Credit cards play a significant role in making purchases for almost everyone. But innovation has two sides.
Phishing scams happen all the time despite the fact that numerous cases have been reported. Phishers have no difficulty keeping up with new technology, learning from it and spotting its weaknesses. That explains why credit card fraud and identity theft are on the rise. In 2020, the United States suffered credit card fraud losses of $11 billion, which equated to a real-world loss of $39.6 billion.
There are various ways that criminals can commit credit card fraud, from digital to low-tech methods. The 3 most common types are card not present fraud, stolen card fraud, and false application fraud. It’s critical to understand how these popular frauds operate to protect your personal and financial information against being taken advantage of.
Card-not-present Fraud
A credit card may be safe in your wallet, but your assets may not be.
Card not present payment refers to transactions made when both the card owner and the credit card are absent at the time of sale. For example, when you buy stuff online or on an ecommerce store platform, when you purchase through phone call and give the customer staff your credit card information, when you set up automatic payments for electricity bill or water bill.
Card-not-present payments are extraordinarily convenient and easy to use. But the major drawback of this type of transaction is, when fraud happens, it’s likely impossible to trace. Some companies, like Securter, are working on tools to make this kind of fraud much harder to commit. For the moment, there are still risks in this area.
Card-not-present fraud (CNP fraud) occurs when your card is hacked, hackers take over your account, gain access to your credit card information and use it to make remote purchases. Unfortunately, purchases continue to be processed as the online stores can’t discover the illegal nature of the transactions or verify the customer’s identity.
In 2018, Javelin Strategy & Research conducted a survey of 5,000 U.S. citizens over age 18 to get insights into fraud trends. According to the results of Identity Fraud Research, online shopping presents the greatest risk of fraud and CNP fraud is now 81% more common compared to point of sale fraud, a popular method before.
In addition to identity fraud, card-not-present fraud can result in identity theft, meaning crooks use cardholder’s information for the act of impersonating an identity, instead of illicit financial gain. Not only do cardholders suffer from this type of fraud, but merchants are affected as well; in most cases, the loss is more enormous, accounting for billions of dollars every year.
The best practices for cardholders to minimize card-not-present threats are to be more careful when you have to provide your personal or transactional details online. It’s also recommended to research the stores before making online purchases to spot red flags from other customers and ensure the payment system of the stores is safe.
In some cases, fraudsters take over your card information for financial gain, instantly connecting your bank to temporarily suspend your account until the situation is resolved.
Stolen Card Fraud
Stolen card fraud is another unexpected case with credit cards. It happens when your card has been lost or stolen by pickpocket. In fact, a thief won’t miss a single chance to use your card until it’s suspended or reaches a credit limit.
According to a study from 2019, called U.S. PaymentsInsights – Technology and Fraud: Consumer Concern Is Real, 29% of US consumers reported a card lost, stolen, or fraudulent charges while 9% reported their physical card was stolen. While the figure of cases is not too enormous, the consequences from stolen or lost credit cards could be huge.
Clearly, keeping track of your cards is the best way to avoid losing your information. If you want to deactivate your credit card and have a new one, remember not to throw it into the trash bin. Notify your card issuer first, cancel your account and cut it up to avoid thieves taking it from the bin.
False Application Fraud
False application fraud is a type of credit card fraud happening when fraudsters use your personal information to register for a new account in a service or product. This trick is also a type of identity theft. The thing that sets false application fraud apart from card-not-present fraud (since both can lead to identity theft) is the combination of both virtual and physical factors. In one word, it could be performed in face-to-face or online scenarios.
Imagine someone has your personal information including the legal name, date of birth, address, social security number, as well as other important details. It’s now pretty simple for him or her to submit a credit card application, gathering as much debt as they can and drag your credit card score down.
In another scenario, crooks can link a credit card with a different name to your bank account and eventually you are hit hard with repayments performance. False application fraud can somehow extend financial-related scope of threat since stolen or synthetic identities are made used by organized criminal groups for higher levels of crime.
To protect yourself from data breaches, or identity theft under false application fraud, you need to make sure to create a strong password and enable an additional layer of security to all of your accounts. It’s commonly called two-factor authentication (2FA).
As mentioned above, always double check the sites you visit and be careful whenever you intend to provide your personal information to them. Additionally, keep an eye on your credit reports and transactional details so that even if fraud happens, you can quickly detect and provide instant protection.
SOURCES
https://www.javelinstrategy.com/research/2018-identity-fraud-fraud-enters-new-era-complexity