Give investment tips and advice.

Different Types of Credit Card Frauds and How to Avoid Them

Types of Credit Card Frauds and How to Avoid Them
In the wake of a growing number of credit card scams, it is important that we are completely aware about them. Scammers of credit card frauds can not only steal your money but also use your identity for nefarious activities and create bigger problems for you. WealthHow will give you useful information about the different types of credit card frauds and how to avoid them.
Madhushree Kelkar
Last Updated: Mar 21, 2018
Did You Know?
According to Statistic Brain, worldwide credit card frauds amount to about $5.55 billion.
So, you think your credit card is safely tucked away in your pocket? Think again! There exists a credit card fraud known as credit card shaving. In this, the scammer will shave off the 16 digits from a prepaid credit card and then replace them with an estimated number. He will also scratch the surface of the magnetic strip, and the shopkeeper will have no choice but to manually key in the number on the front side of the card. He will keep on trying different combinations of numbers until one of them works.

All this will happen with your card being present safely with you all the time. You will not even realize that you have been a victim of credit card fraud until you see the credit card statement. If you check the statistics, you will be alarmed to see the incidences of credit card frauds that take place not only through actual credit cards but also through the 'card not present transactions' on the Internet. Not only is your hard-earned money stolen, but this can even result in bigger crimes, like identity theft. Hence, it becomes important that each of us knows about the various credit card frauds and ways to avoid them.
Stealing of Cards
Stealing of cards
This is perhaps the most common of all the credit card frauds that exist. Without your notice, your card is carefully removed from your bag, and purchases of large amounts are made on it. Pickpockets have a special knack to remove your wallet and your credit cards. Scammers may use it to apply for more credit cards, or in extreme cases, even avail loans in your name. It may become an even bigger problem if you have a high credit limit and your card gets stolen.
Tips for Prevention
✦ Carry your credit card only when you need it.
✦ Don't keep the credit card in your wallet.
✦ Do not forget to take your card back after the transaction.
✦ Do not leave your card at places where someone will be easily able to access it.
✦ If your credit card gets stolen, inform the issuing company immediately.
Theft of Identity
A man with card in hand
With many people resorting to e-commerce, any person can gain knowledge about your personal and financial information. Such a fraud can also happen due to data breaches at a merchant's end. The data may include your social security number, account number, credit card number, etc. The scammers may also steal information about your utility bills and bank statements. They may then apply for a credit card in your name and utilize this information for their own benefits, like adding charges to your credit card, making extravagant purchases, availing loans, opening new accounts, etc. They may even apply for jobs or home rentals using your identity. This may seriously ruin your FICO scores and payment history. This will not only cause you financial trouble but there are chances that the scammers may even leave your identity proof at the crime scene.
Tips for Prevention
✦ If you doubt that your card has been compromised, act immediately.
✦ Always keep your credit card number confidential, and do not share it with others, no matter how close they are.
✦ Keep your credit card statements and other details at a safe place.
✦ Keep your card issuer posted when you are traveling abroad.
✦ If you lose your credit card, do not forget to bring it to the issuing company's attention immediately.
A man operating bank account
There is a six-digit Issuer Identification Number (IIN) on your credit card. It was previously known as the Bank Identification Number (BIN). They identify the institution to which the card belongs. Hence, credit cards are produced in different BIN ranges. A fraudulent person can acquire one original card and use computer programs known as 'generators' to create a number of valid cards. This is done by changing the last four digits and producing a sequence. They may source your information through your online transactions or by stealing your card. The expiry date of these 'generated cards' will be similar to that of the original one.
Tips for Prevention
✦ If you are making an online purchase, make use of a one-time-use virtual credit card number.
✦ Observe your credit card statement carefully.
✦ Always go in for a secured mode of payment on the Internet.
✦ Do not leave your credit card in a place where the perpetrator will have an easy access to it.
✦ Keep on changing your passwords and PIN.
Internet Credit Card Fraud
credit cards
When a person places an order via the Internet, the actual card is not available to verify its authenticity. Scammers use this opportunity to dupe both the card owner and the merchant. They place an order via stolen cards or credit card information and get the ordered things delivered to temporary addresses. However, as the merchant does not see the original card, there is no way for him to determine if the card is good or not. Once the person realizes his card has been compromised, he can claim for refunds. However, it is unlikely that the merchant will get back his share of losses unless the perpetrator is caught.
Tips for Prevention
✦ There are many tools available freely for verifying the authenticity of a credit card.
✦ If you doubt a person, you may block the transaction.
✦ You may also ask for additional information, like card security code or card verification number.
✦ Call up the credit card company and verify if the card is stolen or lost.
✦ You can ask the consumers to login to keep a record of their email addresses and other details.
Phishing, Telephone Phishing, and SMS Phishing
A woman with book
Scammers may send fraudulent emails to you. The email is composed in such a tone and language that you may be duped into thinking that it has arrived from an authentic source, like a friend, bank, financial institution, etc. The email may or may not have a link routing you to some other fake website, which may be designed to create an illusion of an authentic one. You are then requested to provide your credit card details and other sensitive information related to your bank accounts. Once you feed this information, the scammers will use it to access your credit cards and other accounts. Nowadays, a new scam known as telephone phishing is used by scammers to gain access to your information. They call individuals, act as if they are speaking from your trusted financial institution, and collect your credit card details. A similar kind of phishing attack also occurs through SMS where you will get messages that will demand immediate action and force you to divulge your personal information.
Tips for Prevention
✦ Make your computer and your phone spam-proof.
✦ Don't click on suspicious links or pop-ups.
✦ Never fill in your personal or financial information in response to emails and SMSes.
✦ Do not download any file or attachments from unknown senders.
✦ Do not divulge your personal or financial information on emails even if you know the person.
Carding is a process used to verify the actual validity of the stolen credit card's data. Scammers use this method to verify if the credit card is good for the cards acquired by the methods of skimming and phishing. The scammer uses the card's information for websites that have a real-time transaction processing to understand if the card is still valid. He may spend a few dollars buying insignificant small things or making donations, which do not require large amounts from your card. This will not alert the card owner or use up the credit limit entirely.
Tips for Prevention
✦ Never send your credit card information through emails or SMSes.
✦ Do not keep your credit card information even in your deleted folders.
✦ Ensure that the online stores which you access have credible security systems.
✦ Keep a closer eye on the transactions of your credit card.
✦ If the e-commerce merchant is suspicious, he should verify with the company issuing the credit card.
Account Takeover
This is a type of identity theft where the scammer collects important information and documents regarding you and asks the credit card company to change the address. Once the address is changed, he impersonates you by submitting identity proof to the company and requests for a credit card replacement. The scammer then uses this newly acquired card for various purposes, like shopping, etc.
Tips for Prevention
✦ Don't leave your credit card statements and related mail unattended.
✦ Shred your mail once you have read it.
✦ If you are planning to keep the credit card statements, store it in a safe place.
✦ Credit card companies should also ask for photocopies of the original card along with its monthly statements.
✦ Ask the credit card company to verify every transaction with you before proceeding.
Cramming is new kind of credit card scam where small unauthorized charges are made to your credit card over a period of time. This is done without your consent or a disclosure. This may be in the form of charges, taxes, fees, etc. According to the Federal Trade Commission, cramming has led to approximately $24 million in stolen funds. This problem cannot be monitored if you do not check your bills thoroughly.
Tips for Prevention
✦ Keep a record of all the translations at your end.
✦ Review your credit card statement and compare it with your records.
✦ If you find any charges or fees questionable, raise an alarm.
✦ Know about every charge debited to your account.
✦ Try to limit the number of outstanding charges.
Have you ever given it a thought that when you pay the bill in a restaurant or bar using your credit card and the waiter takes the card away to swipe, he may be scheming you by a skimmer? A skimmer is a small electronic device, which helps to store the credit card information of many people. Not only this, the skimming scammers can also photocopy your receipts and transcribe your card security code. Apart from these, there have been instances where scammers put a machine over the card slot in ATMs, which reads the information from the card's magnetic strip. Also, a small camera is fitted to read the PIN. There are chances that a keypad-like device―similar to the original keypad―may be overlaid and used to transmit the PIN key log. These illicit devices installed in ATMs are also known as skimmers.
Tips for Prevention
✦ Most ATMs provide a picture of these skimmers, and you should look out for them before you use your card.
✦ Watch out for the presence of a card skimmer camera.
✦ Don't let your credit card go out of sight when you are paying for something through it.
✦ Compare it with other ATMs to be sure that you are not getting skimmed.
✦ If you find anything unusual with the ATM, do not put your card inside it.
Fake Credit Cards
Many scammers make fake credit cards using the authentic credit card information gathered from a person. This information is derived from skimming, phishing, etc. These cards look similar to the original credit cards. However, on a closer look, you may be able to spot differences in the hologram, colors, placement of elements, symmetry, UV logos, etc. Even suspicious behavior of the consumer can help in tracking credit card frauds. The expenses incurred on this fake card may be charged to the original owner of the card.
Tips for Prevention
✦ Any additional charge in your credit card statement should be investigated.
✦ The merchants should have an eye to spot counterfeit credit cards.
✦ They should also train their employees to do the same.
✦ Compare the signature behind the credit card with the slip.
✦ Install cameras in your stores to keep a record of the consumers.
Always keep your credit card number and other card details at a safe place. Also, keep a record of the credit card issuing company's number to contact easily in case of a problem. Always remember that you should never allow others to know your password or PIN. If possible, try to cover the keypad in an ATM. Always make online transactions with trusted websites only. Look out for https or a padlock sign at the beginning of the URL. This will indicate that your information is secure. Now that you know about the different types of credit card frauds, beware and stay alert to avoid them.