If there has ever been a persistent problem in the credit card industry, it would be credit card fraud. It has always been an escalation when it comes to fraud as scammers are getting smarter in breaking through layers of protection set up against them while companies are coming up with more complex methods of protection to help credit card holders.
Here is the problem, though: companies can only do so much to protect you from credit card fraud. You yourself would have to set up measures to protect your cards and credit score from scammers and this would require you to understand the very nature of credit card fraud itself.
Basically, credit card fraud is when somebody uses your card to make purchases that you never authorised. The problem here is that credit reference agencies can never tell if you’re the one doing the purchase or not. So as long as that card is performing something, any expenses it’s actions will make will be charged to your account. In other words, you are still obligated to pay for those charges even if you were not the one making them.
However, credit card fraud goes beyond annoying you with a few extra charges here and there. Since the transactions that card makes will be sent to your account, they will form part of your payment history which can affect your credit score. This is quite true if the payments caused the card to reach it’s monthly limit, thereby affecting your credit utilisation ratio, or when the fraudster makes a rather expensive purchase that you yourself have no means to pay for. Either way, your credit score is going to drop by a few hundred points which can affect your transactions in the future.
Although credit card fraud can take on many forms, they often follow two distinct strategies which are:
This is perhaps the most straightforward out of the two methods. Basically, the fraudster takes actual physical possession of the card from you and this, in theory, would allow them to do whatever they want with it. Fortunately, a lot of credit issuing companies are quite successful in countering stolen or lost cards, especially with Chip & Pin and remote card terminals. Also, a lot of credit card thieves prefer not to do this as it the riskier route to take.
Also known categorically as a card-not-present fraud, this strategy involves fraudsters getting hold of your information such as card numbers, social security numbers, and PIN to make unlawful transactions on your behalf. It doesn’t matter if you have your card currently in your possession. So as long as thieves have a hold of several of your most-guarded information, they can effectively pose as you in transactions.
If it isn’t obvious, credit card thieves would opt for the second strategy as it is indirect and subtler. Also, it can be employed through a number of schemes like the ones listed below:
How this works is quite easy. You will get a pre-recorded call telling you that you qualify for a program that can help you lower your interest rate which should help you pay your balances as quickly as possible. All you have to do is pay a fee to enroll onto the program.
What happens is the scammer charges the services to your credit card and your interest rate is lowered. Most of the time, this is considered as a low-tier scam as the scammer gets nothing from it but the sheer enjoyment of annoying you. However, the scammer might get an idea as to your susceptibility to scams which opens you up for worse attacks like the ones to follow.
In this method, the scammer poses as a representative of your credit card issuer, usually from the “Fraud Department”, and informs you that they’ve noticed some suspicious activity in your card. To verify the problem, they would need you to confirm your identity by asking you for something like the security code on your card.
The scammers here already have your basic information like name and address. Their call is to get additional information from you, information that they can use to impersonate you and make transactions on your behalf.
This scheme often targets tourists visiting some other places in the world. Here, you might get a call from someone posing as the front desk of the hotel you are staying in that something is wrong with their computer system. Due to that, they would need your credit card information again to get you registered to the system again.
This can be tricky as there is no way to verify the call immediately. However, such scams can be shot down if you decide to head to the real hotel front desk and confirm if there’s a problem or not.
This scheme is surprisingly effective despite it’s simplicity for the simple reason that it targets a need most people have today: quick and cheap access to the Internet in public. To do this, scammers set up a Wi-Fi hotspot that requires no password. However, embedded into the hotspot is a program that immediately scans the device that connects to it. For example, if you connect your laptop to that hotspot, the embedded program will then scan your laptop especially its internet history, cookies, and log-in data.
Even information you’ve sent through secure channels can be decrypted if the scammer has other tools at their disposal. The sheer volume of information that scammers get from this strategy is what makes it quite dangerous.
Also known as digital card cloning, this strategy is quite effective for the sheer fact that those that use this would directly attack you through transactions in public channels you thought were safe. To do this, scammers would often put a skimming device inside credit card processing terminals. Often, terminals at fuel stations and ATMs are used by skimmers as they are the least-guarded devices compared to other terminals.
If you make a transaction at these compromised terminals, the skimming device would then read your credit card information the moment you swipe it at the reader. From that point on, the skimmer has the option to make clones of your card and use them to make unauthorised transactions; charged to your account, of course.
This is perhaps the oldest and most obvious trick that scammers have used. How it works is simple: you will receive an e-mail coming from a prince or any similar leader from some far-off African country (some scammers also use Europe or Asia just to make things varied) and are looking for someone who can help them transfer their vast amounts of wealth to the west.
To do this, the “prince” would ask for your credit card information so they can wire the money, promising you a large portion of the money for your help. At first glance, you can tell that the setup is stupidly obvious but you’d be surprised at the fact that many people still get their credit card information stolen through this trick.
Knowing how frauds work is just half of the solution. You also have to make yourself as scam-proof as possible. Here are a few tips to help you do so.
l Know the Facts – First of all, credit card issuing companies never contact you by phone or e-mail immediately revealing any issues. They have policies in place that will require you to contact them on the same number you would see on your statement coming from the same company and go through a security check only revealing partially enough information to recognise you so that they can personally discuss the matter with you.
2 If it’s Too Good to be True, It Is – Always remember that there is no such thing as free perks. If a Wi-Fi hot spot has no password, you should wonder why. If that person on the other line of the phone is offering you lower interest rates for a fee, it’s best to hang up.
3 Contact the Authorities – If you feel that you might have inadvertently given your private information, your best option is to notify your credit card issuer. The company has measures in place that can protect your account until you can strengthen its defenses or close the account completely if it has become compromised. It is important that you contact them as soon as you think that your identity has been stolen as any transaction that that account makes before you notify the agency of the theft could well be still be charged to you.
It goes without saying that the fight against credit card fraud is showing no signs of stopping. Instead, it continuously escalates as scammers get smarter and more brazen while protection technology gets more complicated.
The best kind of protection you can afford is knowledge. If you know how frauds work and are vigilant enough for signs of such, your credit card’s information can be protected from all manner of attacks for as long as possible.
Have you ever had encountered a credit card fraud before? What other signs do you think people should be on the lookout for when it comes to scams? Let us know in the comments below.