Credit card fraud

credit card fraud: an overview

Credit card fraud involves an unauthorized taking of another’s credit card information for the purpose of either charging purchases to the victim’s account or removing funds from the account. It is regarded as one form of identity theft. With online purchasing having become pervasive, a thief no longer needs a physical card to make an unauthorized purchase; the cardholder’s name, the credit card number and its expiration date will usually suffice.Consequently, when a hacker opens a database or the database crashes on its own and releases its users’ credit card information, millions of accounts can become victimized almost immediately. Federal law, however, limits cardholders’ liability to $50 in the event of credit card theft, but most banks will waive this amount if the cardholder signs an affidavit, explaining the theft.

Credit card fraud schemes fall into one of two general categories of fraud: application fraud and account takeover. The former refers to scammers who open credit card accounts in someone else’s name. This may occur if the criminal can obtain enough personal information about the victim to completely fill out the credit card application. Alternatively, the criminal may create counterfeit documents. Such a scheme poses a serious problem because the criminal can make a myriad of purchases without the victim having any idea. The billing statement may not come for a month, if it ever does.

Account takeovers typically involves the criminal hijacking of an existing account. A criminal can pull off this scheme by obtaining enough personal information about the victim to contact the bank or credit card company and having the billing statement location changed. Upon completion, the criminal can report the card lost or stolen and ask the bank or company to send a new card to the new location. The criminal can then make fraudulent purchases on that card.

Another common method used to achieve an account takeover is called “skimming.” Skimming schemes occur when dishonest employees of businesses with unfettered access to the credit cards of customers record their customers’ credit card information. They then either sell the information to identity thieves or hijack the identities themselves.