Stealing cards is passé. Be careful about account takeover and skimming.
The best way to avoid fraud is to know how the fraud occurs. Credit card fraud starts when the card is stolen or any crucial information regarding the card is stolen. These include the name of card holder, the account number, expiration date and card verification value (CVV) code.
First things first – as soon the card is stolen, it should be immediately reported to the customer care department. Blocking the card is the first step that should be taken.
Given that stolen card or information is difficult to trace, one would actually get to know about the extent for damage once the bill statement is issued. And if there are serious discrepancies then, you have to approach the bank.
However, just stealing of cards is an old hat now. Nowadays there is a new threat – identity thefts. They are of two types - application fraud and account takeover.
Application fraud refers to the fraud, when the criminal steals your document to open an account. To achieve this, the person may steal your important documents like utility bills and bank statements. These documents give him/her personal information that can be used to open an account. Alternatively, some take the longer route of account takeover. Here, the criminal gathers the information from a person’s bank account. This is done by sending mails that ask you to reply with some details.
Once the criminal has the information, he/she calls up the bank as a genuine cardholder and asks for a change in the mailing address.
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Soon the criminal reports the loss of the credit card. And then once the criminal receives the replacement card, he/she can use it. After running up a bill, they disappear. When the bank enquires in the new address, no one exists there. Tracing back, the bank gets in touch with you either by phone or the old address.
However, you don’t have to worry too much about application and account takeover frauds. If any unsolicited card is activated without the consent of the recipient, the Reserve Bank of India has said that the issuing bank has to reverse the charges.
Plus, they (issuing bank) would be required to pay a penalty that is twice the amount of the charges reversed. All you must do is to file a complaint with the issuing bank.
If you do not receive a satisfactory/any response within two-three weeks, approach the banking ombudsman.
Skimming is another type fraud on credit cards. It is typically done by a dishonest employee working with the merchant, where you have purchased something.
In case of skimming, the criminal uses a small electronic device, which is known as skimmer to capture the magnetic strip data on the card. It is then transferred to a duplicate card.
The duplicate card is then used for fraud purposes. It is easy for a bank to detect this type of fraud. The bank can collect a list of all the card holders who have complained about fraudulent transactions. Then, it uses data mining to discover relationships among the card holders and the merchants they use.
For instance, if a large number of the aforementioned credit cardholders have used a particular merchant, that merchant terminal or (point-of-sale device) can be directly investigated.