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9 Types of Credit Card Fraud That Happen Everyday
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9 Types of Credit Card Fraud That Happen Everyday

Around the world, there are millions of people who have credit cards. Using a credit card is an easy way to make online purchases, especially if you don’t have enough cash. They can help you save money on interest and give you a chance to earn reward points. Additionally, there are also lenders who offer credit cards for people with bad credit loans. But did you know that there is another side to this? Using your credit card regularly not only has its own benefits but also entails risks of theft and fraud.

This article will tell us more about credit card fraud and the importance of being aware of the risk that comes with it.

What is credit card fraud?

By definition, credit card fraud refers to the fraudulent use of a credit card that involves the theft of the cardholder’s personal information. Credit card thieves now have an easier time than ever stealing your information thanks to the internet and the several eCommerce sites that come with it.

Before the internet expanded into society, credit card theft may have been imagined as a figure in all black snatching your card from your wallet. However, con artists now have a variety of methods for taking money from your credit card, and the majority of them don’t require your actual card.

Types of credit card fraud

There are several types and kinds of credit card fraud. It can take place in person, on the phone, through text messages, or online. The theft of your cards from your mailbox, information theft due to a data breach, and deception via bogus emails are all possible. These are handful of the options.

1. Card-not-present (CNP) fraud

Credit card numbers and personal information are stolen by scammers, who then use the information to make transactions over the phone or online. Because there is no physical card to inspect and the merchant cannot confirm the buyer’s identity, CNP fraud is challenging to avoid.

2. Counterfeit and skimming fraud

Despite the widespread use of cards, credit card skimming continues to occur. Devices called skimmers are used to steal credit card data from the card’s magnetic strip. They are attached by scammers to credit card readers at ATMs, shops, gas stations, and other establishments. After that, they utilize your card to make purchases by either selling the information to other con artists or using it themselves.

3. Lost and stolen credit card fraud

This is the type of credit card fraud wherein the thief take someone else’s credit card or uses a card that has been misplaced is one of the simplest types of credit card theft. However, you can avoid the worst of the damage by freezing or cancelling the card as soon as you can by calling your bank. But some of them even let you do this with the click of a button in their mobile banking apps.

4. Card-never arrived-fraud

In 99.9% of cases, you will receive your credit card in the mail after applying for one. Fraud involving cards that never arrive occurs when they are either stolen from your letterbox, which is more common, or they are intercepted before they arrive.

The Australian Payments Network advises building a lockable mailbox or, at the absolute least, inspecting your mailbox frequently to guard against this kind of scam.

5. False application

False application fraud happens when an account is opened using the identity or information of another person. It’s possible that someone may apply for a credit card in your name, rack up a lot of debt, and damage your credit. You may also be charged for the repayments if they apply for a card under a different name but link your bank account to it. Before you realize you’ve been duped, someone might rack up thousands of dollars on a credit card or entirely ruin your credit score. This can eventually affect future loan applications.

6. Account Takeover

When a fraudster gains access to another person’s account, it is called an account takeover. The issue is that the account may be connected to a credit card, and from there, thieves can steal the information and start online payment scams.

If the account serves as an eWallet, the issue is significantly worse. When a fraudster has access to a BNPL, crypto, or neobank account, they may practically withdraw or move money right away.

7. Phishing

A typical way to collect personal information is by phishing. Phishing scams have developed over time from obvious emails promising an “inheritance” to occasionally difficult-to-detect texts, emails, and faked websites. The goal of phishing is to trick the victim into clicking a link and entering their personal information. These can appear brazenly apparent or convincingly realistic depending on their level of complexity. After obtaining this personal information, fraudsters can utilise the bank information for a variety of illegal transactions.

8. Pagejacking

This happens when online fraudsters design websites that closely resemble trustworthy websites. Customers are then sent to a fake website where they can be easily duped into making a transaction and giving criminals access to their credit card and personal information.

9. Data breaches

Consumers can reveal their financial information without purposefully clicking a link or going to a fake website. Sometimes, a data breach that exposes this information causes millions of dollars in harm. Memorable breaches include those at Target and Marriott, which exposed the financial and personal information of millions of customers and cost millions of dollars in penalties and legal fees.

10. Card Testing

Card testing, which is categorised as credit card fraud, happens when con artists make a number of small purchases to test the viability of the stolen data. The bad actor frequently makes larger purchases to use the whole balance on the card after these transactions have cleared. This kind of fraud is typically committed online and can lead to expensive fines and chargebacks. Card testing is a frequent tactic used by con artists to check their proficiency with the payments once the information about them has been made public, whether through phishing, breaches, or stolen identities.

How to detect credit card fraud?

Using the following equipment and methods, businesses identify when credit card information has been stolen.

●    Monitor for suspicious transactions

It is crucial to review client information carefully to search for fraudulent activities. Red flags include incorrect invoicing and shipping information call for further investigation. Even while high-value and speedy shipment from unknown purchasers isn’t necessarily a sign of fraud, double-checking the information may help a company save time, money, and reputation.

Businesses should also keep an eye out for tiny transactions that happen quickly one after the other since this is a certain sign of card testing. To avoid this kind of fraud, transaction processing must be stopped and no merchandise must be shipped.

●    Provide responsive and helpful customer service

The first step in combating friendly fraud is to offer attentive and helpful customer service. Additionally, ensuring that payment descriptors are obvious and coincide with the company name can assist stop friendly fraud started by perplexed clients. Maintaining a record of repeat offenders and ceasing business with them may also be important if this kind of fraud is common.

●    Card Security Features

To stop fraudulent activity, credit card networks have created a number of security mechanisms. These consist of:

  • Address Verification Service (AVS): Using the cardholder’s registered address, the Address Verification Service (AVS) may verify the cardholder’s identification. The address is verified using the bank’s files.
  • 3-D Secure (3DS): A security measure that asks customers to input a code to finish a transaction. Under various names, such as Visa Secure (Visa), SecureCode (Mastercard), or SafeKey, several card issuers provide the service (American Express).
  • CVV: A CVV, or Card Verification Value, is a three-digit number that may be found on credit and debit cards. Its purpose is to confirm that the card was actually in the customer’s possession when the transaction took place.

●    Risk scoring

A common risk management technique called risk scoring makes use of rules to evaluate risk. They aid in the formation of educated hypotheses on certain user activities. For instance, you may use a risk score to decide whether or not to authorize payment on your website.

Risk scoring frequently uses heuristic criteria, commonly referred to as heuristics, for the identification of credit card fraud. They are shortcuts made to use if-then logic to offer quick conclusions. Companies with limited resources could opt to use an off-the-shelf solution. Whitebox systems are typically prefered by those that have a dedicated risk management team since they allow for more customization and flexibility.

●    Data Enrichment

Verifying clients without raising friction is the main problem that businesses facing detecting fraudulent credit card payments must overcome. Customers will churn if there are too many barriers between them and their purchases, at which point they will shift to your rivals.

Because of this, data enrichment is among the most fascinating and useful methods for establishing identification. It’s an imperceptible layer of protection that functions by obtaining additional data from a single data point. For instance:

  • Device fingerprinting: Determine whether the user has previously connected to your site using the same device. Do they intend to forge their connection information?
  • IP analysis: Is the connection coming from a Tor node, a VPN, or another dubious proxy?
  • BIN lookup: Check the BIN to see if the credit card is the proper one. Would having a prepaid card, for instance, make sense for a consumer in APAC?
  • Checking social media in reverse: Was the phone number or email address previously used to sign up for a social media website? Does the user bio seem to match the information about the transaction?

How to avoid credit card fraud

There are several things you can take to lessen your chance of falling victim to credit card theft. This include:

  • When making purchases, keep your card close to you at all times since you never know whether it has been cloned or tampered with.
  • If someone calls you without your permission, use caution. That includes avoiding any unforeseen phone calls, letters, emails, or knocks at the door.
  • Never divulge private information or login information, such as your PIN or password.
  • Chop up old credit cards, making sure you cut through the chip and magnetic strip.
  • Ensure that the software on your computer and mobile device is up to date.
  • Always use strong passwords and don’t use the same password for multiple accounts. You should also change your passwords regularly.
  • Double-check that the card companies you’re dealing with are legitimate before making payments.
  • Use private Wi-Fi only when necessary. Utilizing connections at home, where they are not frequently utilised by many people, is safer. Your phone’s data internet connection is frequently safer than those at coffee shops and restaurants.
  • Utilize safe websites. By examining the web address’s beginning, you may identify sites that are more secure. Those that begin “https” are safer than those that begin “http.”
  • Never use a public computer without first logging out of your bank and online accounts.
  • Keep an eye on your posting. Speak with the company that sent you the bank statement or official document if it hasn’t arrived when you were expecting it.
  • If you relocate, make sure your mail is redirected so that it can find you.
  • Avoid throwing letters in the trash since they are simple to recover and can be used to steal your identity. Use a shredder or a designated confidential container.
  • Use caution while posting on social media. Remember that posts are frequently available by anybody, from anywhere, so if you publish any personal information—such as your date of birth—it might be the final piece needed to pass for you.

The Bottom Line

Credit card fraud has been a major issue ever since the first credit cards were issued. There are a number of different ways that fraud is committed. Some forms of credit card fraud are fairly easy to spot, but others are much harder to detect. Overall, be smart when using your credit card, read any and all fine print, check your credit card statements frequently to make sure your account has not been tampered with and most importantly, report fraud immediately.

Author’s Bio:

Marjorie Hajim

Marjorie Hajim is the SEO Manager for Friendly Finance. Friendly Finance is a leading loan matching service in Australia specialising in consumer finance. She loves growing businesses focusing on their online presence and is passionate about organic growth and all things digital. She has written articles for Is it Vivid, EcommerceFastLane, Money Visual, & many more!

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