Last editedOct 20212 min read
From identity theft to credit card cloning, there are numerous ways that sensitive financial information can be compromised. Protecting your business from fraud means being aware of the latest tools used by criminals. Here’s a look at the most common types of credit card fraud out there today.
What is credit card fraud?
Credit card fraud is a blanket category referring to any type of theft or scam involving card details. The aim is usually to purchase goods or services without paying, whether it’s by using a stolen card or copied details. In addition to making unauthorised purchases, there are different types of credit card frauds focused on stealing money from the cardholder’s account.
Common types of card fraud
To prevent the types of credit card fraud mentioned below, it’s important for businesses, consumers, and banks to work together. This begins with understanding how the most common scams work, so that you can recognise any red flags immediately.
1. Lost or stolen cards
Perhaps the most obvious type of card fraud occurs when a card is lost or stolen. A thief might physically take the card from a victim during a robbery or steal it from an unsecured location. They’ll then use the card for unauthorised transactions until the card is cancelled by the victim. To minimise damage from this type of theft, it’s important to report your card as stolen as soon as possible. This will block future transactions. You can also set up your card to require a PIN to be entered before finalising any purchase.
2. Credit card cloning
Also called skimming, credit card cloning involves copying the card’s data electronically and then using this to make an identical account. The fraudster can then use the copied card to make purchases or withdraw cash from the account. One method is to fit an electronic skimming device onto cash machines, which pick up a card’s details when the cardholder makes a withdrawal. Sometimes the card details will be copied by a retail or restaurant employee when taking customer payments. The trouble with this type of fraud is that it can take some time for the victim to notice there’s a problem. They still have the physical card in their wallet, so may not notice unauthorised purchases until receiving a bank statement.
3. Identity theft
Many different types of credit card fraud revolve around identity theft in some way. With identity theft, the fraudster steals the victim’s personal details to open or gain access to an account. For example, the criminal might steal bank statements or utility bills and use the details included within these documents to take over the cardholder’s accounts. Many scams occur over the phone or via an email link. The fraudster will pretend to be the bank or another authority figure, requesting sensitive information. They then use this personal information to contact the cardholder’s bank and report a lost card. The bank issues a new one to the criminal, who has stolen the cardholder’s identity.
4. Card not present fraud
Finally, it’s possible for criminals to use stolen card details even if they don’t physically have the card in hand. For example, they might access the card number and account holder’s name through stolen documents. This provides just enough information to make purchases online or over the phone. As with skimming fraud, these unauthorised charges aren’t noticed until the customer’s next bank statement is issued.
Safeguard against fraud
As you can see, there are many different types of card fraud to be aware of. So, how can you protect yourself and your business against these common scams? From an individual perspective, protect your personal details carefully with secure, separate passwords for all online accounts. You should also make it a regular habit to check over your bank statements for unusual charges. If there are any you don’t recognise, get in touch with your card provider straight away. According to the Consumer Credit Act of 1974, consumers aren’t liable for unauthorised credit card payments.
Businesses can also help prevent these common types of credit card fraud by putting steps in place to protect consumer details. End-to-end encryption, tokenization, and two-factor authentication procedures can all help make your website more secure.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.
