Credit Card Fraud Detection vs Credit Report Monitoring: What’s the Difference?

With all of us connected online, fraud has become big business for anyone looking to deceive for profit. Unsurprisingly, credit card fraud tops the list of so-called identity theft crimes. To better understand this, businesses and consumers have better tools. For example, there are credit card fraud detection options for those who accept payments, such as retailers. Additionally, you will find various credit report monitoring services readily available to better protect spenders.

Detecting credit card fraud and monitoring credit reports are two entirely different beasts that target different audiences. And yet each is designed to make it harder for criminals to make illegal purchases, steal identities, and everything in between.

Credit card information for sale

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How widespread is credit card fraud?

In the United States, the Federal Trade Commission (FTC) is responsible for helping consumers who are victims of identity theft recover. He also publishes a Annual Report (opens in a new tab)detailing the scale of fraud year over year, not only in the digital age, but also during the pandemic. Unfortunately, the news is not good.

In 2021, people reported losing more than $5.8 billion to fraud, which was up $2.4 billion from the previous year. The median loss for those who declared was around $500, although the number is much higher for those aged 70 and over. Credit card fraud was second only to government documents or benefit fraud in the past year.

Most credit card fraud cases in 2021 involved criminals opening new illegal accounts rather than stealing existing accounts. Both types, however, are bad for businesses and consumers because they can lead to losses and increased interest rates.

Thieves operating in credit card fraud do so by physically stealing cards or tricking account holders into providing credit card numbers online or over the phone. Many criminals have also turned to the dark web for information about consumers seized during data breaches. Then they use this information to open new credit card accounts on behalf of the victims.

Credit card fraud leads to higher interest rates for law-abiding cardholders and negatively affects their credit rating. It can also lead to higher prices of consumer goods.

credit card

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What to know about credit card fraud detection

When someone uses a credit card online or in person, a series of authentication steps take place behind the scenes. As a result, most transactions are completed quickly and easily. However, the attempted purchase is canceled when credit card fraud is detected.

The cause of cancellation is ultimately up to the merchant, who may employ various tools and techniques to detect possible fraud. For that, they are not reinventing the wheel. Instead, companies use credit card fraud detection software such as Actimize, Bolt,, etc.

Among the tools included in this type of software are:

  • The CVV is the three or four digit number on the back of the card. If the merchant receives the wrong number, they can report the transaction.
  • AVS: Known as the Address Verification Service, AVS matches credit card numbers with the physical address. A flag goes up when the client provides incorrect information.
  • AI and Machine Learning: Special algorithms are now used to analyze the likelihood of credit card fraud. This may include fraud scoring.
  • Geolocation: companies know where customers usually use their bank cards. If this suddenly changes, a transaction may be flagged and require additional information from the customer.
  • Velocity Limits: Spending too much in a short time? Many more transactions than usual? Both could cause a problem.

As you can see, credit card fraud detection is designed to prevent illegal transactions from happening in the first place.


(Image credit: Lucia Grzeskiewicz from Pixabay)

What to know about credit card monitoring

The transaction will eventually appear on your monthly statement if someone is using your credit card illegally. You can turn to a credit card monitoring service for added security, which will alert you whenever it detects something irregular. With this information, you can quickly contact your credit card company for resolution.

As mentioned earlier, credit monitoring services offer various benefits to consumers and are available in both free and paid versions. The Services are ideally suited for uncovering potential identity theft, fraud and misreporting on consumer credit reports.

A good rule of thumb is to identify the most important features and choose a service that best fits those needs. The best solution for some might be to sign up for more than one service to cover all the bases. For example, choose two that are free while subscribing to a paid option.

Examples of the type of transactions a credit monitoring service can detect include:

  • Opening a new credit account
  • Irregular Purchases Paid on an Existing Card
  • Late payments
  • Closed accounts
  • Changes of address
  • Other suspicious activity

What is clear about credit monitoring services is that they were designed to alert the consumer afterwards. Illegal transactions are those that appear and have not been detected earlier. Therefore, these services are not preventive.

Some of the credit card monitoring services we recommend include IdentityForce, CreditWise, Experian IdentityWorks, PrivacyGuard and many more.

You might also consider checking out the best identity theft protection tools of the year.

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