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Is credit card fraud really a big deal?

May 26, 2015

Debit and credit card fraud is troubling, and although the numbers are sometimes overstated, it still affects a large number of consumers and businesses on a consistent basis.

Debit and credit card fraud is troubling, and although the numbers are sometimes overstated, it still affects a large number of consumers and businesses on a consistent basis. It is always important to remember that when dealing with money, security should be a priority.

Some fraudulent card transactions are false alarms
CreditCards.com study data reported on by USA Today found that 7 out of 10 Americans who have had a debit or credit card transaction fail due to suspected fraud indicate at least one of those alerts was a false alarm. The study, which surveyed 1,000 people, also discovered that 53 percent of purchases declined for suspected fraud are in fact valid. Recently, much media attention has been focused on credit card thefts and vulnerabilities in payment systems, but the situation may not be as bad as it seems at first glance. False alarms likely mean that banks are trying to be more careful about authorizing certain transactions that appear suspicious.

“One of the main ways that banks prevent fraud is by examining transaction history.”

Last year, data breaches at large retailers like Target and Home Depot caused many merchants to take extra precautions in security and also worried consumers regarding the safety of their personal information. Matt Schulz, senior industry analyst with CreditCards.com, explained that banks have extra incentive to limit fraud because they are the ones held financially responsible for reimbursement of the charges.

“By and large it’s the banks and card networks that absorb the costs, so it’s definitely in their interest to keep a watchful eye out for fraud,” said Schulz, according to the news source.
“I think ultimately [false alarms] could be a good thing, because it means that your bank is keeping a close eye out for you and may be more likely to notice when the bad guys really do strike.”

One of the main ways that banks go about the business of preventing fraud is examining transaction history and seeing if current purchases are in line with that history. If a consumer only tends to buy items of $100 or less, and then suddenly starts making $5,000 purchases, it raises red flags.

“What the banks are really looking for and keying in on are patterns of your spending,” Schulz added. ”A purchase that is not typical of your usual buying patterns, whether it’s strange because of how much it is or where it is, or some other aspect.”

Schulz advised consumers who expect to be making purchases that are not inline with their typical buying patterns to call their financial institution or go online and let them know. 

‘Card not Present’ fraud may increase with the introduction of EMV cards
E-commerce continues to grow in popularity and consumers increasingly shop online, foregoing store visits. However, as more people buy online, “Card Not Present” fraud occurs more often as well. CNP fraud involves illegal purchases where the physical card is not required. Hackers can use personal information and card numbers online to make purchases, without having to see the actual card. The Orlando sentinel pointed out that some experts expect CNP fraud to increase in October, when merchants are required to replace their magnetic stripe readers with NFC terminals that accept chip-based EMV cards. Fraudsters who are used to using stolen cards at stores will likely go online to continue their criminal activity. Matthew Gross, a bankruptcy attorney, explained that consumers are now hyper aware of the risk associated with entering their personal information into sales platforms.

Consumers should never volunteer their personal information over the phone. EMV cards are coming to the U.S. soon.

“People are getting more aware of the dangers of giving your social security numbers and credit card information,” Gross said, according to the news source. “At the same time, hackers and criminals are getting more sophisticated and more organized.”

Gross also noted that seniors are particularly vulnerable to CNP fraud because they are more likely to volunteer their information in response to “phishing” efforts, or illegitimate organizations asking them for their credit card and social security number.

“Florida has a lot of people who could fall for scams like this over the phone,” Gross added. “Never give anyone information over the phone.”

Consumers are not held liable
The Wall Street Journal reported that as merchants intensify their efforts to prevent fraud at the checkout counter, criminals have been targeting automated teller machines with greater frequency. ATM thefts are at their highest level in two decades. Greg McBride, chief financial analyst at Bankrate.com, explained why ATM thefts are troublesome for consumers, namely that when money is taken out of a bank account, the financial hit is felt instantly. It is different for credit card transactions where the bill is sent at the end of the month. Website CardHub.com advised consumers to use a credit card as their main card for this reason. The Consumer Financial Protection Bureau maintains that consumers are not to be held liable for fraud with their card, but this does not take into account the inconvenience of the experience itself.

Ultimately, consumers should be careful about where they use their cards, and merchants should also double up on their efforts when implementing security measures. 

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