The Threat of Credit Card Fraud
A credit card scam is a fraudulent scheme executed by thieves intending to make a quick profit. Credit card fraud costs consumers approximately $4.8 billion a year and merchants $190 billion a year. According to the Fair Credit Billing Act (FCBA) consumers can only be held accountable for unauthorized card transactions up to $50, leaving credit card companies with the unfortunate responsibility of covering the remainder. Needless to say, credit card companies are desperately invested in thwarting credit card scams that inevitably lead to fraudulent transactions.
Card-not-present fraud is a type of credit card scam in which the credit card does not need to be physically available in order for a fraudulent transaction to occur. Generally these scams are associated with transactions that transpire online or over the phone. In addition, card-not-present fraud can be manifested through criminal practices such as online phishing or merchant database hacks.
There are several common scams that fall into the card-not-present category. The first of these is called the interest rate reduction scam, which targets frustrated credit card users who want to reduce their interest rates and pay off their balances immediately. The scam begins with a phone call from someone congratulating you on qualifying for a program that enables lower interest rates and balance repayment plans. The caller explains that in order to activate this program a fee is required, thereby obtaining your credit card information for said fee.
Another card-not-present scam involves a phone call from someone impersonating an employee of your credit card issuer’s fraud department. This individual might claim that there is evidence of some suspicious activity on your account and in order to verify whether or not your account has been compromised, they need you to provide information. This scam is an attempt to get credit card information that can be used for fraud.
There is a scam involving fake front desk calls in which you receive a call to your hotel phone from someone posing as a front desk employee. This imposter explains that there’s been a glitch in the hotel’s computer systems and they need you to give your credit card information again.
Credit card skimming has been around for quite some time and is less frequent since the EMV or credit card chips have been instituted, but nonetheless is still a prevalent crime. Although most credit cards have the chips, many retailers are using out of date equipment that requires you to swipe the magnetic strip instead of inserting the chip. With credit card skimming, the scammer captures your credit card while you’re making a legitimate and seemingly normal transaction. Once a credit card has been skimmed it can subsequently be used to create fake credit cards.
The last major card-not-present scam is the free Wi-Fi ruse. In this con scammers will go to a heavily populated public space and create free Wi-Fi hotspots that don’t require a password. The intention is for unsuspecting victims to connect to this hotspot, leaving themselves and their personal information virtually vulnerable. Once you’re using the scammer’s Wi-Fi, he or she can access personal information in your browser history or decrypt information being sent over through secure websites.
Preventing Card-Not-Present Fraud
There are some preventative measures that can be taken to lessen your chances of being scammed or hacked. It is important to not volunteer or confirm any personal or financial information on a phone call that you did not initiate. Vigilantly monitoring your account activity is a great way to avoid being a victim of credit card fraud. While monitoring, you must immediately report unauthorized charges to your credit card company. It’s a good rule of thumb to be cautious of free Wi-Fi connections and to be careful of the information you send when you’re on any free Wi-Fi. Being aware and conscious of the existence of scammers and hackers will help you to be more intentional in the ways in which you handle both your personal and credit card information.
Card-present fraud is a sub-category of credit card fraud in which the card is physically presented to the merchant during the counterfeit transaction. Card-present fraud is easier to prevent and does not occur as often as card-not-present fraud. In these criminal scenarios, any type of preventative responsibility falls onto the shoulders of the merchants carrying out the transactions.
How Credit Card Companies are Cracking Down
In response to the billions of dollars lost to fraudulent transactions, credit card companies have implemented complex procedures for detecting fraud. These tactics include high-level technical algorithms and meticulous pattern tracking. Data analytics such as clustering and averaging are being used to determine typical buying behavior, alerting the system when there are outliers or anomalies. Credit card companies are utilizing sophisticated technologies such as cloud computing and machine learning. Cloud computing allows for an infinity amount of data to be analyzed and scrutinized for any suspicious activity. Machine learning is a process in which computer models are trained to evaluate a transaction and almost simultaneously decide its likelihood of fraudulence. When a card is declined by a cashier, more often than not it is a direct result of machine learning. When machine learning produces a high fraud probability score, the transaction is shut down.
The best tool in minimizing credit card fraud is being mindful of your spending patterns and your card’s physical location. While monitoring your card statements and credit reports, if you do happen upon some suspicious activity, be sure to act immediately. The first step is to call the toll-free number associated with your credit card (this can be found on your statement, on your physical card, and in your online account). Recognizing the warning signs of fraud can help prevent it or at the very least minimize the impact if an occurrence takes place. Transaction monitoring systems are now part of mobile apps and ID Theft Protection Systems. Set up your alerts so you can detect suspicious activity.