Don't let your guard down - Why credit card fraud is so easy


(1:10 min read)

Credit card fraud remains the most common type of identity theft in the U.S., accounting for over 40 percent of all identity theft reports. A total of 271,823 cases were reported in 2019, more than doubling from the numbers reported in 2017. You feel violated.

This is big business. These are organized crime rings that are behind the vast majority of this fraud and their operations are industrialized, they're automated. The Federal Reserve Bank of Atlanta estimates that over 75 percent of consumers in the U.S. have at least one credit card and that card fraud losses in the U.S. amounts to a little more than a dime for every one hundred dollars they spend. And part of it is because we let our guard down and we're not quite as secure with our payment information because we like convenience.

Credit card fraud occurs in one of two ways: “card present” or “card not present”.

For years, “card-present” frauds were the most popular type of card frauds where perpetrators were presenting stolen or counterfeit cards in order to make a purchase. Most credit card fraud nowadays, however, are “card-not-present”, usually involving online or over-the-phone exchanges where physical card doesn't have to be presented. “Card-not-present” fraud is very easy to commit. So, all you need to do is make a fake identity and steal a credit card number and you're in business.

When a card fraud is identified or reported, what kind of fraud was committed determines who is responsible for the chargeback. For “card-present”, it's usually the bank that has to bite the bullet.

However, with more prevalent “card-not-present” crimes, it's the merchant that's responsible for the chargeback. Unfortunately, this includes small businesses that might not be able to afford such a loss.

Chargeback fees can often range from $20 to $100 per transaction in addition to the cost of product or service. So, for a big business, they can absorb a loss, even a pretty significant loss.

Small businesses rarely get law enforcement involved as they rarely succeed in catching the criminal. Big businesses also don't report it out of worry that it would reflect them in a bad light. And a lot of card frauds go unnoticed by consumers after banks automatically clear bogus charges.

So just having basic practices like keeping an eye on your bank statements, checking it out once a week, make sure there are no unauthorized purchases. Having the awareness that having the same set of usernames, passwords across all of your online relationships is not a good idea. Another way would be to set up automatic notifications every time your card is used for online transaction.

Holding your cards inside an RFID protected wallet will increase your protection and peace-of-mind significantly.

It is the same as closing shut your windows and making sure your door is locked when you leave your house or car even if you have a good alarm and insurance policy in place.

*most of the above are extracts from the video


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