What is Credit Card Fraud
Posted by Fintra , updated 2021-04-18
Credit cards have become an essential part of us and in our daily life. We can forget to carry our wallets, but not mobile and credit card! Wherever, whenever we desire to purchase or book anything, this little friend of ours always comes to our aid. In critical times when cash is immediately required, we can visit ATMs to withdraw through the help of credit cards.
However, what to do when we accidentally lose or misplace it? What if it lands in the wrong hands. It’ll surely be a delight and treat for the fraudster but a nightmare to the cardholder! Before a fraudster attempts to milk your plastic buddy for all it’s worth, it’s wise to take precautions and be proactive. In this blog, we will enhance your knowledge and guide your path on how to prevent such nightmares.
The topics we will enlighten you on are:
- What Is Credit Card Fraud?
- What Is Identity Theft?
- How Does Credit Card Fraud Happen?
- Types of Credit Card Fraud
- Prevent and Protect Yourself from Future Credit Card Frauds
- 5 Steps to Take If Credit Card Is Lost or Stolen
What Is Credit Card Fraud?
The digital world has brought us some marvellous good effects, however, along with the good, it has brought some bad effects as well. In today's digital world, one huge negative effect it has brought is credit card fraud and ID theft. They’re continuing to rise even as we speak. In simple terms, credit card fraud is fraudulently done when somebody makes an unauthorized purchase using a stolen or misappropriated credit card (or card number).
The invention of the internet and the endless supply of e-Commerce websites that came with it, it has made it even easier for credit card scammers to pinching in your details. In fact, before the period when the internet exploded into society, one may have visualized credit card fraud as a human dressed black stealing cards from wallets. However, nowadays these scammers have an arsenal of tricks and methods to swipe from credit cards, and most of the time they don't even need the individual’s physical card to do the fraud. Besides stealing credit cards, the fraudsters can also steal an individual’s credit card account number, PIN, and security code to make an unauthorized transaction without having their physical credit card. Such unlawful transactions are termed as card-not-present fraud.
Credit card frauds are indeed the most common types of identity thefts and with the immense availability of credit cards in India, it’s not surprising to note that millions of users fall, victim, each year. To protect us from such fraudulent charges, the government and financial institutions have crafted special laws. For example, certain laws state that you might have to pay a minimal amount for the unauthorized use of a credit card. Moreover, if the card gets lost, you must report the loss immediately before someone uses it- by reporting immediately you won’t be responsible for the unauthorized charges. If a fraudster steals your credit card number, but not the card itself, then there is no liability on the cardholder at all.
What Is Identity Theft?
Identity theft is the illegal use of your name, birthday, PAN or AADHAAR card number, credit card numbers, and more, to use existing credit accounts or open new ones in your name. When this happens, criminals get to capture the spending power of your credit, and you get stuck with the huge bill.
How Does Credit Card Fraud Happen?
There are various ways fraudsters can get your credit card number:
- A fraudster can dig in your trash, and finds the discarded receipts or credit card statements which has your account number. With this information, they can rack up fraudulent charges.
- An unscrupulous person steals your card number and uses it to finance his lavish fantasies.
- A random thief may allure you to visit a fraudulent website where you get tricked to provide your card number. While doing this, the thief ultimately gets your credit card information and does fraudulent purchases.
- At times when swiping your card at a local ATM or fuel station, you later notice some fraudulent purchases on your statement. Wondering how it happened? Someone may have installed a credit card skimmer to steal your account information. This is a tiny device used by thieves to install anywhere you swipe the card. Skimming is an effective way thieves make use of to steal credit card information.
- Sometimes credit card information gets stolen without your notice. For example, the credit card number can get exposed in a data breach that hits one of your favourites. As soon as this occurs, thieves use this information to rack up online charges with credit card account numbers.
- Fraudsters can also purchase stolen credit card numbers from the dark web, this is a part of the web only accessed through special software. Credit card numbers are valuable to fraudsters, and they don’t hesitate to visit such illegal dark web markets.
- Fraudsters can be found in your own house as well. They could be a guest, resident, visitor, or service technician. Such people can somehow get access to your credit cards and use their details fraudulently.
Types of Credit Card Fraud
In every field of work, creativity always exists, and so does in the field of fraud. Just as fashion designers, fraudsters are extremely creative. How they invent various ways to pilfer your personal information and destroy good credit is very mind-boggling! Some of the ways include:
- Card-not-present (CNP) fraud- This fraud happens without using the physical card itself, and it occurs mainly online or over the phone. Since point-of-service fraud has decreased due to EMV technology, card-not-present fraud has increased. In this fraud, criminals just require basic information such as the credit card number and the cardholder's name. With this info on hand, they can commit mail order or online fraud.
- Stealing a credit card: The moment you look away, leaving your wallet free-PUFF! Your wallet has disappeared into a crowd, if you forget to zip-up your purse, someone can slip your wallet from it. Thus, it’s strongly advised to immediately report the card issuer when your credit card gets stolen.
- Using lost or found credit card: Accidents can occur anywhere and when they happen, the may card falls out from your pocket. Whoever finds it might make attempts to use it. Hence, you should always notify about lost cards your credit card issuer immediately to lower the chances of someone doing severe damage to your credit
- Account takeover: Once the fraudster avails your personal information such as your home address, mother's maiden name, etc., they can contact your credit card issuer and pretend they're you. They can then claim your card is lost or stolen, or inform you've changed addresses, and get the card issuer to send them a new card. Few issuers enable you to have a verbal password while calling them, and this method successfully enables you to prevent this type of fraud.
- Counterfeit and skimming fraud: Such frauds occur when the credit cardholder’s details are illegally taken to create a feigned credit card. To reduce this type of frauds, banks now have created chip-and-PIN (EMV) technology.
- Card-never arrived-fraud: Credit card companies do try to take utmost precautions to protect new cards that are in transit, however. This type of fraud occurs with the cards that have been ordered by a customer but they never receive it.
- False application fraud: Such fraud happens when an account gets established using someone else’s identity or information.
Prevent and Protect Yourself from Future Credit Card Frauds
Fraudsters are everywhere; they have embraced the credit card industry as a gold mine or a place where they can make a quick buck. Although it is completely tough to minimize the risk of becoming a victim of credit card fraud schemes, Fintra here describes several steps to protect yourself and reduce your risks:
- Before throwing away your old credit cards, make sure to cut them properly, specially cut through the account number.
- Keep track of your cards and store the less used ones in a secured place.
- Record your credit card information in a safe location so when the need arises, you’ll be ready to report a lost or stolen credit card.
- Take a guard of your account number. Don’t write the account number on any piece of paper or anywhere where someone can easily find it.
- Avoid sharing credit card numbers over phone calls unless you have made the call. Make sure no one is eavesdropping.
- Shop online only from reputable companies or ones whose security measures can be verified. For example, search for web addresses that begin with ‘https’ because the ‘s’ indicates the website is secure.
- Carefully review every credit card statement. As soon as the credit card bill arrives, don’t immediately jump to make its payment, first glance at each transaction on the list. If there are unfamiliar transactions, report them to the card issuer. Nowadays you don’t need to wait for the statements because you can regularly review the transactions online on the bank’s website.
- Destroy old credit card statements when you have paid your monthly statements. Tatter it before discarding it.
- Wherever heading out, carry only the cards you require. If you have various credit cards, try reducing the risk of losing them by keeping the unneeded cards at home.
- Don’t fall for phishing scams. Sometimes you may get emails that appear vital such as your cable TV provider, internet service provider, or bank requesting you to provide your credit card information. Hold on- these are scams sent by hackers seeking to steal your personal information. May whatever is the scenario, be alert, and never share credit card information with anyone online. First, check by calling the respective person to make sure the request is legitimate.
- Check your credit reports: When you request to receive your credit card reports, carefully inspect for accounts or loans in your name which you don’t remember availing of.
- Watch out for phone scams. The internet isn’t the sole medium on which scams can occur, thieves can also use phones to make calls claiming they are from your credit card issuer. They’ll ask for your credit card number to “update” your account. Always remember no bank will ask for your credit card information over the phone.
- Go paperless by signing up for online statements from your bank as it will reduce the chances of thieves gaining access to the papers, which includes your account information.
- Report lost cards or suspected fraud quickly. The sooner you report suspected fraudulent purchases it’ll be better because your credit card issuer can promptly put a hold on your card and suspend your account for a while.
5 Steps to take if your Credit Card is Lost or Stolen
Being quick in reporting a lost or stolen credit card always counts. Fintra presents five vital steps to take if you’re in such a situation:
Step 1. Call your credit card issuer: It is strongly advised to immediately report the loss or theft of your missing card to the credit card issuer. The credit card issuer’s phone number will be printed on your credit card statement or online.
Step 2. Get prepped with information: When you call your credit card issuer they’ll first verify your identity. Hence, before making the call get prepared to provide your details such as your name, address, and Pan/Aadhaar card number. Your issuer will ask when and where the card was lost or stolen and when it was last used. They will review all recent transactions and inform you to check if any of them seem to be fraudulent.
After interrogation, the card issuer for a while will freeze or cancel your account and issue a new credit card with a new account number. There won’t be any major effect on your credit report if you’ve replaced your lost card. Just remember to inform the vendors of your new card number from which you’ll be making payments to them. It’s always vital to continue making payments on time.
Step 3. Follow up and keep records: Besides making a call do also follow up about your loss. Email your credit card issuer or send a letter. Here’s what to conclude:
Your account number.
The date and time you noticed the card went missing.
How and when did you report the loss to the issuer.
Always keep a copy of your letter and note when you sent it.
Step 4. Check your credit card statement: Always closely check your credit card statements after reporting your card lost. If any charges are noticed which appear fraudulent or unfamiliar, call the credit card company immediately.
Step 5. Check your insurance coverage: Some banks and card issuers do provide policies to cover your liability for credit card theft. It is advised to check how much insurance coverage you have availed from your bank/issuer. If possible, do opt for a coverage policy for lost cards.
Unfortunately, credit card fraud can harm your credit, especially if it takes a while for you to notice it. Such frauds affect your credit in two major ways:
- Late payments: Fraudsters usually use your personal information to open a credit card without having the intention of paying the bill When the fraudulent card is reported to the credit bureaus, it could plummet your credit score rating. Learn about the importance of payment history by clicking here.
- High credit utilization: If a fraudulent credit card is being used to increase charges you haven’t authorized, it can affect your credit utilization. When a fraudulent activity raises your total credit utilization over 30%, your credit scores could temporarily suffer. Learn about the credit utilization ratio by clicking here
Whether you’ve or not been a victim of credit card frauds, it’s always advised to take precautions to protect your precious little friend. Take immediate steps to lessen the chances of being susceptible to credit card thieves.