Understanding and preventing bank account fraud

Author: Sophia Acevedo, Tanza Loudenback

Source: Business Insider

• Bank account fraud can happen through card skimming or when someone steals your debit card.
• Debit cards don't offer as much protection as credit cards, and you can lose money.
• To reduce risk, review your bank statements frequently and avoid using your card at certain places. 

A debit card can be a useful tool for accessing money in your bank account, but you should be mindful of where and when you use it.

If you're a victim of identity theft or bank account fraud, you may be liable for significant losses. You may be able to recover from identity theft by reporting it quickly to the necessary institutions, though.

Common types of bank account fraud

Stolen debit card

Debit card fraud occurs when an unauthorized person uses your card without your permission.

A criminal can most easily access your card information if your debit card is lost or stolen.

In 2022, the Canadian Anti-Fraude Centre found that credit card fraud accounted for 438 of fraud transactions and resulted in a total loss of $571,200. 

ATM and card skimming

Criminals may also be able to access your debit card information through a process called card skimming.

Card skimming can happen anywhere — a shop, a restaurant, or an entertainment venue. People will utilize devices to capture card information, which they can later use to clone a card or make online purchases.

Phishing and identity theft

Phishing emails, texts, and phone calls look like they're coming from a person or organization you trust, such as your bank. They're really coming from a clever scammer who is trying to get you to share identifying information, such as your bank login credentials, so they can gain access to your account.

Never access your bank via a link provided in an email or text message. If you receive a phone call from someone purporting to be a bank representative, tell them you're going to hang up and call back. Find the official customer service phone number on the back of your debit card.

Preventing bank account fraud

Review bank statements monthly and online transaction activity at least once a week to see if there's any unusual activity on your account. In doing so, you can minimize risk and prevent any unauthorized person from making debit card transactions.

Common places where fraud can occur

Be extra careful when using a debit card in the following situations: 

• Gas stations: Breyault warns that gas stations are a common place for card skimming. You also may be asked to swipe your card instead of inserting it or using a contactless tap, which isn't as secure.
• Restaurants/bars: At a sit-down restaurant or bar, you want to be mindful of your payment method. If the waitstaff walks away with your card, Breyault says you might consider using a credit card instead since it offers more protection.
• Travel: If you're traveling to an unfamiliar place or outside Canada you'll want to be mindful of card skimming and older card readers. It's also generally advised to notify your bank that you're traveling so your cards won't be declined. It might be a good idea to exchange currency if you want to have extra payment methods abroad. 

What to do if you're a victim

Call your bank immediately, and ideally within two business days of the fraudulent transaction.

Your financial institution will conduct an investigation. Funds in your bank account may be frozen while the bank investigates.

The investigation may take anywhere from a few days to a few weeks, however, the best banks typically conduct investigations more quickly than community banks.

If the bank determines that fraud occurred, you may have access to those funds again. However, be aware that you may not get all your money back.

Consider setting up a fraud alert with one of the credit bureaus to prevent the offender from opening a line of credit in your name.

Bank account fraud FAQs

How can I tell if my bank account has been compromised?

Review your online transaction history at least once a week. If you see a charge that you did not make or authorize someone else to make, your account is likely compromised.

What are the first steps I should take if I suspect bank account fraud?

Call your bank immediately to report unauthorized bank transactions. Timeliness is a crucial factor in your liability for any losses.

Can I get my money back if my account is compromised?

Your ability to recover lost funds often hinges on how quickly you notify your bank. Most banks offer fraud protection, but only if you report it promptly.

How do fraudsters typically gain access to bank accounts?

Common methods include stealing your physical debit card, ATM skimming, and phishing calls or emails.

What are some emerging trends in bank account fraud?

Criminals use sophisticated methods to gain access to bank accounts through artificial intelligence, as well as social targeting in peer-to-peer (P2P) payment networks.

This article was written by Sophia Acevedo and Tanza Loudenback from Business Insider and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.