Credit Card Fraud Prevention
Our Guide to understanding and preventing credit card fraud.
The first step in preventing credit card fraud is to understand a little about the types of fraud that take place and how they can happen.
Types of Credit Card Fraud
The most common types of card fraud and identity theft are explained below.
Lost and Stolen Credit Cards
This is where your card is stolen from your wallet, purse, car or home or is lost and is then used by a fraudster pretending to be you. Unfortunately, most of the time, the fraudster has already spent up before you realise what has happened.
Skimming Credit Cards
A skimmed, cloned or counterfeit card may have been either embossed, printed, encoded, recorded or altered. Skimming usually occurs when the card details are recorded, for example by a sales assistant or waiter, and sold on to fraudsters. The card’s magnetic strip is literally copied onto another card without the cardholder’s knowledge.
Fraud where Card Not Present (CNP)
This may involve online, telephone, fax and mail order purchases. In most cases, your card details will have been obtained by fraudsters via discarded receipts or by skimming or copying your card details during a transaction.
Interception of your Card in Transit
This type of card fraud occurs when your card is stolen when it is in transit, for example when the bank has sent you a new card. Communal post boxes in flats and apartment blocks are often places where the actual interception takes place.
Identity Theft
When your personal information is copied or stolen, a fraudster may either use your details to open a new credit card or bank account or run your existing account, having correspondence redirected to them and spending beyond your credit limit.
Where does Credit Card Fraud Happen?
Cash Machine Fraud
Fraudsters can use ATM cash machines in a variety of ways to steal your details.
Skimming
Here, a skimming device would be attached to the cash machine at the card slot enabling the card’s details to be copied from the magnetic strip to the skimming device. Also, a tiny camera will capture your PIN number as you type it into the cash machine. With this information, the fraudster can make a copy of your card and withdraw cash from the cash machine from your account using your PIN number.
Shoulder Surfing
Here, a fraudster would watch you enter your PIN over your shoulder and then steal your card for example by distracting you or pick-pocketing it.
Card-Trapping
A fraudster can retain your card by trapping the card in the cash machine so that it is not ejected and wait for you to re-enter your PIN number until you give up and walk away. The fraudster can then release the card and enter your PIN to withdraw cash from your account.
Card Fraud Abroad
When card fraud occurs abroad, the card details have usually been obtained from the card within the UK. However, card fraud abroad can occur as a result of British holiday-makers having their cards stolen or copied in one of the above ways.
Internet Fraud
The majority of online card fraud occurs as a result of the fraudster bin-raiding for your details or skimming your card details. Payment transactions online are called "card-not-present-transactions". Some fraudsters will intercept your card by raiding your post, a common occurrence in apartment blocks, or apply for the card in your name using your address details. Once the fraudster has your card details, they can use them to make purchases online.
Spam Emails
Fraudsters may use spam emails to contact millions of people online. The intention of the fraudster when using spam email is to dupe you into disclosing personal information, such as bank account details, for example by pretending to be from your bank. Once in possession of these details, the fraudster can then make fraudulent purchases online in your name.
How to Prevent Card Fraud
Chip and PIN for Credit Cards
The microchip in chip and pin cards retains your account details in a much more security-tight manner than the magnetic strip and it more difficult for fraudsters to copy. The purpose of the four digit PIN is to prove that you are the genuine card holder. The PIN is better than a signature because it does not differ each time unlike a signature which can alter for example with age or if you have injured your hand.
Dedicated Chip and Plastic Crime Unit (DCPCU)
The DCPCU was set up in April 2002 as a pilot scheme focusing on organised crime in relation to counterfeit card fraud. The scheme was initially funded by banks and the Home Office and staffed by a variety of sectors, including fraud investigators, bank staff, police personnel and more.
Due to the success of the two-year pilot scheme, the DCPCU was set up permanently and is now fully funded by the banking industry and has expanded its focus to include cheque and plastic crime as well as counterfeit card fraud. The DCPCU has a remarkable success record. Between April 2002 and April 2005 the DCPCU recovered over 3,400 counterfeit cards, 39,600 stolen card numbers and 5,420 cheques being used for fraudulent purposes. The industry saved over £100 million in this period alone thanks to the DCPCU.
Payment Industry and Police Joint Intelligence Unit (PIPJIU)
The PIPJIU shares intelligence information among the police forces, banking industry and other agencies throughout the United Kingdom. The PIPJIU’s primary goal is to overcome counterfeit card fraud and skimming in the UK.
The PIPJIU works closely with DCPCU and is a leading source of intelligence information for many industry related organisations including card-not-present-transactions.
Retailers
Programmes have been developed to try to combat online card fraud. Methods to reduce card-not-present fraud have been put in place with great success. Such methods include verification and security codes being requested before a purchase can be completed online. Examples of these are 'Verified by Visa' and 'MasterCard SecureCode' where you will be asked to enter your password or security code.
Fraud Detection Computer Systems
Intelligent computer systems are being used by banks to track your use of your account for spending patterns. These fraud detection computer systems are very effective because if any irregular spending is detected, your bank will immediately contact you to check whether you have made these transactions.
Identity Theft Prevention
The Home Office and Card Watch launched a website www.identitytheft.org.uk to provide consumers with advice on how to stay protected.
Lower Floor Limits
Many retailers and businesses have a floor limit. A floor limit is an amount where anything over this amount will require authorisation from your bank before the transaction can be completed.
Industry Hot Card File (IHCF)
The IHCF allows retailers to electronically check each card transaction made to help prevent the use of cards fraudulently.
Fraud Prevention Service
The CIFAS provides a variety of services to its members, both organisations and individuals, in an attempt to identify and prevent identity fraud.
