One of the advantages and drawbacks of using a credit card is that it creates a paper trail. This makes it possible for your credit card issuer to send you a bill for the charges you make. It also lets the issuer see where someone who stole your credit card used it, potentially making it easier to catch that person.
TL;DR (Too Long; Didn't Read)
Credit card companies can track where your stolen credit card was last used, in most cases, only once the card is used by the person who took it. The credit card authorization process helps bank's track this. However, by the time law enforcement arrives, the person may be long gone.
Credit Card Authorizations
The credit card authorization process creates an opportunity for tracking. When you, or a card thief, hands your card to a store clerk, he uses a card reader to send its information to a card processing company. That company checks with your credit card company to make sure that your card is good and that it has enough money to cover the charge. If it does, the charge gets approved and you – or the crook – get the stuff. Along the way, information on the store, its location and the amount charged gets passed through to your credit card issuer. This way, it knows where the card got used and can build a history.
"Tracking" Card Users
While your bank can track stolen cards, the tracking isn't perfect. It can generally only track the card if it gets used. Also, since people usually pay when they are on their way out of a retail establishment, it's reasonable to expect that they would be gone by the time that law enforcement could arrive. On the other hand, stores and card issuers can also use transaction information to pinpoint the exact time the stolen card was used and find video footage of the person from the store's surveillance system.
How Cards Get Stolen
Card thieves don't have to take your card to steal it. They can use the carbon copies that were part of the paper slips used to capture physical card imprints, too. At restaurants, waiters would write down the information on your card while running it for you. Now, theft has gone digital. Waiters can use small card-skimming devices in their aprons, thieves can attach readers to gas pumps and larger-scale cyber criminals can steal credit card numbers by the millions by hacking into corporate databases.
Card Theft and You
If your card gets stolen, it shouldn't matter to you whether or not authorities ever ever catch the thief. Under federal law, your liability for fraudulent charges is capped at $50 as long as you promptly report the theft, and, if your card number is stolen or you report the theft before your card gets used, you have no liability. Some card issuers might give you even more protection than this, too.