credit card fraud

How to Win a Fraud Dispute With Your Credit Card Company

Jason Steele — Wed, 10 Jan 2018 09:30:10 +0000

Credit cards are one of the most secure methods of payment, but they're not perfect. In fact, your cards are a huge target for hackers and other criminals who try to steal your account information to make fraudulent charges.

Thankfully, you are protected by the Fair Credit Billing Act, which allows you to dispute a charge on your credit card and temporarily withhold payment on that charge while the card issuer investigates. During that time, the issuer can't legally charge you interest on that charge or report your payment as late to the credit bureaus. (You do, however, still have to pay for all undisputed charges on your bill by the due date.)

If a stranger uses your card fraudulently, this law limits your liability to $50, and if the thief uses your card online or over the phone, you aren't liable for anything. In any case, all of the major payment networks offer a zero liability guarantee, meaning you likely won't be responsible for even $50. To enjoy the protection of this powerful law, however, you have to identify fraudulent charges and dispute them with your card issuers.

Identifying fraudulent charges

These days, your card issuer often spots fraudulent charges before the cardholder does. When that happens, they'll usually call you to alert you, and issue a new card immediately while closing the old account to prevent any further fraudulent charges.

However, sometimes the card company doesn't catch a fraudulent charge. That's why it's important that you scrutinize every transaction on your credit card statement each month. Sometimes a fraudster may charge small amounts — maybe a few cents — to test out whether they can use your account for larger transactions. Beware of charges that are less than a few dollars.

Unfortunately, your statement will not offer you much detail about a charge other than the date, the merchant name, and the amount. To make matters worse, some charges may appear with a merchant name that differs from the name of the company that's advertised.

When you see an unfamiliar charge on your account, first spend a moment researching the name of the merchant. A quick internet search may reveal that it wasn't a fraudulent charge, it was just processed under a merchant name that's different from the one you remember doing business with.

Also check to see that the charge isn't something you inadvertently authorized — maybe you signed up for a free trial subscription and forgot to cancel it before it automatically turned into a paid service. If the merchant's terms and conditions spell out that this was going to happen, you'll have to take it up with the merchant. It's not considered fraud by the card companies.

Finally, a charge is not considered fraudulent if it benefits you. For instance, if your spouse used your card without your knowledge to pay the phone bill or to buy groceries for you both, that's not considered fraud.

How to dispute a fraudulent charge

Once you've done a little bit of investigation and concluded that a charge is likely to be fraudulent, your next step is to notify your card issuer. One way is to call the number on the back of your card and ask to speak to the fraud department. Keep notes about when you called, who you spoke to, and what was discussed.

Many credit card issuers also provide a way to dispute a fraudulent charge online. In that case, you should take a screenshot of your confirmation page or print it.

Once you've disputed the charge, your card issuer will likely give you a temporary credit that will become permanent if the fraud team's investigation confirms that fraud has occurred. You'll also usually be sent a new credit card and have the old one closed.

Winning the dispute

Just because you've received a temporary credit to your account, it doesn't guarantee that you will eventually win the dispute. As part of its investigation, the credit card company will contact both you and the merchant to ask for both sides of the story. For example, if you claim a charge was unauthorized, the merchant could respond with a signed receipt showing your authorization, or a recording of a telephone call where you approved the charge. And if you claim that you never received the goods you ordered, the merchant could offer a tracking number that proves delivery.

When a merchant is actively fighting your dispute, you must provide proof supporting your claim. If you are claiming a charge was never authorized, the burden of proof is on the merchant to show that you gave it permission to charge your credit card.

Preventing fraud in the future

If you found an unauthorized charge from a company that you've never done business with, then it's likely that your account information has been compromised in some way. The best way to prevent further unauthorized charges is to report your card as stolen and have it replaced. There is no charge to cardholders to take this step.

You will also want to monitor your credit to spot other possible fraudulent charges. Regularly viewing your credit score for significant changes is one way to spot potential problems early. Credit cards that offer free credit scores make it easy to stay on top of changes.

You can also request free copies of your credit reports from the three major consumer credit bureaus through AnnualCreditReport.com. Finally, you can request a credit freeze from the major consumer credit bureaus that will prevent anyone from opening a new account in your name. (See also: How to Protect Your Credit After the Equifax Breach)

The good news is, credit cards come with robust legal protections against fraudulent charges and other billing errors. But you must do your part to use this law. By identifying and reporting fraudulent charges, and providing documentation supporting your claims, you can win credit card disputes.

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This article is from Jason Steele of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Reasons Credit Is Safer Than Debit

Jason Steele — Mon, 13 Feb 2017 10:00:10 +0000

A debit and credit card may look the same, but they offer very different services. One takes money directly out of your bank account at the point of purchase. The other sends you a bill at the end of the month to pay for your transactions. If you're a Millennial who grew up during the Great Recession or someone else who's struggled with debt, a debit card may be your first choice for payment.

But overall, Americans increasingly prefer credit cards to debit cards. In 2016, credit cards for the first time surpassed debit cards as the favored payment method, according to the TSYS 2016 U.S. Consumer Payment Study. Forty percent of respondents chose credit cards as their most preferred payment type, compared to 35% who chose debit cards.

That makes sense from a security perspective. While debit cards have the advantage of preventing you from going into debt, they don't compare to credit cards when it comes to safety. Here's why.

More Types of Credit Card Transactions Are Protected by Law

Credit card users are much better protected by law. The Fair Credit Billing Act (FCBA) allows you to dispute not only fraudulent charges on your account, but also charges that are the result of merchant error. You can even dispute authorized charges and temporarily withhold payments — without harm to your credit score — if you are unsatisfied with the goods or services you purchased and the merchant won't refund your money. (The goods must be worth $50 or more and have been bought within 100 miles of your home in order to qualify for this protection.)

In contrast, debit cards are protected by the Electronic Fund Transfer Act, which doesn't cover disputes on authorized charges to your debit card, just unauthorized charges. (See also: Why Millennials Should Embrace Credit Cards)

Credit Cards Users Enjoy a More Generous Dispute Window

Legally, you've got more time to dispute a credit card charge than a debit card charge. The FCBA caps your liability at $50 as long as you dispute the transaction within 60 days of the date your billing statement was mailed to you. And there's no time limit for disputes if your credit card was included in a security breach.

With debit cards, your liability is also legally limited to $50, but only if you report the billing error within two business days of the transaction. The liability cap goes up to $500 if you report the mistake within 60 days, and you may not have any protections at all if you wait longer than that.

Fraudulent Credit Card Charges Don't Have an Immediate Impact

Should a criminal make an unauthorized charge or a vendor accidentally charge you the wrong amount on your debit card, your bank account will be immediately affected until you can resolve the problem. That's not so for a credit card. An accidental or fraudulent charge on your credit card will affect your available credit until you dispute it, but unlike a charge made on your debit card, it won't affect your ability to pay bills from your bank account. (See also: 7 Reasons I Use My Credit Card for Everything)

Credit Cards Protect Your Purchases Better Than Debit Cards

Credit cards often come with one or all of the following protective benefits on purchases.

Purchase Protection

If your purchase is stolen or accidentally damaged, this benefit can replace or repair it, or reimburse you for its cost. Policies vary, but some cover you for up to $10,000. (See also: How Credit Cards Protect Your Purchases From Damage or Theft)

Extended Warranty

Most credit cards offer an extended warranty policy that can add up to two years to the manufacturer's warranty of covered items. (See also: How Free Extended Warranty Works on Credit Cards)

Return Protection

There are times when you want to return a purchase, but the retailer will not accept it. Credit cards that offer a return protection policy may issue you a refund if you contact them within 90 days of the purchase.

It's extremely rare to find a debit card that offers you any of these benefits. (See also: Credit Cards vs. Debit Cards: A Comprehensive Comparison)

This article is from Jason Steele of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Times You Should Never Use Your Company Credit Card

Brittany Lyte — Tue, 04 Nov 2014 21:00:14 +0000

Business purchases should be made on the business card and personal shopping should be done on your personal card — simple as that, right? Well, sure, but our professional and personal lives have become so entwined that there's an enormous amount of gray area when it comes to deciding what charges to make and avoid making on the company dime. (See also: Best Credit Cards for Small Businesses)

It's not always an easy decision to make, but it's an important one, as questionable charges to the company could put your livelihood in jeopardy. Fortunately, we've got your back. Read on for our guide of the top business card purchase no-no's that could put you in hot water.

1. Trips to the Strip Club, Pool Hall, or Pawn Shop

If you're swiping the company plastic at places frequented by people with poor credit, there's a chance that the card issuer will cut your credit limit, raise your interest rate, hike your fees, or cancel your card. That's because they'll think that you, too, are more at risk for falling short on your debts. That's exactly what happened to Kevin Johnson, founder of Johnson Media, when his credit card company informed him by letter that the credit limit on his card had just been cut from $10,800 to $3,300. "In effect, the letter said I was shopping at places where people with bad credit shop, which means that I too am a greater risk," Johnson told All Business.

In fact, credit card issuers rate the spending behavior of 35 million cardholders each month, according to a 2010 survey by the Federal Reserve. It's a practice that's legal, though not necessarily ethical. CompuCredit, the company that marketed Visa and Mastercard to consumers in the subprime credit market, agreed to pay consumers $114 million in a settlement after the Federal Trade Commission filed suit against the credit card issuer in 2008 for deceptive marketing practices. Among the accusations was failure to properly disclose to cardholders that they could be punished for purchases made at bars, billiard halls, and tire retreading shops.

2. Splurges Your Small Business Can't Swallow

If you've got a small business card in your name, swipe with caution. Many of these cards have joint and several liability, which means that the business and the individual making the charges are liable for all debts, according to a spokeswoman for American Express. So if your business can't cover the trip to London you booked on the company dime, it could very well come back to bite you. "Any mistakes, missed payments, purchases exceeding your credit limit or simple mismanagement can be damning to not only your business rating but your personal credit score," writes Lou Dubois of Inc.com.

3. Meetings That Are More Pleasure Than Work

If talk of Sunday night football is more entree than icebreaker, you should pay for meals with clients, co-workers, and the like out of your own pocket — even when business is briefly discussed. Why? Well, for starters, the Internal Revenue Service is particularly watchful for people who attempt to bundle business and personal expenses. And you don't want the IRS coming after your company for a purchase you made. Case in point: The agency once rejected a deduction of tickets to a baseball game because the volume levels at a ballpark don't allow for a comprehensive business discussion.

4. Personal Shopping — Even When It's Low-Cost

The risk of being caught by your boss isn't the only reason you should never charge personal expenses to your business card. "When an employee has been trusted to be an authorized cardholder of a business or corporate credit card, the employee is agreeing only to use the card for business use," writes Jason Steele of The Credit Card Solution Program. "Using such a card for personal use, with the expectation that the employer will pay for non-business transactions, is tantamount to fraud."

5. To Get an Upgrade

Upgrades on rental cars, hotel rooms, and plane tickets are on most companies' list of prohibited charges. It's not that your boss wants to deny you extra legroom on your flight to Dallas. Rather, she just doesn't want to foot the bill for it. "It's for personal, not for business," Capital One spokesperson Sukhi Sahni says of upgrades of all sorts. So if you're on a business trip and want a hotel room with a kitchenette, charge the basic room to the company and pay for the upgrade out of pocket.

What have you used a business credit card for that turned out to be a mistake? Please share in comments!

This article is from Brittany Lyte of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

New App Ondot Is a Remote Control for Your Credit Card

Joe Epstein — Sat, 26 Apr 2014 04:14:40 +0000

What's the good of ordering food via your smartphone's Grubhub app or ordering a car via its Uber app if you don't also have an app to make sure there's some money left on your credit card when it gets there? (See also: Apps to Manage Credit Card Rewards)

Well soon you will, thanks to Ondot, a San Jose-based company that just unveiled Card Control, a mobile command center for defeating fraud, all built into your phone.

At the most basic level, the app serves as an extra line of protection against fraud, allowing the user to toggle the card's use on or off, or set the card to only function within certain parameters.

For example, a location-based control means one can set their card to work only in a specific zip code, meaning it will automatically shut off if it gets nabbed and taken for a ride. Or, the app can sync a phone's GPS to the card, effectively disabling it if they're separated (e.g., the card is left behind).

Other users might choose to toggle types of merchants the card will work with, disabling e-merchants until the user manually unlocks them before making a purchase, for instance. (See also: Credit Card Safety When Shopping Online)

And here's where — even for those unconcerned with fraud — the app gets really interesting. That same technology allows parents to limit or toggle types of spending on their kids' credit cards, meaning one might allow food purchases but bar clothing expenditures on any particular card. And the app would even allow parents to monitor their kids' card use in real time.

While the company's been around since 2011 and already raised $18 million in funding, the app itself is just now rolling out, having already partnered with four major card processors working with 10,000 banks and credit unions across the country.

This article is from Joe Epstein of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Will New Chip-and-PIN Credit Cards Stop Identity Theft?

Emily Guy Birken — Mon, 17 Feb 2014 10:36:26 +0000

If you were one of the 70 million Target customers whose credit card information was compromised this past holiday season, you may have found yourself thinking, "There's got to be a better way!" as you combed through your statements looking for fraudulent activity. (See also: How to Avoid Credit Card Fraud)

As a matter of fact, there is, and it's been in place in Europe for a decade. It's called Chip-and-PIN technology, and it will vastly improve credit card security for in-person transactions.

MasterCard and Visa made headlines recently when they announced that they will be shifting to the Chip-and-PIN system (also known as EuropayMasterCardVisa or EMV), with a deadline of October 2015.

The security improvement is certainly good news, and it will also be beneficial for the United States to finally join the rest of the world in using this well-proven technology — but the news isn't all positive. Here is all that you need to know about this major infrastructure change to credit cards. (See also: An Intro to Bitcoin)

How Chip-and-PIN Technology Works

The cards you currently carry in your wallet have a magnetic strip on which your credit card information is stored. Unfortunately, it's relatively easy to capture and copy the information on these magnetic strips, making security a serious issue. Add in the fact that our current swipe-and-sign technology assumes that you have signed the back of your card and that the clerk will check your signature to make sure it matches the one on the card, and it's pretty clear that your credit card information is vulnerable.

Microchips on chip-and-PIN, or "smartcards," on the other hand, offer another layer of security. Like magnetic strips (which will still be present on the new smartcards), these embedded chips also have the credit card information encrypted on them. When you swipe one of these cards on a chip-and-PIN reader, the terminal verifies that the card is authentic by checking the chip, and it asks the customer to enter the 4-digit PIN.

According to Kate Cox of The Consumerist, "the chips cut back on card fraud because their existence makes cards significantly harder to clone: even if you get all of the information from a card's magnetic strip, as through a skimmer, without the chip actually being present, the card data is useless in a physical transaction."

This means that chip-embedded smartcards are harder to clone — even if a swindler were able to get both your credit card information and your PIN. (See also: 10 Things to Do If You Lose Your Wallet)

October 2015 Marks the Beginning of the Liability Shift

One of the reasons why the United States has been so slow to adopt this technology is because of the cost and effort required to set up the huge infrastructure necessary for a technology change of this size. Jaikumar Vijayan of Computer World reports that the upgrade to the new point of sale (POS) terminals will cost billions overall:

POS systems capable of reading EMV cards can cost hundreds of dollars apiece. Retailers like Target can expect to pay tens of millions of dollars just swapping out the hardware. In addition, they will also need to spend on software, testing and deployment.

Those costs mean that many smaller retailers and banks may feel as though they cannot afford to make the switch. However, the deadline given by MasterCard and Visa for the changeover to chip-and-PIN technology is actually the time frame for a "liability shift" for fraud.

Currently, in the case of card fraud, it is up to the credit card company to determine who is liable for the costs. In October 2015, the liability will shift to whichever party has the lesser technology. Carolyn Balfany, MasterCard's EMV expert, recently explained this liability shift to the Wall Street Journal:

If a merchant is still using the old system, they can still run a transaction with a swipe and a signature. But they will be liable for any fraudulent transactions if the customer has a chip card. And the same goes the other way — if the merchant has a new terminal, but the bank hasn't issued a chip and PIN card to the customer, the bank would be liable.

Creating this liability shift was an ingenious method for Visa and MasterCard to ensure adoption of the technology, since it gives all merchants and banks the incentive to invest in the new system at the same time, making the transition much smoother for everyone.

Potential Pitfalls

Unfortunately, any change of this size is unlikely to be completely free of issues.

Internet Transactions Still Risky

The first concern is the fact that while chip-and-PIN technology greatly improves security for in-person transactions, it does nothing to make your Internet or phone purchases any safer. This is concerning considering the fact that swindlers "look for the path of least resistance" according to Balfany. That is why half of all credit card fraud occurs in the United States but only a quarter of all credit card transactions do. As other markets moved to EMV cards and technology, fraudsters simply moved to easier markets for gathering information — specifically the United States.

Likewise, once our in-person transactions are much more secure, it's a safe bet that data thieves will start working on the less secure angle of Internet purchases. (See also: Keep Your Credit Card Safe While Shopping Online)

It's a Big Change in a Little Time

Another potential issue has to do with the amount of time it takes to make a major change like this. While MasterCard and Visa have done their part to incentivize this switch, it is highly unlikely that smartcard technology will be a fait accompli by October of 2015. Jaikumar Vijayan reports that, "Canada first began moving to EMV in 2003. More than 10 years later, only about 85% of the country's POS systems can take EMV cards — and that's in a country with a more centralized payment system and far fewer POS systems, compared to the U.S."

Basically, there may be some growing pains as we implement this technology. In addition, while the chip-and-PIN technology is proven in other markets, that also means it's an older technology. There is the possibility that we are just now adopting a technology that will become obsolete as we shift to more secure mobile and online payment options that are just now becoming available.

The Bottom Line

While we are late to the chip-and-PIN party, it is good news that the U.S. market is finally getting proactive about making our credit card information more difficult to steal. However, no matter how smart our technology becomes, it will always be up to the consumer to keep a close eye on their statements and their credit reports — because swindlers, much like nature, will always find a way.

Have you ever been the victim of credit card fraud? Will you feel more secure with this new technology?

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Shop: A Beginner's Guide

Matt Brownell — Wed, 06 Jun 2012 10:36:11 +0000

So you’ve decided to buy something. Congratulations! Here’s how to do it.

1. Pick the Right Time

First things first — you’ll need to determine when your adventure in commerce will take place. (See also: The Best Days to Shop)

This is a bigger deal than you might think, as “when to buy” can often be more important than “where to buy” when it comes to getting the best price. As a general rule of thumb, you’re a lot more likely to pay full price if you’re trying to buy something at the same time everyone else is. If you’re just now getting around to buying an air conditioner, for instance, it’s probably too late to get any kind of significant discount — this is peak season for air conditioner purchases, and most stores don’t need to offer discounts to move units. You would have been better off buying at the end of last summer or in the fall, when purchases have slowed to a trickle and stores are trying to get the last remaining units off the floor.

Timing is important for non-seasonal purchases as well. Most new products will start coming down in price after spending some time on the shelves. The waiting period can vary — iPhones and iPads tend to come down by $100 when the new model comes out a year or so later, while a new video game can see its first price drop within a couple of weeks. No matter what, though, you can expect to pay full price if you insist on getting that brand new book or DVD the day it comes out, so do your best to show a little patience.

2. Decide on Quality

People tend to talk about getting the “best bang for the buck” — that is, the best quality-to-price ratio. That’s a reasonable goal, but I find focusing on value above all else sometimes means you wind up with a low-quality product because you couldn’t pass up a too-good-to-be-true price. And that can backfire on you when your new forks and knives that you bought at the dollar store turn to rust in your sink after a couple weeks, forcing you to purchase a new set.

That’s why it’s a good idea to do some research, read user reviews, and determine which brands of your target product meet your standards for quality (and which don’t). That doesn’t mean casting aside questions of cost and simply buying the highest-quality product on the market — there’s nothing wrong with balancing quality and price to some degree. But you should go into the store having established the minimum quality standard and feature set you’re willing to tolerate.

3. Shop Around and Find Coupons

Once you’ve established what you want to buy and when you want to buy it, figure out where you’re going to make your purchase. Buying online is usually cheaper than buying in a store, so start there. While you can have some success by simply checking the price on major e-commerce sites like Amazon and NewEgg, your best bet may be to use a price comparison site like PriceGrabber or Google’s shopping tool. If you do find the best price online, don’t forget to account for the additional cost of shipping — though remember that shipping costs could be offset by the lack of tax if you live in a state which does not collect sales tax on online purchases. You could also avoid shipping costs if you go with a site that offers free shipping (sometimes this is contingent on spending a certain amount) or if you’re able to find a free shipping code.

Speaking of codes, you’ll want to hunt around for any way to get a discount off the sticker price. You can find coupon codes on deal sites (RetailMeNot is one popular destination for code-hunting) as well as on the websites and social media feeds of individual retailers. You should also check weekly circulars for deals, sales, and clip-out coupons.

4. Feel Free to Haggle

If there’s one area where brick-and-mortar retailers have a definite advantage over online shopping, it’s the potential to save by haggling. If you decide to skip the e-commerce trend and hit a physical store, don’t be shy about negotiating for a lower price.

While you can haggle for anything, you’re going to have the most luck (and the most potential for savings) haggling over big ticket items like TVs, appliances, cars, and jewelry; these have high margins and are typically sold by commissioned salespeople empowered to negotiate. Entire books have been written about the art of negotiation, so I can’t even begin to tackle all the ins and outs of the haggling process. But the basics are simple: go up the retail hierarchy until you find a salesperson or manager who’s allowed to haggle, then see how low he or she is willing to go. Don’t be afraid to walk away from the negotiation and leave a phone number for the salesperson — as the end of the month gets closer and they grow more desperate to hit their monthly quotas, they might just call you with a better offer on that big-screen TV.

5. Use a Credit Card

Now that you’ve done your research and picked out your purchase, head to the cashier (or checkout screen) and pull out your credit card. You’ll notice I said “credit,” not “debit” — whenever possible, you should use a credit card for purchases.

In part that’s because your credit card likely gives you some sort of cash-back rewards with every purchase (and if it doesn’t, you should apply for a rewards card as soon as you get the chance). But beyond the potential for rewards, there’s also the fact that credit cards simply leave you better protected against the various things that can go wrong with a transaction. Many of them, for instance, offer purchase protection that serves as a sort of warranty on your merchandise. Obviously you’ll want to read the fine print in your card agreement, but in many cases it will allow you to bypass the costly extended warranty that most salespeople will try to sell you. And if you make a purchase and somehow fail to receive the product you ordered, you can do a chargeback, which means the credit card issuer will refund you the money and then go after the shady retailer itself.

Using a credit card also provides good protection against fraud in case the transaction somehow results in someone getting a hold of your card or card number. Most credit card issuers will refund all fraudulent charges made with your card, and federal law makes you liable for no more than $50. By contrast, you could be on the hook for up to $500 if someone goes on a shopping spree with your debit card number.

Some people prefer using cash, and there are admittedly a few advantages there; being allowed only the cash in your pocket can rein in spending impulses, for instance. And using cash can also help in a negotiation, as the promise of avoiding swipe fees may prompt a retailer to knock another $5 or $10 off the price of an item. Other than that, though, you’re better off using a credit card — just don’t go getting yourself into debt.

If you did everything right, you've purchased a quality product at the lowest possible price. Don't forget your receipt!

This article is from Matt Brownell of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Credit Card Fraud and How to Avoid It

Louise Tillotson — Fri, 22 Oct 2010 13:00:28 +0000

Credit card fraud affects thousands of people every year. During 2009, in the UK alone, £440.3 million was lost due to fraudulent actions on stolen or cloned credit cards. In addition to this, £59 million was lost after tech-savvy criminals developed sophisticated malware programs designed to hack into online banking accounts.

But despite these frighteningly high figures, the cost of UK fraud has actually fallen by 28% from the previous year. And 2010 is seeing a further decrease, although official figures will not be known until early 2011. The decrease comes at a time when more people than ever are using credit cards and online banking, so it would suggest that consumers are becoming familiar with the types of fraud and how to spot (and avoid) them. (See also: How to Avoid Phishing Scams)

Types of Credit Card Fraud

The most widespread form of credit card fraud in the UK is Card-not-Present fraud. This has grown alongside the rising popularity of internet shopping, as an online retailer does not see the card being used and therefore cannot always determine the authenticity. A fraudster of this type can obtain a card through mail fraud, skimming/cloning, or theft — then use it to buy goods online. They may even buy from the same sites as their victim, to reduce the risk of banks flagging unusual activity.

Mail fraud involves the criminal intercepting mail from their intended victim's bank or building. The fraudster can then register the card themselves and use it. People who live in buildings with a communal mailbox are particularly susceptible to this type of fraud.

Skimming is the term given to the practice of scanning a credit card using a device designed to harvest card details. These details can then be used to create a cloned card which may be sold to other fraudsters or used for CNP fraud.

The most common place for skimming to occur is in a bar or restaurant, where customers have to hand their card over to the waiting staff in order to pay the bill. The card is taken by the staff and processed — but a corrupt employee may carry a skimming device which they pass the card through before doing the actual transaction.

Often, the victim isn't aware that anything untoward had taken place until they receive a statement showing unfamiliar transactions. At this stage, the criminals may have been obtaining credit in the victim's name — another form of fraud known as identity theft or application fraud. Someone with a good credit score may not know this is happening until they apply for credit themselves and get refused.

Due to the sophisticated nature of some of the devices used by criminals, it can be difficult to detect fraud. But there are steps everyone can take to lessen the chances of falling foul of the fraudsters.

Detecting and Avoiding Fraud

Only use trusted online sites, which display either https in the URL or have a locked padlock symbol in the status bar on the lower right. Sites that have these use an advanced form of encryption which prevents thieves from harvesting data as it's being sent from server to server.
Using a PO box instead of a communal mailbox can lessen the chances of mail fraud. If this isn't possible, some banks may allow customers to collect cards from their local branch.
Verified by Visa is a payment system set up to prevent card fraudsters committing CNP fraud. It's a way for online retailers to confirm a buyer's identity at time of checkout, by way of a special security password known only to the card holder. The password is chosen by the consumer when they register with VbV. When purchasing from a site which uses VbV, 3 digits or characters from the 6+ character password will be asked for, and the entire password is never entered. This is currently one of the most secure ways to buy online, as more and more e-merchants are signing up to the scheme.

Banks are becoming more intelligent when it comes to fraud detection, and are able to recognize certain behavioral patterns on a customer's account which raises security issues. These can include a series of small transactions (usually under £2) or usually large amounts being withdrawn. The former is one way in which fraudsters can tell if it's worth using a card, so banks are being trained to recognize this as a warning sign.

It's recommended that if a consumer genuinely intends to withdraw a large amount from their account they contact their bank beforehand to inform them of the fact. This can then prevent any anti-fraud measures, such as a block being put in place for that instance.

Legal Rights and Responsibilities

In the UK, if money has been lost as a result of fraud, the card holder is only liable for repaying the first £50, provided the fraud is genuine and not as a result of negligence (i.e., leaving the card on a bus or in an unattended bag). Reporting the fraud as soon as it's discovered increases the chance of money being recovered and the perpetrators being caught.

The fraud department of each card provider should be contacted along with the police. Any online banking passwords should be changed and the credit reference agencies notified; they will place a fraud alert on the affected file in case the thief tries to commit application fraud.

The Consequences of Fraud

A victim of fraud may be left feeling vulnerable and afraid to trust anyone outside their close circle of family and friends. If you or someone you know has suffered at the hands of a fraudster, don't feel like you are alone. Seek advice and counseling and follow the preventative steps above to restore your peace of mind.

Guest Post Blurb:

This is a guest post by Louise Tillotson. Louise is a financial writer in the UK and her work has appeared on several websites, including as a credit card applications guide for Moneysupermarket. She has also written several pieces on Voices in Finance and related sites and runs a local community blog and site network called Flintshire Families.

This article is from Louise Tillotson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What Do You and a Credit Card Thief Have in Common?

Linsey Knerl — Thu, 11 Dec 2008 03:51:51 +0000

I've always considered myself to be an educated credit card user. I keep my balances low, pay on time, and don't do anything that could potentially come back to haunt me.. Little did I know, that by playing it cool, I was putting myself at risk for being treated like a criminal.

Remember my recent Kmart Double Coupon excursion that left me more than a little irritated? Part of my frustration stemmed from the outcome of my purchase – or rather my NON purchase. I never got to buy all the goods in my overflowing cart that day, and the major cause of my headache was the decline of my credit card. For real.

I don't play games with my credit. I kept this card in my wallet, but barely used it for in-store purchases. I think I had used it to reserve hotel rooms from time to time, but almost always ended up paying with cash or a debit card when it came time to check out. The card was a little worn from carrying it around all that time, but really didn't get much swipeage (if you know what I mean.)

“Your money is no good here.” Upon entering the checkout line, I tried to swipe the card. Apparently, the reader machine was having a hard time making sense of my card. The Kmart cashier suggested that I put a plastic bag over the card and try again. No go. So I suggested that she type in the numbers manually.... after some discussion with a manager, she did. My card was declined. I was flabbergasted.

I tried, unsuccessfully, to use other methods of payment, but due to the code that was coming up for why my card was declined... I couldn't get any other method (including check) to work. I left fuming, and received precious advice from the Kmart cashier. “That's why I always carry cash.” Thanks, lady, but we're talking over $350 cash, and with all the muggings going on in my area this time of year, I think I'll pass.

I hang my head in shame... and confusion. I felt like a loser, but I wasn't sure why. I got home and immediately noticed an email from my credit card company, alerting me to “problems” with my account. I called, and I was told the following:

This time of year is ripe for credit card fraud, so my card (along with every one else's) was being monitored especially well
My account was showing “suspicious” activity, specifically, a $16 Subway charge and a $30 gas charge – all in one week.

Because of the shocking nature of the recent flurry in activity, my card was flagged as suspect for fraud. (I.e., they thought that the two charges in one month was a little shady, so they froze my account... hours before I headed to Kmart.)
They were very sorry, but they have to think of the safety of their customers. Big purchases (like that monster charge of $200+ at Kmart) was unspeakably high. It could only mean theft.

OK.... so I argued (politely, of course) with the rep. How can I possibly use my card if small charges like this could be flagged as fraud? What if I was traveling out of town and needed to crash in a hotel slightly nicer than the Wagon Wheel Inn? Would the $80 charge throw my account into a meltdown? How could I be sure I could count on my card?

After a long letter to the executive office and a phone call later, I got everything straightened out (and a nice compensation of award points, to boot.) Basically, there was no surefire way any one of us could guarantee the same thing wouldn't happen. Here's what was recommended, however:

If you plan on using your card after a period of long inactivity (sitting in your freezer, perhaps) start slow, make many small purchases, and work your way up to larger purchases. Be prepared for it to cause an alert to be placed on your card, and carry a backup method of payment, if you can.
Be aware of your spending patterns. In my case, my credit card had only two charges each month for over a year. They were recurring charges for Netflix and my newspaper, so they were very predictable. When my spending went OUTSIDE of this pattern, it alerted my credit card company. It might help to call ahead and let them know if you plan on making large purchase outside of your pattern, or if you are going to be out of town with a need for easy access to funds.
Monitor your card carefully. Just because they caught my intentional purchase, doesn't mean they'll catch everything. Small fraudulent purchases are more likely to go under the radar and cause financial damage than large ones. Read your statements every month.

This article is from Linsey Knerl of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Once Bitten Twice Shy: What is Credit Security Worth to You?

Nora Dunn — Sat, 23 Aug 2008 01:16:25 +0000

Anybody who has had their identity stolen is usually willing to pay good money to ensure it never happens again. Weeks upon weeks upon months of tiresome paperwork, changing bank accounts, switching automatic payments, and in some cases pleading a case for wrongly damaged credit is among the giant task list of nightmarish to-dos when you’re picking up the pieces after the fact.

So what is it worth to you to try and avoid this problem altogether? Obviously, exercising due caution is easy enough to do and prudent to say the least. Don’t use a credit card or do banking over an unsecured wireless network. Be careful with your bank card and entering in PIN numbers in public places. Avoid using the same password for everything that also happens to be the name of your pet.

In this day and age, most of these techniques are relatively commonplace. But what else can you do?

Credit Reporting and Monitoring Services

Most credit agencies like Equifax, Experian, and TransUnion have a credit reporting service you can subscribe to. For between $10 and $15 per month for example, the Equifax Credit Watch program will alert you to any changes in your credit such as:

Somebody trying to open an account in your name
Credit inquiries made on your accounts
Changes in your account balance beyond user-set parameters
Even $20,000 in Identity Theft Insurance

Experian and TransUnion have similar programs here and here. Most programs encompass monitoring of all three credit bureau activities, but before you race out and sign up it would be prudent to double check. Paying a monthly fee for a service that monitors only one third of your credit history is, well, only one third as good.

Initially, it seems like a good deal, worth considering – especially for those who were once bitten and now twice shy.

But upon further consideration, I begin to question the value in the name of frugality.

Can I not hop online and check my credit balances daily (or every other day), scanning for erroneous charges?
If somebody does a credit check on me I’d like to know, but what if instead of subscribing, I periodically order a free credit report? Each of the three credit agencies usually allow one free report per year: if I timed it right I could check my credit activity every four months.
And although the Identity Theft insurance sounds handy, with a little bit of elbow grease, I shouldn’t have to pay any erroneous charges to my credit cards or account change fees once we’ve established the identity theft as the cause.

Then again…

There’s no denying the fact that simply paying the monthly fee could be easier, and may give you some more free time and well-deserved peace of mind.

Then again…

$10 here and $10 there, and you’ve blown your Latte Budget before even getting one drop of caffeine into your system.

So what is your credit security worth to you in this world of ever-increasing identity theft and credit crime? And what are you prepared to do about it?

This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: