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Credit Card Fraud and Theft

Credit card fraud is becoming prevalent in our society. Anytime there is a positive development in the society, criminals look for how to scuttle such development and negatively take advantage of it. Even though credit card is one of the safest means of banking, it is prone to criminal attack. According to Consumer Action, credit card fraud “is a wide-ranging term for theft and fraud committed using or involving a payment card, such as a credit card or debit card, as a fraudulent source of funds in a transaction.”

On her own part, Debra Ross (2019) describes credit card fraud as an act “committed by any person who, with intent to defraud, uses a credit card that has been revoked, cancelled, reported lost, or stolen to obtain anything of value.” Using the credit card number without possession of the actual card is also a form of credit card fraud. Stealing a person’s identity in order to receive a credit card is another more threatening form of credit card fraud, because it works in conjunction with identity theft. Credit card fraud is a problem that affects the entire consumer credit industry. It is one of the fastest-growing types of fraud and one of the most difficult to prevent (Ross, 2019). This is the pure truth and the more reason why everyone needs to exercise caution in their transactions.

Briefly, we will be exploring some forms of credit card fraud:

Postal theft: One of the simplest ways to obtain a person’s account information or actual credit card is through postal theft. Any person who steals mail may now have access to someone’s personal information, including credit card account numbers, credit limits, and banking information. The fraudster can use this information to obtain additional cards or create new accounts without the knowledge of the true owner (Ross, 2019).

Verify your information for your EMV card: The credit card industry is moving to EMV chip enabled credit cards to reduce credit card fraud. The move has taken place over several months, with credit card issuers sending out new cards over a period of time rather than all at once. So, how is this fraud carried out? Scammers, posed as credit card issuers, email consumers warning that the cardholder must update their personal information before they can receive their new chip card. Replying to the email with personal information, even clicking a link and entering personal information can give the scammer information that can be used to commit identity theft (Irby, 2018).

In order to avoid this form of fraud:

  Always remember that your credit card issuer will not ask you to update information over email.

  Credit card issuers send new chip credit cards automatically without any action on your part.

  Contact your card issuer’s customer service using the number on the back of your current credit card for questions about receiving your new EMV card.

  Don’t click on links in emails, even if they look like they come from your credit card issuer. Visit your credit card issuer online only by going directly to the card issuer’s website (Irby, 2018).

Advance payment schemes are also prevalent. Most laws around the world require that credit card issuers credit a customer’s account as soon as payment is received. This is now possible instantaneously since most transactions are electronic. Using a counterfeit or stolen credit card or credit card number, a fraudster either makes an advance payment on the card or overpays an existing balance using a counterfeit check. Because the account is credited upon receipt of payment, cash advances can be immediately drawn against the credit card before the payment has cleared. A fraudster can clear millions of dollars this way, and it will go undetected until the next bill arrives (Ross, 2019).

Reduction of interest rate: Credit card interest rate reduction scams take advantage of frustrated credit card users who want to cut their credit card rates and pay off their balances faster. So, how does fraud come in? You receive a pre-recorded call from someone who says you qualify for a program that will help you lower your interest rate and pay off your credit card balance sooner. All you have to do is pay a fee, enroll in a program, and the company will work to lower your credit card interest rate. The call may sound like it comes from your credit card issuer and the company may even have your credit card account information. The scammer charges your credit card for the services, but doesn’t help you lower your interest rate as promised. You might be charged even if you decline the services (Irby, 2018).

You can avoid this fraud by following the guidelines below;

  If you receive an automated call from a company asking to lower your interest rate, hang up the phone without speaking to anyone for any reason. Talking to a human may lead to more calls.

  Don’t give out or confirm your personal or financial information on any phone call that you didn’t initiate. Scammers have often obtained some credit card information and need to confirm the accuracy or get just one more piece of information from you, like a PIN or security code.

  If you qualify for a lower interest rate, you can get one for free by simply asking your credit card issuer for a lower rate (Irby, 2018).

Another type of credit card fraud is the counterfeiting of credit cards. Criminals have been able to use technology, with relative ease, to produce fraudulent versions of existing credit cards. The Internet helped this scheme to grow. Some criminals sell the magnetic strips found on many cards or the technology to duplicate the information from a valid credit card. These magnetic strips contain all the information a fraudster needs: names, account numbers, credit limits, plus other identifying information. Using a computer system and the right equipment, a counterfeiter can create a fraudulent credit card with ease. Fraudsters also use technology to create fictitious cards. Fictitious cards are more advantageous because there is no person truly responsible for the account. The credit card companies will notice that the account is not being paid and they will attempt to contact the account holder, but no one exists (Ross, 2019).

References

Hassibi , K (2000). Chapter 9 on “Detecting Payment Card Fraud with Neural Networks in book “Business Applications of Neural Networks”. Singapore-New Jersey-London-Hong Kong: World Scientific. pp. 141–158. ISBN 978-9810240899.

Irby, L (2018). 5 Credit Card Scams To Watch Out For. Retrieved from https://www.thebalance.com/5-credit-card-scams-to-watch-out-for-4083118

Ross, D (2019). Credit Card Fraud. Retrieved from https://www.britannica.com/topic/credit-card-fraud

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