Prevention, Detection, and Reporting
About 0.1% of all credit card transactions are fraudulent, which may seem small but actually accounts for huge financial losses and financial losses from fraudulent transactions. So what is credit card fraud and how can you prevent it?
Credit card fraud defines any form of fraud or theft committed using a payment card such as a credit or debit card. The aim of credit card fraud is to purchase goods without paying, steal money from someone else’s account, or might be part of a larger identity theft scheme.
There are two forms of credit card fraud:
The latter being the most common form with card-present fraud not being as common. Your account could be compromised without you even knowing and can occur in a huge variety of different methods and means.
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As modern technology advances banks have become wiser to the methods applied by fraudsters, as a result, hackers, identity thieves, and other fraudsters have developed more proficient methods of compromising a person’s financial data.
Here are some examples of methods employed by fraudsters to obtain financial data, so you know what types of behaviour to be on the watch for:
This generally occurs as part of a greater identity theft scheme. This is when other people apply for credit or a new credit card using your name. They will usually first steal sensitive personal documents and data which are then used to create a fraudulent application.
This is a form of fraud where a criminal skims information contained on the magnetic strip of your credit or debit card. This information is then used to encode a fake card or complete fraudulent transactions.
As discussed earlier this is one of the more common methods of card fraud, this is when somebody learns the expiry date and account number of your card. This means they can make transactions via the phone, mail, or internet without having a physical card in their possession.
Often merchants will also require the card verification number making this form of fraud slightly more difficult, but if a fraudster has your card details they will likely know the CVN too. Sometimes a criminal can guess the code since there are only 999 possible code configurations. When this occurs criminals may attempt to order items of very low amounts whilst they figure out the right number.
This is type is usually committed via skimming when a fake magnetic swipe card holds all of your card details. This fake strip can then be used to create a fraudulent and fully functioning card.
This type of fraud can also be committed by someone who knows your card details to create a ‘fake plastic’. This is a fake copy of a card however the magnetic stripe or chip on the card doesn’t actually work. To bypass this the fraudster may convince a merchant that there is something wrong with their card, at which point the merchant will enter the transaction by hand.
This is a form a credit card fraud in which the details of your card become known to a criminal, your details are then used to take over a card account or open a new one. This is one of the most difficult types of fraud to identify and recover from since it can take a long time before you become aware of the crime.
This type of fraud takes place when you are expecting a new card to arrive via mail. In this case, the criminal will intercept the delivery of the card and will then register the card to use to make purchases and more.
This is when a strong magnet erases the metallic stripe on a card. This is done so criminals can then change the details on the card itself so that they match those of valid cards.
An account takeover is one of the most common forms of credit card fraud. This occurs when a criminal gets ahold of all of your information and relevant documents, this is usually done online. They will then contact the credit card company and pretend to be you, asking to change the address. A replacement card is then sent to the fake address and the criminal will be able to make changes.
This is when a customer’s information is stolen from a merchant’s database. This information could include both your credit card detail, name, address and other sensitive personal information. This form of breach doesn’t solely happen when data from merchants is compromised, this information could also be compromised when using your card at a hotel, doctors office, or to pay utility bills. When this occurs, you will receive a letter from the merchant to inform you that data has been compromised.
Phishing is a cybercrime where perpetrators send out false emails to unsuspecting cardholders. These criminals may pretend to be a company’s warranty department, a bank, credit card company, sometimes even the police or other legitimate seeming sources. These emails will bait you into giving out personal information, these emails can often appear legitimate however if the logo looks odd or the language is poorly written then this is likely to be a scam.
Now that you are sufficiently warned on methods commonly used by scammers, we can move on to discussing how to detect credit card fraud. Detecting fraudulent activity can take a bit of time out of your day however not noticing that someone else is using your details could potentially land you with a hefty bill.
Firstly, check your bank statements on a regular basis. This means that if you find a charge which you don’t recognise, you can call up your card provider and bring it into question before any substantial damage is caused. Secondly, regularly check your credit reports. This can tell you if someone has applied for credit cards whilst pretending to be you. You could also set up alerts from your bank for payments made using your card, this means you will receive a notification every time your card is used.
If your credit card is declined or the provider tells you that you’ve reached your credit card limit, it could mean that someone has been using your card details. Check for high-value payments and payments you don’t recognise before then getting in contact with your provider if you find any potentially suspicious transactions.
The first step to avoiding financial loss from credit card fraud is to report suspicious activity immediately, banks may hold you negligent if you don’t inform them of any concerns before the situation gets out of hand.
Card issuers already, maintain several countermeasures against fraudulent spending including software that can estimate the probability of fraud. This means the merchant may be instructed to call the card issuer for verification or to decline the transaction if a purchase appears suspicious. Sometimes they might freeze your card until further notice to prevent any further spending.
When it comes to cardholder responsibility for preventing credit card fraud, the best when to prevent credit card fraud along with identity theft is to secure your sensitive personal as much as possible. This means, keeping documents in a safe place out of sight, shred letters before they go in the bin to avoid leaking sensitive info, not giving out pins or passwords, chop up old credit cards, and always be sure to log out of bank and web accounts especially when using a public computer.
You might also want to be careful with unexpected phone calls, letters, emails, or house-callers to avoid phishing scams. Make sure your compute and phone software is up to date to prevent hacking attempts, don’t use public wifi for transactions, and make sure the websites you purchase from are secure. I would also advise checking your card provider and bank for their own advice on credit card scams as this advice can be better tailored to your own personal finances and situation.
Just be aware of your own personal information and possible ways it could be compromised because sometimes despite your best efforts you can still become a victim of credit card fraud.
If you suspect that you are becoming a victim of credit card fraud contact your credit card company. Then, change your passwords and PINs. They may have gotten access to just one account or many accounts and services, so be sure to be thorough.
After completing these steps you will need to go through your bank and credit card statements for a few months prior. You should also get a copy of your credit file to ensure that no-one has used your identity to apply for credit cards or loans without your knowledge.
Sometimes a bank might claim that you have been negligent and so cannot receive a refund for the fraudulent spending. This might be the case if it has been 13 months or more since the fraudulent activity occurred, your card provider can prove that you authorised the transaction, you acted fraudulently, or you didn’t protect your card details properly for example keeping your PIN code in your wallet.
However, if you have completed all these steps and have taken proper precautions to avoid credit scams then you should be eligible for support from your bank, card provider, and possibly legal support if needed.
If you would like to report a case of credit card fraud, then Trader Defense Advisory can help you. If you require legal advice and aid in ensuring a refund of any lost expenses you can rely on their team of well-informed professionals to help you get the advice you need. Visit them on their webpage for a free consultation or to report a scam and get the legal support you need to fight back and recover your funds.