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Cardholders and issuers suffer losses worth millions of dollars every year in the form of credit card frauds. The best way to avoid these frauds is to know about these thefts in a more detailed manner.
There are different ways in which people commit credit card frauds. The most common way is through physical theft of the card. This type of fraud is easy to identify. When a card is stolen, it still remains usable until the bank is notified about the theft.
Another type of credit card scam occurs when the data associated with the credit card is compromised. This data includes the credit card number and the security code that is used routinely at the time of making a transaction at any merchant outlet or ATM center. One more important type of credit card scam occurs when the credit card is used for making any online transactions. This has become the most featured among all the frauds involving credit cards primarily due to increased use of internet technology and growth of e-business concept. Credit card rackets occur on the internet due to database security lapses. Specific software is designed by hackers for gathering information about various credit card details from e-commerce and e-business sites. The most common details required for making an online transaction using a credit card include the name of the card holder, account number, card expiry date and the verification or CVV code. These details are then used for committing fraud. Both these types of frauds are difficult to locate until the cardholder receives a billing statement.
There are also various other types of credit card rackets and scams that include skimming, phishing, carding, account takeover, and mail/internet order fraud.
Phishing :
Phishing is a technique employed by scamsters to illegally procure personal information of the cardholder like credit card number, bank account details and passwords. The main strategy used in this technique is to send spam mails to customers, where the mails are drafted in such a way that they look exactly like an email sent by the bank asking the recipient to enter his transaction details.
Skimming :
Skimming can be explained as an illegitimate way of stealing credit card information during the process of doing a legitimate transaction. There are different ways in which skimming occurs. The most common way is to transcribe the information present on the card on a piece of paper. Security codes present on the magnetic stripe are stolen using a small keypad. This is usually done in a restaurant where the credit card is taken away from the view of the cardholder for making a transaction. Another way of skimming is to attach a special device to the ATM. The device reads the information present on the magnetic stripe and transfers the data to another remote system. These devices are also attached with special cameras used to gather the cardholder’s PIN.
Carding :
This is the process used to verify the validity of a stolen credit card data. In this technique, special software is designed for producing a sequence of credit card numbers. These types of computer programs are called as generators. The credit card numbers generated in this way are verified for their validity.
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