Credit Card Fraud
Credit card service scams make up what amounts to a billion-dollar business, with seemingly unlimited possibilities to exploit merchants, banks, and consumers. Card companies are striking back with an effort to recoup some of their losses with improved technology.
The cost for credit card fraud in the U.S. was more than $8 billion in 2015. About 52% of credit card fraud transactions occur at retail stores and the other 48% take place online or other places where the card is used. Banks and card companies absorb most of the financial responsibilities for the fraud. However, in October of 2015, major card companies installed an EMV chip in credit cards and that is expected to significantly reduce fraud at the retail store level.
The EMV (Europay, MasterCard, Visa) chip creates a unique transaction code that can’t be duplicated. If you use the card at shop A, it produces a unique transaction code. If you go to shop B and make a purchase, the transaction code changes again to another unique setting.
Thus, if a thief steals the information from your card at shop A and tries to use that information anywhere else, the transaction will be denied because he is attempting to use a duplicate transaction code.
This is a dramatic change from the previous system where credit cards used a magnetic stripe that contained unchanging data that was duplicated for every transaction. Each time you swiped a card, it used the exact same transaction code as it did anywhere else.
The fact the code never changed makes it easy for thieves to steal either your credit card or the information on the magnetic stripe and use it to defraud you and merchants over and over again.
The EMV card has been used for years in Europe and other places in the world, but it only recently has been introduced in the United States. Merchants are not required to use it – yet! The cost of implementing the system has discouraged small and medium-sized businesses from using it. However, because banks and card companies are going to force merchants to absorb a larger share of money lost to fraud, it seems inevitable that these businesses eventually will adopt the technology.
Additional Credit Card Fraud Practices
Merchants, banks and card companies must deal with the endless ways that credit card thieves have found to exploit the current magnetic stripe card system and commit fraud with that information.
Some of the common ways credit card fraud is committed include:
- Lost or Stolen Card – If your card is being used without permission, report it immediately. It is a costly event for everyone involved.
- Skimming – Your data is skimmed from the magnetic strip on your card and then used to encode fake cards or make online purchases. Restaurants, ATM machines and gas stations are popular skimming sites.
- Phishing – Computer hackers send malware to you via email. When you open the attachment or click on a link, it instantly downloads a program that gives the thief access to all the information on your computer, which could include every keystroke, including passwords.
- Fake Cards – A card is created that appears to be a legitimate credit card, but has a bogus name and numbers that are not associated with any credit card company.
- ID Theft – If a criminal gains access to your personal information (name, address, social security number, etc.) they could use the information to open new accounts with it or take over existing accounts.
- Change of Address – A criminal could use your name and request a change of address for billing, then call the credit card company and ask that a replacement credit card be sent to the fake address. Reduce Risk of Credit Card Fraud Former FBI Director James Comey has said: “There are two kinds of big companies in the United States. There are those who have been hacked … and those who don’t know they’ve been hacked.” When you discover that fraud has been committed with your credit card, it is imperative to act quickly to limit damages to all parties involved. The first thing consumers must do is call the bank or company associated with the account and close it immediately. This helps protect all parties involved. It is helpful if you file a report with the Federal Trade Commission, which uses the information to spot trends in identity theft to help them break up large rings of thieves. The final stop is a series of precautionary moves to reduce the damage from any information that was stolen. Things like changing passwords and pin numbers, contacting utility and phone companies to alert them in case someone tries to open an account in your name and maybe even getting a new driver’s license are all good ways to ensure you don’t suffer from the loss of information.
- The next step is to file a police report on fraudulent credit card activity to serve as proof should you need to contest credit card charges or have a dispute with the card company. The police likely won’t try to solve the case, but there is proof you were innocent of wrongdoing and it could help them solve identity theft cases.
- A lost or stolen card could have a significant effect on your credit score so the next step should be to contact the credit reporting agencies and make them aware. The nation’s three credit agencies will put a fraud alert on your credit file, which tells lenders you have been a victim of fraud.
- Consumers usually are not responsible for fraudulent activity with a stolen credit card or account number. The Fair Credit Billing Act limits liability to $50.
- Reporting Credit Card Fraud
- If you have used your credit card with any of these businesses, it is very likely your personal information (at least) and credit card number (at worst) have been compromised. With so much compromised data available, it may take some time before you see fraudulent activity on your credit card.
- Computer hacking for personal, credit card or bank account information is an increasing problem for every consumer. There have been so many data breaches at major companies that experts in the field say it is far more likely that your personal information has been compromised than not.