Topics Types of Bank Fraud 12 Most Common Types of Bank Fraud Account Takeover (ATO) Fraud Check Fraud ACH Fraud Real-time Payment Fraud First-Party Fraud Wire Fraud Zelle Fraud Types of Card Fraud Credit Card Fraud Debit Card Fraud Lost or Stolen Card Fraud Card Skimming Chargeback Fraud Card Not Present (CNP) Fraud Fraud Defenses Anti-Money Laundering (AML) Crowdsourced Abuse Reporting Device Fingerprinting Real-time monitoring Email Reputation Service IP Reputation Service SR 11-7 Compliance Supervised Machine Learning Suspicious Activity Reports (SARs) Two-Factor Authentication (2FA) Unsupervised Machine Learning Fraud Tactics Bot Attacks Call Center Scams Card Cloning Credential Stuffing Data Breaches Deepfakes Device Emulators GPS Spoofing Money Mule Scams P2P VPN Networks Phishing Attacks SIM Swap Fraud URL Shortener Spam Web Scraping Fraud Tech Device Intelligence Feature Engineering Identity (ID) Graphing Fraud Types Application Fraud Transaction Fraud Payment Fraud Bust-Out Fraud Buyer-Seller Collusion Content Abuse Money Laundering Loan Stacking Romance Scams Synthetic Identity Theft Cryptocurrency Scams Pig Butchering Scams Credit Card Fraud: Everything You Need to Know We use credit cards to make purchases every day. They’re one of the most ubiquitous and trusted methods of payment. We can even pay with them in real-time using apps or by tapping our phones at checkout at the store. But credit card fraud is equally as popular, and it poses a serious threat not only to customers but card issuers and banks. That’s why it’s crucial that card issuers and consumers alike be aware of how credit card fraud happens and the methods they can take to prevent it. What is credit card fraud? Credit card fraud is any transaction a fraudster makes with another person’s credit card without authorization. It’s a form of identity theft, and in many cases can involve a case of outright theft if the fraudster steals the card or its corresponding information. One of the most common types of bank fraud, credit card fraud affects an estimated 151 million adults or more in a single year in the U.S. alone. The reason this fraud is so common is in part because credit cards are one of the most common forms of payment. It’s also in part because of the ease with which fraudsters can take control of a card. How does credit card fraud happen? Credit card fraud is considered identity theft because the fraudster using the stolen credentials is in effect pretending to be the real account holder. The two main ways they accomplish this are through account takeovers and application fraud. In account takeovers, a fraudster can use a credit card by basically stealing it from a good user, then pretending to be that person to make fraudulent transactions. Types of credit card fraud Card skimming Fraudsters use a small device called a skimmer to steal credit card information from the magnetic stripe on the back of a card. Once they have the information, they can clone the card or use the stolen credit card information for online purchases. Phishing In a phishing attack, fraudsters send emails or texts posing as a legitimate institution like a bank, credit card company, or some business the cardholder would trust. Then, they trick the victim into revealing the credit card’s most important details. Malware When a victim unknowingly downloads malware to their computer, it can work in the background completely undetected. Fraudsters then use it to capture credit card information as the victim enters it online. “Card Not Present” (CNP) transactions Fraudsters who have acquired credit card numbers, either by purchasing them from a data breach or stealing the information themselves, can use them without having the physical card present in online purchases. Weak passwords Cardholders that have common or easy-to-guess passwords are at risk of fraudsters getting their login email then guessing the password and taking control of the card account. Types of credit card application fraud Fraudsters can use credit card applications for fraud in several ways. Here are some common methods: Synthetic identity fraud First, a fraudster makes a fake identity using a combination of real and fake information to apply for a credit card. Then they can verify the fake persona with a real social security number, but a fake name or address. Because the fraudster’s alias was verified through traditional means (the SSN) they’re approved to assume this fake identity and use a real credit card. Stolen identity fraud Sometimes a fraudster steals someone else’s identity entirely and applies for a credit card in their name. They might obtain a victim’s personal information through data breaches, phishing scams, and sometimes even by taking their discarded pre-approved mailer offers. Once they cheat verification and get the credit card approved, they’re free to make fraudulent transactions. Credit card churning Taking advantage of sign-up promotions and bonus offers, a fraudster applies for multiple cards using the same identity. To avoid detection, they’ll use many different fake names and addresses. Authorized user fraud Also known as authorized payment fraud, this occurs when a fraudster either convinces someone to add them as an authorized user to their credit card account or convinces the cardholder to make fraudulent purchases. These schemes help fraudsters avoid detection by adding another layer between them and the purchase. How to spot credit card fraud? While fraudsters’ main goal is to avoid detection, there are ways you can spot their activity and prevent further malicious action. First, you should be paying attention to your statements and looking for any suspicious charges or account activity. If you see a transaction you don’t recognize, notice a new user, or see a new account you aren’t sure was you, contact your card provider’s fraud line immediately. In many cases, a fraudulent charge can be reversed, but you won’t spot them if you aren’t looking. If you receive any notices from your bank or card issuer about potential fraud, take them seriously. Once you’ve confirmed the message is legitimate and not a phishing scam, contact their fraud department immediately. What to do if you become a victim of credit card fraud? The first step if you’re a victim of credit card fraud is to contact your card issuer or bank. Always report credit card fraud or even possible fraud to them as soon as possible so they can take action to possibly find the fraudster. Next, you’ll want to place a fraud alert on your credit report so you don’t suffer a hit to your credit score and history from a fraudulent transaction. Report your credit card as stolen to law enforcement, as it may be part of a connected fraud scheme. Lastly, contact each of the credit bureaus and put a freeze on your credit, so that you are not a victim of credit card application fraud. How often does credit card fraud get caught? It really depends on the actions taken by a cardholder after they notice a possible attack and the prevention methods a bank or card issuer takes to detect fraud. Some estimates say less than 1% of credit card fraud is actually caught, while others say it could be higher but is impossible to know. The truth is that most credit card fraud does go undetected, which is a major reason why it’s become a favorite among crime rings and fraudsters. Is credit card fraud a felony? No, it’s not always a felony, but it also depends on the state the fraud takes place in. In some states, it is a felony and can carry years of jail time plus fines, in other states it’s a misdemeanor and carries shorter sentences and fines. In either case, credit card fraud is always illegal and will carry a penalty for those caught committing it. If credit card fraud affects interstate or foreign commerce, federal law takes precedence and it immediately escalates to a felony that carries significantly more penalties than at the state level. For example, the federal penalty for using a “device” (which a credit card would count as) carries sentences of up to 20 years in prison. How to prevent credit card fraud? Preventing credit card fraud means staying on top of your account, monitoring statements regularly, and checking your credit score so you notice abnormalities. You can set up transaction alerts so you know each time your card is used and secure your card in a safe place then use the card on your phone when paying at stores. Be aware of the methods fraudsters use most often to commit credit card fraud, especially the ones mentioned above. If you receive a call from someone purporting to be your card issuer or bank, don’t share any information with them unless you have initiated the call. When you receive emails that appear to be from your card issuer, double-check that the URL in the email matches the actual bank’s website. Don’t respond to texts from potential scammers that you’re suspicious of, and report any fraudulent activity to your card issuer right away as soon as you notice it. Credit card fraud detection with AI Modern machine learning gives your bank or card issuer a significant fraud prevention platform to leverage in their fight against credit card fraudsters as well. Using device and behavior intelligence, it can detect malicious devices, map consistent device IDs, and even catch fraudulent activity happening in real time. Another powerful piece of a machine learning fraud platform, ID graphing, scans the digital footprint of a card applicant or user to find signs they are a fraudster or member of a fraud ring. Perhaps most impressive of all, with unsupervised machine learning credit card issuers and banks can allow their credit card fraud detection platform to work in the background to catch fraud when it happens, alert them, and allow them to make a decision to block the fraudster. Learn about how DataVisor can detect credit card fraud in real-time and provide a fast response without adding friction to the customer experience.