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What Credit Card Scammers Are Actually Doing?

What Credit Card Scammers Are Actually Doing?

High-Tech Organized Crime create Synthetic Frankenstein Financial Zombies!

Chris (Loogie) Luger
January 09, 2026

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I was curious and wanted to learn more about how these criminal pricks actually swipe our credit card numbers, and how credit card fraud is so prolific throughout the industry. And, sometimes doing the normal or right thing with your credit cards can make you look like a criminal. I had been traveling, and while in Chicago, my credit card called me because I used my card in another city and at a liquor store. Two things that didn’t follow my pattern of typical usage. So I thought I’d share some of what I found, and help us understand how some of this works, and most importantly how to help protect ourselves.

I’ve also heard from plenty of folks who tried to pay down their credit card balance early, add a family member as an authorized user, or make a mid-cycle payment to keep their utilization low, only to have their bank freeze the account or flag it for fraud. Meanwhile, the actual scammers are running circles around the system, racking up billions in fraudulent charges. Yeah… f’n billions!

So why does this happen? Why does paying your bill early raise those red flags while actual fraud often flies under the radar for months? The answer is way more interesting (and kinda disturbing) than you might think. After digging into how credit card fraud actually works, I realized that the tactics criminals use to game the system look eerily similar to things regular people do every day. And that’s exactly the problem.

Let’s pull back the curtain on how this whole mess works.

Synthetic Identity Fraud Explained

First, we need to talk about synthetic identity fraud. This isn’t your old-school, grandma’s stolen credit card situation. This is next-level stuff.

Synthetic identity fraud is when scammers create completely fake people from scratch. Yeah ya know the Synths from Alien 🙂 Fake people!

Anyway, they’re not stealing your identity exactly, they’re building a Frankenstein identity using bits of real data mixed with made-up information. Think of it as creating a financial zombie that walks around looking legit enough to fool the system.

This is what makes this scary. These fake identities don’t have real victims who notice something’s wrong and report it. There’s no actual person checking their credit report and seeing fraudulent accounts. The actual “person” doesn’t exist, so nobody’s complaining. The bank just writes it off as a credit loss when the fake person eventually ghosts on their debt.

This, also, isn’t some small-time operation. According to TransUnion, U.S. lenders faced approximately $3.3 billion in exposure to suspected synthetic identities by mid-2024. That number represents auto loans, credit cards, retail credit cards, and unsecured personal loans tied to people who literally don’t exist.

How Fraudsters Create Fake People

So how do these criminals actually pull this off? It’s disturbingly simple once you understand the process.

Prior to June 2011, Social Security numbers followed a predictable pattern based on geography and timing. Even though they’re randomized now (the Social Security Administration implemented SSN randomization on June 25, 2011), there’s still an algorithm involved, and people who know what they’re doing can work the system.

Scammers typically target Social Security numbers that don’t get used much. Kids and elderly people are prime targets because their credit files see little activity. True story. My Social Security number was used by my mom’s boyfriend to open credit cards when I was just an infant! What a dink! This is why freezing your children’s credit files isn’t just being paranoid anymore, it’s totally smart parenting.

And here’s what is really frustrating, we know all of our data is already out there anyway. The 2017 Equifax breach alone exposed sensitive information for 147 million Americans. Using Social Security numbers, birth dates, and even your mother’s maiden name for verification is basically worthless now. That horse left the barn a long time ago lol.

The Store Credit Card Strategy

Once scammers have their synthetic identity assembled, they need to bring it to life. Toss the lever to charge the Frankenstein identity with electricity! This is where it can get kinda clever.

The fraudsters walk into a retail store, maybe Target or Best Buy, and apply for a store credit card at checkout. The employees aren’t really trained to spot fraud, they’re basically incentivized to get as many applications as possible. So they happily run the application.

The scammer probably gets denied. But that application just created a credit file. Now this fake person exists in the system.

They repeat this process at a few different stores over several weeks. Each rejection adds more and more data to the credit file. Eventually, some issuer approves them for a tiny limit, let’s say $500. That bank figures their risk is minimal with such a small limit, but they just gave birth to a financial phantom baby.