The explosion of instances of credit card fraud is now at epidemic levels. In many ways, the very versatility and transferrable nature of pertinent card information makes this type of crime attractive to savvy fraudsters all over the world.
Credit cards are designed to operate efficiently and with a great deal of convenience to both the buyer and seller. This includes electronic transferral of information and a dissolving of geographical boundaries so that many cards can be used internationally. For this reason a limited amount of information from the cardholder is enough to process transactions. The necessary information in most cases is the card number, the customer name, the expiration date and a signature. For online and virtual transactions, additional information such as a billing address and a card verification code number are often necessary to prove the physical presence of the card in the possession of the person initiating the transaction. This additional amount of required information presents a level of difficulty to fraudsters, but this can be relatively easily overcome.
Advanced electronic data retrieval and interception techniques have now introduced a new level of concern where fraudsters target databases of major retailers and financial institutions to capture credit card information of clients and customers. In theory, data protection equipment such as advanced encryption protocols should go a long way towards protecting sensitive data, but increasingly, many companies are behind the curve in keeping their information secure and keeping up with advances made by fraudsters in countering accepted data protection practices.
When it does occur, credit card fraud can be extremely difficult for law enforcement organizations to counter or prosecute. Information can be transmitted overseas and it is common for criminal elements to operate from international locations where law enforcement may be somewhat lax or stretched and to affect consumers and victims across the world.
Three means by which financial institutions counter or limit the damage done to consumers by this phenomenon are:
Early detection of fraudulent transactions
Limiting the liability of victims of fraud
Immediate cancellation of accounts when fraud is reported
Financial institutions such as banks and issuers of credit cards have sophisticated programs which use complex algorithms to calculate the likelihood that a particular transaction is fraudulent. Tip offs include transactions originating from a geographical location far from the address or recent location of a victim. Certain goods and services are also more likely to be purchased by thieves. The delivery destination of such goods and services can also be a tip off.
In the United States, consumers are by law not liable for more than $50.00 of a fraudulent charge made on their account. Card issuers and banks will generally not assess this amount. They will however require victims of fraud to file paper work relative to the incident and to formally file a criminal report to law enforcement agencies.
Financial institutions will encourage closing any accounts displaying suspicious activity or which have a high probability of being compromised in cases such as lost wallets and pocketbooks, residential break ins and so on. It's a simple matter and more cost effective to simply open a new account and have a new card issued. The most important thing to do if you are a victim of fraudsters is to contact your financial institution as quickly as possible.
Preventing Credit Card Fraud
There are some prudent steps that can be taken to lessen the probability of falling victim to fraudsters:
Do not give your credit card information by phone or online to retailers or service providers you cannot vouch for.
Check your monthly statements and transaction invoices closely.
Keep credit cards separate from other items such as your wallet. This is difficult for many to do, but keeping these securely in a particular other location minimizes the potential for problems if your wallet is stolen or misplaced.
Memorize your card account number and information and never write it down and thus expose it to others
Destroy all carbon copies and do not dispose of old receipts in the garbage without shredding. This includes monthly statements and other information that can be retrieved from your trash.
For online payments, as often as possible, use a third party payment system such as Paypal. They provide protection and concealing of your financial information from potentially unscrupulous merchants.