Credit Card Fraud Explained

Credit card fraud is a term used for any theft and fraud committed with the use of a credit card. The term also covers the act of any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose of credit card fraud is to obtain goods without paying by obtaining unauthorized funds from an account. It is estimated that in 2006 the UK alone had a cost of over £428 million in fraud.

Until the card holder actually reports the card as being lost or stolen the card remains usable allowing time for a thief to continue making unauthorized transactions until the bank has been notified and the card consequently cancelled. In most cases, the cardholder is not actually aware of any fraudulent activity until they receive a credit card statement at the end of the month.

Types of card fraud:

Lost or stolen card fraud is when a card is stolen from yourself or home or lost. A thief then poses as the cardholder using the card for as long as possible before the official cardholder becomes aware and reports the card as stolen. Chip and pin is a new security measure which was introduced a security measure to reduce this particular type of card fraud.
Skimming or counterfeit card fraud involves the production of a cloned card where all genuine data of the original is transferred to a fake copy. This form of fraud can take place at any place of retail where a fraudulent employee has the correct device needed to electronically copy data.
Shoulder surfing occurs when a criminal will look over your shoulder and try to watch and record the numbers of your PIN which you punch in the machine, either a cash point or pay point, then use some form of distracting technique as they then steal your card.
Card-not-present fraud (CNP) includes fraudulent activity carried out over the internet, telephone, fax and mail order. Criminals obtain card details via these payment methods and keep any discarded receipts containing these details from the transaction made. Due to the fact that the cardholder is not present there is no way of checking the physical security features of the card, obtaining a signature or a PIN or guaranteeing that the information has been given by the genuine cardholder. This type of card fraud is now contributes to the largest portion of all card fraud within the UK.
Mail non-receipt card fraud is when a card is stolen in transit from the bank to the cardholder’s property. Properties with communal letterboxes are very high risk but a percentage of this particular type of card fraud does actually come from within the mail service itself.
Identity theft on cards occurs when a criminal attempts to open or access card accounts by using fraudulently-obtained personal information. This can be done by application fraud where stolen or false documents are used to open up an account under someone else’s name using stolen information or counterfeit documents. Alternatively key personal information is obtained for criminal use where the criminal will pretend to be the genuine account holder and deceive the bank arranging for payments to be taken from the account. Various details may also be changed i.e. addresses and the application of a new card along with the request for a cheque book then carried out.

The moment you notice anything you think might be suspicious relating to your cards, especially in your statements, contact your bank or credit card provider as soon as possible to report it so that the card can then be cancelled. Most banks do provide a 24 hour help line designed to prompt customers into reporting incidences at the earliest possible convenience.

Published on September 29, 2007