How Credit Cards Work

By: Melanie Radzicki McManus  | 

Credit Card Safety

Americans are making some 20 percent of their retail purchases online, for a total of nearly $800 billion in 2020. While e-tailers (electronic retailers) would love these figures to keep climbing, consumers still have some worries about shopping online. Credit card fraud is always a threat, both on the internet and out in the real world. And hackers have found ways to steal credit card numbers from websites.

In 2019, Capital One admitted 100 million of its credit card applications were accessed by hackers, resulting in an $80 million fine. These are the kinds of stories that deflate consumer confidence in online credit card use. While internet companies and businesses with an online presence have taken responsibility for security breaches and resulting losses to credit card users, there's also the problem of identity thieves who use stolen credit cards to make online purchases. And while unfair or fraudulent practices by credit card companies are not commonplace, they do happen.


The good news is that consumers are protected by law. In the case of credit card fraud online or off, federal law limits your liability to a maximum of $50 of the amount stolen. Often, you don't have to pay a dime.

There are also a lot of simple steps you can take to protect yourself and your credit card. Here are several.

  • When shopping online, go directly to the merchant yourself. Don't click through from an email, no matter how official-looking, as it might be a phishing scam.
  • When you use your card at an ATM, enter your PIN in such a way that no one can easily memorize your keystrokes.
  • Don't throw out credit card statements or receipts without first shredding them.
  • Authorize two-step authentication on your credit card account. This way if someone gets your account login, they won't be able to access more account information.
  • Ignore any credit card offer that requires you to spend money upfront or fails to disclose the identity of the card issuer.
  • Make certain you get your card back after you make a purchase. One practice to help you remember: Leave your wallet open in your hand until you have the card back. Also, make sure that you personally rip up any voided or canceled sales slips.
  • Always keep a list of your credit cards, credit card numbers and toll-free numbers in case your card is stolen or lost.
  • Check your monthly statement to make certain all charges are your own, and immediately notify the card issuer of any errors or unauthorized charges. (More on this later.)

When you're applying for a credit card, make sure to pay close attention to the application form. Some forms provide a box that you can check to allow or disallow the selling of your information to mailing lists. You can also protect yourself by taking your name off the major credit bureaus' mailing lists.

One way to do this is to visit The Consumer Credit Reporting Industry Opt-Out Prescreen website, run by Experian, Equifax, TransUnion and Innovis, the four major consumer credit bureaus. On this site you can fill out a form and opt out of receiving pre-approved credit or insurance offers in the mail for a five-year period. You can also call 888-5-OPT-OUT (888-567-8688). If you'd like to permanently opt out, you must do so by mailing in a form that you can access online or request over the phone. When you write to these companies, you'll need to provide your complete name, mailing address, date of birth and Social Security number.

The Direct Marketing Association (DMA) also tracks consumers who prefer not to receive solicitations by mail or phone. Check their Consumer Assistance site for more information.

Next, let's look at all of the fine print that comes on credit card applications. What is it really saying?