Different Types of Credit Card Fraud

Credit Card Fraud
Credit Card Fraud


Credit Card Fraud
Credit Card Fraud

Credit card fraud is one of the biggest loss concerns in a bank. The frauds are usually performed by a group of people either using counterfeit credit cards to cheat unsuspecting merchants or in collaboration with the merchants to cheat the banks. This group of people who performed fraud is known as fraud syndicates.

Types of frauds

There are many types of frauds that have identified by the banks. To ease the efforts of fighting fraud, they are classified into various categories by their natures

1. Counterfeit cards

Counterfeit credit card transactions are one of the biggest fraud reasons in the industry. It make up about 40% of all money lost through credit card frauds. The syndicates used various methods to obtain card information to create counterfeit cards. The illegally created counterfeit cards will have all the information of the genuine credit cards in their magnetic stripes. One of the known methods used is card skimming whereby information contained on magnetic stripes of cards recorded into chips illegally installed into EDC machines or through wire tapping technology.

2. Lost or stolen cards

Lost and stolen credit card fraud formed 20% or the second highest fraud reason. In most cases, the genuine cards are stolen from cardholders in their workplace, gymnasium and unattended vehicles.

3. Mail order or telephone order Fraud

Mail order or telephone order fraud accounts for 10% or is the third highest fraud reason. Usually the fraud syndicates use shady telemarketers and deceptive internet sites to obtain credit card information from the genuine cardholders. In this kind of fraud, the three digits the syndicates need the security number or card verification code (CVC2) which is printed at the back of the genuine card to complete the fraud transactions.

4. Non-receipt Fraud

Non-receipt fraud occurs when the credit cards are intercepted by the syndicates when they are on the way to the cardholders which are usually by courier or registered mails. This fraud reason accounts for about 7% of the total fraud transactions.

5. Other fraud reasons

The balance 23% of fraud transactions made up of the following fraud reasons not exhaustive:

a. Fraudulent applications
b. No cardholder signatures
c. Unauthorized transactions
d. Invalid transactions

Traditional and Modern Techniques Used For Frauds

Humans are greedy; we all know that, but one thing we can never understand completely is the limit to this greediness. Man works to earn. So that he could earn his living and fulfill his basic needs. But what if he starts earning through illicit means? Then there are constitutional obligations which make him liable for penalties and punishments.

Nature punishes mankind in various ways for not abiding to its fundamental rules. Similar is the case with technology. In case of credit cards, people do manipulate the transactions to gain money out of it. Credit card is often called as plastic money. There is a magnetic strip over every credit card which stores the information about the card holder’s identity and his account details as well. There are various techniques of credit card fraud.

Credit card fraud is categorized into two basic categories depending upon the method of fraud conducted, which are traditional techniques and modern techniques of card fraud. Cards have made shopping very easier. Some of the traditional techniques used for cards frauds are:

  • Application fraud – people submit forged applications by providing incorrect monetary information about their bank accounts and income statements.
  • Intercept fraud – stealing the card, before reaching its final destination. That is stealing the card during post or courier transportation.
  • Lost or stolen card – most common style of fraud but the most difficult to deal with.


Credit card prevents the user form he hassles of carrying hard cash in their wallets, which is truly insecure. People often use their cards to make payments for their purchases where they are unable to make one time down payment. They can then pay the rest amount in various installments.

But there are swindlers and scam artists who manipulate the privacy settings of the card information and perform card frauds. Technology can be altered in one’s interest or favors by manipulating the in-built system.

As technology has provided ample knowledge to the youngsters about its origin and systems, it has made them aware of its use as well misuse too. Card companies take proactive actions to avoid such scams and frauds in advance, but even then there are possibilities of fraud and manipulation.

Modern techniques for credit card fraud are like:

• Skimming
• Fake or doctored cards
• Triangulations
• Credit card generators
• False merchant sites and site cloning.

Fraudsters abuse technology to produce fake cards to coddle in false card transactions. They use powerful electro-magnet to erase the details present in a card, and change those details to match the other card’s details. Fraudsters often create fake merchant sites. Such fraudsters attract customers by providing heavy discounts on purchases and after that, they ask for card information to verify the order. This way they easily get access to the card information of a valid customer, which can now be used as per their intentions.

The best way to avoid such credit card frauds is to stay cautious about your cards, just the way you stay cautious about your cash.