Payment fraud is a growing concern for anyone who uses a credit card for transactions, which, in 2023, was 82% of adult Americans^[1]. Among the many types of fraud that criminals use to steal payment card numbers, credit card skimming remains one of the most persistent threats. As the technology behind skimming gets harder to spot, it's more important than ever to understand how it works and what you can do to avoid it. 

In this guide, we’ll explain what credit card skimming is, how it works, and how it can impact your finances. We’ll also show you ways to spot the warning signs and methods you can use to protect your payment card information from this and other types of fraud. Plus, we’ll explore how virtual cards can safeguard your payment information.

What Is Credit Card Skimming?

Credit card skimming is a type of payment fraud that occurs when criminals steal credit card information using a covert device attached to a legitimate card reader. Usually, criminals install these devices on ATMs, gas pumps, point-of-sale machines, and other payment terminals. 

When you swipe or insert your card into a compromised terminal, the skimming device captures card details from the magnetic stripe, such as card numbers, expiration dates, and your name.

Criminals often use this information to clone cards^[2], make unauthorized purchases, or withdraw cash from your account, often before you even realize anything is wrong.

What Is a Credit Card Skimming Device?

A credit card skimming device can come in different forms. Some are external overlays that fit over the card reader slot, while others are connected directly with the ATM’s wiring. In recent years, skimming technology has evolved from bulky attachments to discreet, micro-sized devices, often consisting of just a few circuit boards and wires. 

Many skimmers now have Bluetooth capability, allowing thieves to retrieve stolen card data wirelessly using a nearby laptop or smartphone. Criminals also often install pinhole cameras or fake keyboard overlays to record the PIN as the customer enters it​.

Real-World Examples of Credit Card Skimming Incidents

To understand how skimming plays out in practice, take a look at these recent U.S. cases spanning different locations and tactics:

• Gas pump skimming ring—An organized crime ring in Southern California stole over $1 million by breaking into dozens of gas pumps and installing skimming devices to capture customers’ card data. The stolen information was sold for profit and used to create counterfeit cards for the criminals’ personal use^[3].
• Retail self-checkout lanes—In late 2023, supermarket chain Big Y discovered that unknown individuals had inserted skimming devices into the card reader slots of self-checkout terminals in at least ten of its Massachusets locations just before the Christmas holiday rush^[4].
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The Impact of Credit Card Skimming

While credit card skimming happens silently in the background, the consequences you might face can be loud, stressful, and costly. Let's look at the risks you could face:

1. Direct financial consequences
2. Credit score drop
3. Stress and anxiety

Direct Financial Consequences

Once criminals obtain your card information through skimming, they can make unauthorized purchases or withdrawals, potentially depleting your accounts rapidly. While many banks offer reimbursement for fraudulent charges, the process can take time, during which you might lack access to essential funds.

The FBI estimates that skimming costs financial institutions and consumers more than $1 billion each year^[5].

Credit Score Drop

When criminals skim your credit card and begin making unauthorized transactions, your credit score can suffer if the issue isn't addressed quickly. 

For example, if a criminal racks up unauthorized charges on your credit card, your outstanding balance suddenly increases, potentially increasing your credit utilization. Since utilization accounts for roughly 30% of your FICO credit score^[6], even temporary spikes can lead to noticeable drops in your credit rating.

Also, if you're unaware of these fraudulent charges, you might unintentionally miss payments, further affecting your FICO score.

Stress and Anxiety

Fraud victims often experience high levels of stress, anxiety, and depression due to the sense of violation and uncertainty associated with the fear of future fraud. A study found that over 27% of identity theft victims whose card numbers were misused reported moderate to severe distress, with the time spent resolving the incident contributing to these feelings^[7].

Best Practices To Avoid Credit Card Skimming Fraud

Here are some actionable strategies you can implement to lower your chances of becoming a victim of card skimming:

1. Learn to detect skimming devices
2. Use chip or contactless cards
3. Stay alert during transactions
4. Regularly monitor your accounts
5. Leverage virtual cards for added security

Learn To Detect Skimming Devices

While it may be impossible to detect every skimming device, you can still stay alert by following these preventive measures:

Use Chip or Contactless Cards

Chip cards are generally much more resistant to information theft due to the encryption and tokenization of data they use^[9]. However, they’re not completely immune to fraud. A technique known as credit card shimming^[10]—the equivalent of skimming for chip cards—can still be used to intercept some data, though it's far less common and harder to execute.

Contactless or tap-to-pay transactions offer even more protection. Unlike magnetic stripe swipes, tap or mobile payments can’t be skimmed by traditional skimming devices. Since these payments rely on encrypted, one-time-use codes, your actual card number is never even shared with the merchant.

Stay Alert During Transactions

Be mindful of your surroundings and any potentially suspicious people around ATMs or gas stations. Also, always cover the keypad with your hand when entering your PIN to prevent it from being captured on camera.

Regularly Monitor Your Accounts

Proactively monitor your bank and credit card statements, ideally through your banking app or online portal. Set up transaction alerts to notify you of charges or withdrawals above a specified amount. If you spot any charges you didn’t make, contact your card issuer to dispute them immediately. 

Quick reporting can limit your liability and help authorities trace the fraud. Under the Fair Credit Billing Act (FCBA), your liability for unauthorized credit card charges is capped at $50^[11]—but most issuers offer zero-liability policies. This means you’re typically not responsible for any charges resulting from stolen cards or card information.

Leverage Virtual Cards for Added Security

To protect your payment card details against the digital equivalent of skimming when shopping online, consider using virtual cards for online payments. These cards come with random card numbers, expiration dates, and CVVs that substitute your real card details. Even if criminals manage to get these temporary card numbers, your actual card details remain safe.

Some banks, like Citi and Capital One, offer virtual cards to existing account holders. Alternatively, a dedicated provider like Privacy allows you to create virtual cards without needing to open an account at a specific bank, offering greater flexibility, advanced card controls, and added convenience.

Secure Your Payments With Privacy Virtual Cards

Privacy is a BBB^®-accredited and PCI-DSS-compliant virtual card provider trusted by over 250,000 Americans. Once you link your bank account or debit card to it, Privacy allows you to generate multiple virtual cards tailored for one-time or recurring use.

You can choose from three types of Privacy Cards:

Privacy lets you apply the following controls to your cards:

• Set spending limits—Define a maximum charge amount to help avoid overbilling, hidden fees, or duplicate charges. Any transaction above your limit is automatically declined.
• Pause or close cards—Temporarily pause or permanently close a card to block all future charges, helping protect you from unexpected payments—especially during subscription cancellations.

Privacy Makes Online Payments Seamless

Privacy includes features designed to simplify and streamline your online shopping and payment experience:

• Browser extension—Available on Firefox, Edge, Chrome, Safari, and Safari for iOS, the Privacy Browser Extension autofills your virtual card details at checkout for faster, smoother transactions.
• Mobile app—Create, manage, and monitor cards on the go with the Privacy App for Android or iOS. Get instant notifications for every charge or decline so you can quickly respond to any unusual activity.
• 1Password integration—Easily store and manage your Privacy Cards within the 1Password browser extension alongside your passwords.
• Card Notes—Add notes like merchant names or renewal dates to each card for better organization and usage tracking.
• Shared Cards—Securely share card details with trusted family or friends without revealing your actual payment information.

Getting Started With Privacy

To get started with Privacy, you have to be a U.S. resident at least 18 years old and have a checking account with a U.S. bank or credit union. If you meet these criteria, setting up your account is simple—just follow these four steps:

1. Create an account
2. Verify your identity by submitting the required KYC information
3. Connect a funding source, such as a debit card or bank account
4. Generate your first Privacy Card and start using it online

Privacy offers four monthly plans to match different user needs, as you can see in the table below:

References

^[1]The Federal Reserve. https://www.federalreserve.gov/publications/files/2023-report-economic-well-being-us-households-202405.pdf, sourced April 4, 2025

^[2]Federal Reserve Bank of Kansas City. https://www.kansascityfed.org/research/payments-system-research-briefings/did-card-present-fraud-rates-decline-in-the-united-states-after-the-migration-to-chip-cards, sourced April 4, 2025

^[3]United States Secret Service. https://www.secretservice.gov/newsroom/releases/2023/07/skimmer-gets-prison-million-dollar-financial-identity-theft-scheme, sourced April 4, 2025

^[4]Boston. https://www.boston.com/news/local-news/2024/02/20/card-skimmers-used-at-big-y-locations-across-western-mass/#:~:text=Big%20Y%20said%20it%20was,surgical%20mask%20inside%20multiple%20stores, sourced April 4, 2025

^[5]Federal Bureau of Investigation. https://www.fbi.gov/how-we-can-help-you/scams-and-safety/common-frauds-and-scams/skimming, sourced April 4, 2025

^[6]Experian.https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-affects-your-credit-scores, sourced April 4, 2025

^[7]U.S. Department of Justice. https://bjs.ojp.gov/document/vit21.pdf, sourced April 4, 2025

^[8]First Education Federal Credit Union. https://firstedfcu.com/how-to-spot-skimmers-at-the-gas-pump-and-atm/, sourced April 4, 2025

^[9]DataVisor. https://www.datavisor.com/wiki/card-skimming/, sourced April 4, 2025

^[10]Experian. https://www.experian.com/blogs/ask-experian/shimming-is-the-latest-credit-card-scam/, sourced April 16, 2025

^[11]Federal Trade Commission. https://consumer.ftc.gov/articles/using-credit-cards-and-disputing-charges, sourced April 4, 2025

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