Methods of Credit Card Fraud

With the increased use of credit cards the world over, also comes new and inventive methods of credit card fraud. No one is exempt from a possible fraudulent activity. If you have discovered that your card is lost or stolen, it's time to notify the credit card company and be watchful over your monthly statements.

In addition, being aware of some of the common methods used by people who have gained access to a stolen credit card, can give you a heads up of what you need to look for and be prepared to  tackle. (By the way, a lost card becomes a stolen card when someone that is not unauthorized to use your card, take the liberty to do so.)

Self-service gas stations are a common target for stolen cards because there is no way to verify the cardholder’s identity. However, some gas stations are requiring the cardholder to key in some identifying information, such as the user's Zip Code or Postal Code.

The individual only has two opportunities to enter the Zip Code before the credit card company will put a lock on the individual’s credit card, making it impossible for the individual to complete the transaction. In addition, the card is immediately deactivated, and the true credit card holder will be notified by phone about the possible thief. It is then, that you can either clarify that it was your mistake, or verify that your card was being used illegally and to please deactivate your card. (Note: If it was your mistake, the credit card company will reactivate your card.)

Internet Credit Card Fraud against merchants is major routes for would-be credit card scam artists. Why?  Because the card is not physically present, the merchant must rely on the honestly of the cardholder making the purchase (or the individual purporting to be the cardholder).

Here is an example of an online credit card fraud. The thief will make a small purchase, to verify that the credit card is legitimate. If the transaction goes through, they will continue to make small purchases against the account. Why?

 It is the calculated bet by the fraudsters that many of the fraud prevention features that are in place, will not be used for small transactions.  In many cases, this is true.   In fact, these small transactions, in most cases,  will not raise a red flag to either the card issuer or the merchant.

Credit card account take over happens when the credit card thief attempts to take over another person’s account. The thief will gather information about the cardholder then; contact the card issuer to request a change of address. If he is successful with this request, he will wait a couple of days, and then report the credit card stolen. The new card is then sent to the thief.

To protect consumers and their reputation, merchants in some cases, have been asking the cardholder to send a photocopy of the credit card and a statement to ensure the legitimate use of the card. However, if the scam artist has already gotten the new card in his hands, with the change of address, it’s counterproductive, in my opinion.

This is a fairly common credit card scam that takes place over the phone. A robocall is sent out to a cardholder(s). The message will state that you are paying too much interest on your credit card, and if you call this number, they can get a lower rate for your credit card.

If you call, and you accept their offer, they will ask you for an upfront fee to get this change done. (Note: You do not have to pay a fee to get a lower rate. If you want a lower rate, and you are a customer in good standing, you can barter your own terms.)

Rule of thumb, never give your credit card account number to anyone over the phone.

Skimming is the taking of credit card information from a legitimate transaction. They do this in two ways, by photocopying the receipt of the credit card transaction or by using an electronic device (skimmer) to skim the card. A common place for this type of credit card fraud is at a restaurant or bar.

Skimming is difficult for the cardholder to detect, but it is easy for the issuer to identify the fraud. All the issuer has to is:

1) get the list of all the complaints in one area where the skimming is purported to have happened

2) identify the merchant that is common to all the credit cardholders that have been victimized.

Whether you lost or your credit card was stolen, the potential damage can be great, especially if you have a high credit limit.

Upon discovering your card is missing, it is important that you report it immediately to your card issuer. When you call the credit card issuer be sure to have the following information available:

1. Your account number
2. When you noticed your card was missing
3. The last purchase made
   

Upon notifying the issuer of your lost or stolen card, the credit card company will close your account and issue you a new card. However, this may not be an end of your problems. The next step will be to look over your statement for the next several months and identify any charges that you may have not made.

According to the Fair Credit Billing Act, if any unauthorized charges are made against your account (before you realized it was stolen), the maximum amount that you will be liable for is $50. If any charges are made after you reported the card stolen, you will not be liable for any of the charges.

In addition, many credit card companies have fraud protection insurance that you can purchase. The cost is minimal for the protection and peace of mind that you will receive in return for your small outlay of money.

This is just a small sampling of the different methods of credit card fraud that can affect, customer, issuer and merchant. The bottom line, you must stay informed, and know where your credit card is at all time.