Credit card fraud

Credit card fraud is the crime of using a credit card to obtain property or financial benefits through improper means for the purpose of illegal possession.

Common types

Swipe:

This is the most common form of credit card fraud. Criminals steal credit card information, such as card number, expiration date, CVV code (the three-digit verification code on the back of the card), and make transactions without the cardholder's authorization. For example, they may use the stolen information when shopping online, or make cloned cards and swipe them on the card machine in a physical store.

Some hackers will attack the merchant's payment system or the database of a financial institution to obtain a large amount of credit card information for fraudulent transactions. In another case, criminals steal credit card information through a small device installed on the card machine (commonly known as a "skimmer") when the cardholder uses the credit card to make a transaction.

Identity fraud:

Criminals obtain the cardholder's personal identification information, such as name, address, social security number, etc., and then apply for a credit card in the cardholder's name. They will obtain this information through various means, such as phishing, which is to send seemingly legitimate emails or text messages to induce the cardholder to disclose personal information.

Or use the information obtained from some data breaches to pretend to be a cardholder and apply for a credit card from a bank or financial institution. Once the application is successful, the fake credit card will be used for consumption or cash withdrawal, and the real cardholder often finds out that his identity has been used when he receives a bill or a notification from a credit institution.

False application:

Fraudsters use false identity information to apply for a credit card. They may fabricate non-existent personal information, including fictitious work units and income situations, in order to deceive the bank's trust and obtain credit card limits.

After these false credit cards are approved, the fraudsters will quickly overdraw their credit limits to purchase high-value goods or conduct other illegal financial activities. Some criminal gangs specialize in this kind of false credit card application activities, obtain credit cards in batches and profit from them.

Account takeover:

This type of fraud refers to criminals controlling the cardholder's credit card account through various means (such as obtaining the cardholder's online banking login credentials). They may use weak passwords, malware or social engineering attacks to obtain the cardholder's account login information.

Once the account is taken over, the fraudster can modify the account information, such as contact information, mailing address, etc., and then conduct unauthorized transactions, including increasing the credit limit and spending, and the cardholder may find it difficult to find out in time that the account has been controlled by someone else.

Harm

Impact on cardholders:

Cardholders may suffer direct financial losses and need to bear the fees for unauthorized transactions. These fees may include the cost of purchasing goods, cash withdrawal fees, etc. Moreover, credit card fraud may have a negative impact on the cardholder's credit record, resulting in a decrease in credit score.

This will make it difficult for cardholders to apply for financial services such as loans, credit cards, and home loans in the future, such as being rejected by financial institutions or having to pay higher interest. In addition, cardholders will also need to spend time and energy to deal with fraud incidents, such as reporting to banks and cooperating with investigations.

Impact on financial institutions:

Financial institutions face financial losses because they may need to bear the losses caused by fraudulent transactions, especially if they cannot recover funds from fraudsters. This will affect the profitability and financial status of financial institutions.

A large number of credit card fraud incidents will also damage the reputation of financial institutions, resulting in a decrease in customer trust in them, and may lead to the loss of customers. At the same time, financial institutions need to invest a lot of resources in preventing and detecting credit card fraud, including adopting advanced security technologies, conducting risk assessments and investigations, which increases operating costs.

Impact on merchants:

Merchants may suffer financial losses because if a fraudulent transaction is found, the merchant may need to refund the money already received. In addition, merchants may face paying higher transaction fees because financial institutions may increase the fee rate to compensate for the risk of fraud.

Frequent credit card fraud incidents will also affect the reputation of merchants, and consumers may have concerns about shopping at the merchant, which will affect the merchant's business.