Credit card fraud is a general term that covers a variety of illegal activities involving credit cards. Credit card fraud may be committed as a separate crime or as part of identity theft. Credit card fraud costs merchants and card issuers billions of dollars annually. Provided here is a brief description of the issues involved.

Stolen Credit Cards

This type of crime occurs when the actual credit card is stolen. The card may be stolen as part of a burglary or mugging, or as a crime of opportunity when a card is dropped or forgotten. Having the card in hand makes it easier to make fraudulent purchases. However, most consumers are aware of a credit card being physically lost or stolen, allowing them to act quickly to cancel the card.

Under federal law, consumers who properly report credit card theft are responsible for only the first $50 of fraudulent charges. In practice, many credit card issuers waive the fee and fully remove the charges from the customer’s bill.

Data Theft

In data theft crimes, the thief steals the information that the credit card holds. The credit card number alone is enough to make certain purchases, but theft of the account holder’s name, the card expiration date and the security code located on the back of the card will make it quite easy for the thief to make internet and telephone charges.

This crime is more difficult for the victim to detect. Thieves often hoard stolen credit card information for weeks or months before using it. When the fraudulent charges appear, the victim may have little or no idea where they may have come from.

Skimming is the term for stealing credit card information during a legitimate transaction. It may be as simple as photocopying sales receipts or as complicated as installing a card-reading device in an ATM slot.

Verifying stolen credit card data through a real-time internet purchase is known as carding. The thief makes a small purchase or donation in order to ensure that the information is valid. The carder may then sell the verified information to another party, who carries out the actual fraud.

Internet Commerce

The explosion of e-commerce has led to an increase in credit card fraud. Hackers are able to exploit weaknesses in both consumer and business security systems, mining credit card information and other data virtually. Additionally, internet transactions never involve the physical presence of the credit card or the purchaser. Simply stealing the right data allows thieves to circumvent internet merchants’ security procedures to make fraudulent purchases.

Efforts to Curb Credit Card Fraud

As consumer liability is generally limited by federal law to only $50, it is the merchants and credit card issuers that bear most of the financial loss. Consequently, these businesses are always searching for new ways of combating fraud. It will continue to be a game of cat and mouse, however.