The World's 4 Biggest Credit Card Scams

By Carrie Kirby. Last updated 5 September 2014. 1 comment

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You know that you need to keep your credit cards close and keep an even closer eye on your statements, lest you fall victim to credit card fraud. But how do credit card scams really happen? Here's a look at some of the biggest card heists, and how they went down. (See also: Don't Be Fooled by 2014's Most Common New Scams)

1. Fake Payment Terminals

In England in 2008, computer science student Anup Patel and an accomplice could have caused more than $27 million in losses to banks when they stole some 19,000 credit card numbers through gas station credit card terminals, and set up a home credit card factory to put those numbers on new, working cards.

Devices known as skimmers, attached to a credit card scanner or ATM machine and painted to blend in, are a common way for thieves to collect card information. The pair also set up hidden cameras, in order to capture information consumers typed in, such as PINs or other identifying data.

In this case, the scammers pocketed about $3.5 million — before they landed in prison.

2. Employee-Operated Skimmers

Sort of like the above example, but with more sleight of hand, is the technique of double scanning a credit card in a restaurant or retail establishment. A waiter or waitress can slide your card through the restaurant terminal to apply legitimate charges, then slide it through another scanner in an apron pocket to collect data for future fraud. The irony here is that you will probably tip the person who just robbed you. (See also: Best Credit Cards for Dining Out)

In 2011, the Secret Service busted a 28-person ring who worked at steakhouses, targeting high-limit cards, and ran up $1 million in charges at luxury stores before getting caught.

3. Hackers

The largest thefts of credit card information hit the stores directly, not individual customers. Hackers sneak software onto the store's credit card processing computers, or break into databases where customer information is stored, accessing millions of card numbers at a time. Fortunately, the merchants and credit card companies involved typically cover any losses to consumers in these incidents.

TJX Companies: More Than 45 Million Card Numbers Stolen

With a security hole that gaped open from 2005 through 2007, the owner of T.J. Maxx, Marshalls, and other stores admitted that it would probably never know the full extent of customer information stolen from it. Because the breach had been going on so long before the company warned cardholders, lots of fraud was perpetrated using the stolen information, including $8 million in merchandise theft by one gift card fraud ring in Florida alone.

Target: 40 Million Card Numbers Stolen

Target advertised hard in the run-up to 2013's Black Friday, and was rewarded by millions of shoppers pouring through store doors. Unfortunately, many of those shoppers later found out their credit card information had been stolen when they swiped their cards at Target's registers. The culprit was a simple piece of malware installed on a company computer that managed to spread itself to every register of every store, and siphon up customer data as they swiped their cards. Target promised that customers would lose no money due to the breach, but Target lost big time, with a 46% decline in sales and a $61 million recovery bill.

It also cost CEO Gregg Steinhafel his job.

CardSystems Solutions: 40 Million Card Numbers Stolen

A virus installed on computers of this third-party Mastercard and Visa transaction processor in 2005 resulted in the compromise of 40 million customers' card numbers, in an incident that first awakened many consumers and credit card industry insiders to the very real danger of cybercrime. (See also: Keep Your Credit Card Safe While Shopping Online)

4. Credit Cards Created for Fake or Stolen Identities

If a thief steals your credit card number and starts running up charges, chances are you'll notice the illicit charges on your card statement and put a stop to it. But crooks who manage to take out new credit accounts in real or fictitious names can get away with running up more bills for longer.

In 2013, four conspirators were charged in Trenton, NJ with setting up an elaborate network of fake identities to borrow more than $200 million. The victims here were mainly credit card companies and businesses, since many of the 7,000 false identities under which they set up credit accounts were fictional. They managed to create good credit profiles for their fictional identities by setting up shell businesses and reporting paid-off loans in the straw borrowers' names.

Have you ever been a victim of credit card fraud? How did you find out?

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Guest's picture

I always worry about number two. It seems so easy. I saw an inside edition episode where they put skimmers in the credit card machines at the gas stations. Just too easy.