before risking a larger purchase.
4. Cashout. Fraudsters turn working cards into money. They make card-not-present purchases online, use cloned cards in stores, or buy resellable goods and gift cards, then launder the proceeds through prepaid cards, shell accounts, and reshipping mules.

Breaking any one link disrupts the chain, which is why authorities fight fraud at every stage rather than at the checkout alone. The scale is industrial. In Carding Action 2020, law enforcement analyzed 90,000 pieces of card data and prevented around €40 million in losses, according to Europol.

Most Common Credit Card Scams

The most common credit card scams rely on social engineering. Rather than stealing card data by force, they trick a cardholder into handing over card details, login credentials, or a one-time passcode. The scale is significant: in 2024, consumers reported losing $470 million to scams that began with a text message alone, according to the FTC.

1. Fake alerts

A cardholder receives a text or call warning about a suspicious charge and is urged to “verify” it by calling a number or replying to the message. The contact routes to a scammer posing as a member of the bank’s fraud team, who pressures the target to move money or share card and login details. The FTC ranked fake fraud alerts among the top text scams of 2024.

2. One-Time Passcode (OTP) 

The scammer already has some card or account details, triggers a genuine verification code, and then impersonates the bank to get the cardholder to read it back. That single code can approve a payment or load the card into a mobile wallet on the scammer’s own device, a tactic UK Finance links to the recent rise in remote purchase fraud.

3. Fake online stores and deals

Fraudsters set up spoofed shops or post offers that seem too good to be true, capturing card details at checkout or taking payment for goods that never ship. Fake package-delivery texts, the most reported text scam of 2024, work the same way: messages impersonating the postal service ask for a small “redelivery fee” that exists only to capture card details.

4. Refund and overpayment 

A caller claims the target is owed a refund or was accidentally overpaid, then asks for card details or remote access to “process” it. Group-IB’s investigation into a social engineering scheme in the Middle East documented fraudsters impersonating officials and using remote access software to steal card information and one-time passwords.

5. Subscription and free trials

A free trial or one-off purchase quietly enrolls the cardholder in recurring charges that are deliberately difficult to cancel.

These scams rely on urgency and misplaced trust rather than technical skill, which is why they keep working even as card technology gets harder to break.

How Credit Card Fraud Detection Works

Credit card fraud detection flags every transaction and login in real time that doesn’t fit a legitimate cardholder’s pattern. No single signal proves fraud on its own, so banks and payment processors layer several techniques and weigh them together.

1. Real-time risk scoring

Each transaction is measured against the cardholder’s normal behavior, including the amount, location, merchant type, and frequency of use. Machine learning models trained on historical fraud data assign a risk score in milliseconds, so a purchase that deviates from the pattern can be held or declined before it clears.

2. Device fingerprinting

Detection systems identify the specific device behind a transaction using signals such as hardware, software, and browser settings. This catches fraud that single-transaction checks miss: when one device runs 20 different card numbers through checkouts in an hour, the system can block the device instead of chasing each declined charge. 

Group-IB Fraud Protection applies device fingerprinting and behavioral analysis across more than 500 million users a day.

3. Behavioral analytics

Models watch how a person types, moves a mouse, and moves through a session. When that behavior does not match the real account holder, the system can flag an account takeover even when the correct password was entered.

4. Bot detection 

Much card testing runs on botnets, so detection tools separate automated traffic from human activity using signals like impossibly fast clicks and headless-browser artifacts.

5. Risk-based authentication (3-D Secure) 

The EMV 3-D Secure standard, maintained by EMVCo, lets a card issuer assess a transaction’s risk in real time. Low-risk purchases pass through a frictionless flow, while risky ones trigger a step-up challenge, such as a one-time passcode or a biometric check in the banking app.

The challenge in detection is identifying fraud without blocking legitimate customers, so the aim is not to add friction to every transaction but to reserve it for truly suspicious ones.

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 to contain the issue instantly. 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 ensures 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 breaks down the key differences between credit and debit card zero-liability protection, including liability limits, 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

Effective credit card fraud protection relies on a multi-layered defense that blends technology, rigorous internal processes, employee training, and proactive monitoring. 

Below, we outline essential steps your business should take to minimize risks, secure its payment systems, and ensure a 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. Add cybersecurity modules to your learning management system (LMS) to 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. Make sure they meet PCI DSS 4.0.1, the current Payment Card Industry Data Security Standard, whose full set of requirements became mandatory in March 2025.

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 the storage of Primary Account Numbers (PANs) 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 learns, false alerts decrease, allowing your team to prioritize genuine fraud risks.

4. Vet third-party vendors

A vendor breach can compromise your business’s defenses. Establish rigorous vendor assessments focused on PCI compliance, cybersecurity certifications, and response capabilities. Isolate or remove vendors that fail to meet your security criteria 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 to what their responsibilities require. Regularly update credentials and review access logs to address any exceptions and ensure continued compliance.

6. Conduct vulnerability assessment and penetration testing

Begin each quarter with a comprehensive vulnerability assessment of your cardholder data environment (CDE). Document every issue in a structured remediation log, assigning clear ownership and timelines.

Conduct internal and external 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 that accesses a system, thereby distinguishing legitimate customers from fraudsters. 

Our fraud protection engine has a proven 96% real-time detection rate, flagging and intercepting fraudulent transactions at targeted merchants. Here are some key ways it achieves this:

• Real-time detection: Uses 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 that accesses a system, enabling the 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 uses sophisticated techniques to detect and prevent fraud 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.