Computer Security Articles

Credit card fraud is one of many forms of fraud involving credit cards, charge cards, debit cards, or prepaid cards.

Credit card fraud is a kind of fraud where a merchant (business, service provider, seller, etc.) is "tricked" into releasing merchandise or rendering services, believing that a credit card account will provide payment for goods/services. The merchant later learns that they will not be paid, or the payment they received will be reclaimed by the card's issuing bank.

Typically, the fraudster causes a credit card of another person to be charged for a purchase. Today, half of all credit card fraud is conducted online, meaning that the fraudsters make online purchases with the credit card details of other people.

Types of Fraud

Mail Non-Receipt Fraud
Mail non-recepit fraud occurs when a thief intercepts a replacement card sent to the legitimate cardholder and uses it. However, many banks increasingly send out inactive cards that cannot be used until the legitimate account holder confirms his or her identity to the bank using Social Security number, home address, mother's maiden name, and the number on the card.

Chargeback Fraud
Chargebacks occur when a cardholders credit card details are used to purchase items without their authorization.

This generally involves online companies, who often cannot verify that the person entering the details on their site is the actual cardholder (i.e. Card-Not-Present activity). When the cardholder becomes aware of the activity they usually notify their bank, who are likely to refund almost all of the costs. These costs are then passed back to the company involved as a "chargeback", effectively a penalty for accepting the transaction without propoer verification of the purchasers identity.

Another type of chargeback occurs when a legitimate cardholder uses the card to purchase goods, or a service, and then when the statement comes, claims that they never authorized the transaction, or they never received goods or service ordered. This is also known as Cybershoplifting or first-party fraud.

Skimming
is when an unscrupulous employee at a legitimate merchant takes a second copy of the card details magnetic strip before processing the payment through the official EPOS terminal. This copy of card details, is sold on the black market to fraudsters who clone the cards.

"skimming" of magnetic stripe details has become slightly less prevalent after the introduction of CVV or CVS codes, which are not encoded on the magnetic strip, but are printed on the card - normally on the reverse of the card.

Skimming of magnetic stripe details together with recording of PIN numbers entered into ATMs has been seen, where a small skimmer device that reads the magnetic stripe is attached to the card slot of an ATM, together with various devices to monitor the keypad, either by attaching a fake keypad over the genuine one, or by remote-controlled spy camera.