The Sneaky Way Credit Card Scammers Go Unnoticed

Lots of little fraudulent charges can add up to a big problem.

They say crime doesn't pay, but the headlines can certainly make it appear otherwise. Every big scam and successful fraudster seems to wind up going viral. But not every thief will get away with your life savings -- sometimes it's the small-time crimes that really pay.

And credit card scammers are some of the most proficient at nickel-and-diming their way to big bucks. One of the most pervasive types of credit card fraud isn't an unauthorized spending spree, but actually a few small charges that can fly right under your radar.

Small charges can be easily overlooked

In some cases, a small -- less than $5 -- charge on stolen credit cards is used to just test the waters. Once the thief has confirmation that the card works, they start swiping like a madman. But sometimes the small charges are the end game, with thieves using the "quantity over quality" approach to credit card fraud.

The key part of this strategy is that small charges are often overlooked, even by diligent cardholders who regularly check their accounts. Unless you save every receipt or maintain a checkbook-style ledger (yes, checkbooks still exist) it's hard to keep track of every coffee and snack purchase. What looks like a normal trip to your local big box store could really be fraud.

Moreover, many of the credit fraud alerts you can set for unauthorized purchases are typically for large expenses. For example, my cards are set to alert me about any purchases over $100 -- which wouldn't do much to warn me about a $5 charge I didn't make.

Issuers are fighting back with AI

It's not all doom and gloom, however. Issuers are getting pretty good at spotting what doesn't belong in your credit card purchases. And much of that comes down to comprehensive algorithms and artificial intelligence (AI) platforms.

Basically, the issuer's algorithms know what kinds of purchases you typically make, how often you make them, and where (geographically) you typically shop. When something hits your account that the algorithms find odd, the transaction can be flagged for further analysis.

In some cases, the transaction may be declined; in others, you may simply be notified. If you've ever gotten a text message from your bank asking about a given purchase, it was likely flagged as questionable by the bank's AI systems.

The hardest part for issuers when it comes to staying on top of fraud is often ensuring they don't get too many false positives. Fraud has a cost, both in money and in hassle. At the same time, few cardholders would be very happy if they had to verify every purchase before it could be cleared. Issuers must walk the line between effectively screening for fraudulent transactions and providing a smooth user experience.

Don't fear the fraudsters

While AI helps banks spot fraud before it becomes an issue, it doesn't catch everything. As a cardholder, you should do your part to avoid credit card fraud, too. This includes regularly checking your purchase histories to make sure everything looks like it belongs. If something does stand out as potential fraud, you can dispute the charge right from your mobile app or online account.

And, of course, if your card is ever lost or stolen, be sure to report it right away. You can even freeze your credit card from your phone if you've so much as misplaced it, stymying fraudsters before they even get started.

Either way, even if fraudsters get away with a few transactions here and there, don't stress. By law, you're only responsible for up to $50 of fraudulent transactions from a physical credit card -- and nothing from a scammer who is using your digital information. Plus, most card issuers these days offer $0 fraud liability clauses for their consumer cards. This means you won't need to pay a dime for unauthorized purchases. So be diligent with your cards, but know there are also tools out there designed to protect you.