There are many different types of credit and debit card fraud that crooks can use to rip off consumers, and instances of this type of crime are on the rise nationwide as a result.
Between January 2010 and September 2011, fraud on debit and credit cards rose considerably, according to new research from the credit monitoring bureau FICO. Everything from skimming card data to stolen and even copied cards have increased, as criminals try to take advantage of new technologies that allow them to more easily get away with these kinds of crimes.
Details of the uptick
One of the biggest ways in which consumer credit cards are now being ripped off is via orders online, through the mail, or by telephone, the report said. These types of crimes increased in volume nearly twice as quickly over the 21-month period as counterfeit credit cards, as crooks moved to take advantage of online shopping avenues. This is possible because in the time it takes for victims or businesses to discover they've been ripped off with this type of transaction, known as "card-not-present" purchases, it allows the crook more time to operate.
"More online shopping has created a shift towards more online fraud, which is proving to be a popular, relatively safe and anonymous means for fraudsters to exploit any weakness in fraud systems," said Doug Clare, vice president of product management at FICO. "Consumers and issuers should remain diligent when using cards for point of sale and ATM transactions."
And while this type of fraud was far more prevalent and cost legitimate borrowers more money, the use of counterfeit credit cards had a higher loss per compromised account, the report said. This means that crooks who copied a stolen credit card were able to rip off those victims for more money on fewer transactions.
In most cases, this fraud was perpetrated for more expensive purchases, such as those for electronics and groceries, the report said. However, it was also very common at restaurants.
Debit affected as well
At the same time as crooks stealing consumers' credit card data, debit cards were also affected by this type of fraud, though at a lower rate, the report said. However, the losses on these transactions were far more costly to cardholders.
Authorization volume, that is, the amount of transactions that were signed-off on through bogus means, rose 15 percent in the months studied, the report said. On the other hand, use of stolen cards to make purchases saw the amount spent on these transactions decline 8 percent during that time.
Increasingly, these types of crimes are becoming international affairs, likely due to the proliferation of hacking and fraud communities online, the report said. In all, 11 cents of every dollar paid fraudulently on debit cards was spent overseas.
The types of businesses most affected by these transactions were grocery stores, automated fuel dispensers and, perhaps not surprisingly, ATMs, the report said. However, despite all these notable increases, instances of debit and credit card fraud still made up just 1 percent of all cards issued worldwide.
What does this mean?
Increases in the frequency and costliness of credit and debit card fraud means that it's more important than ever for consumers to be vigilant about their finances, the report said. However, it's possible for card issuers to increase the security of consumers' accounts on their own as well.
Studies have shown that instances of fraud on accounts in which the card carries chip-and-PIN technology as a means of protecting data are far less likely to be hit with fraud of any kind, the report said. In fact, a FICO study of European accounts shows that counterfeit fraud slipped 60 percent as a result of the newer data protection technology.
U.S. banks have slowly begun to issue cards that contain this type of data encryption, but largely as a means of adding convenience for customers who travel abroad, rather than in an attempt to cut back on fraud at home. Many experts have wondered whether issuers will begin distributing EMV credit cards to borrowers en masse here, as they do in Europe, or if they will wait for the next step forward in technology (likely mobile payments) to begin increasing card security.
If you want to keep your accounts as secure as possible, you should do so by regularly checking your monthly bills and statements to make sure no unrecognized transactions are listed. Further, you should also order a copy of your credit report and try to find any unfair markings, which can also have an adverse effect on your credit score. In these cases, you may want to work with a credit repair law firm to fix your overall standing.