Credit Card Fraud

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Credit Card Fraud

On this page:




Credit Card Tips For Merchants


Preventing Card Fraud

Smart Card Technology

Types of Credit Card Fraud

Links to other pages on this web site


Credit Card Fraud Articles

Credit Card Security Features


Links to external pages


22 Ways to foil Card Thieves

Credit Card Fraud Factory

Credit Card Fraud and Advance Fee Loans

Credit Card Preventative Measures

Debit Card Fraud how to protect yourself

Internet Fraud Flourishes

Preventing Credit Card Fraud

Test your knowledge on Credit Card Fraud

Types of Credit Card Fraud



The credit card industry originated in charge accounts that were maintained by individual shoppers at certain stores. These were relatively simple two-party arrangements involving only the customer and the store extending the credit.


Today’s credit card industry, although it involves complex relationships among several corporate entities, can simply be described as a three-party system in which the credit card company occupies a position between the customer and the store. Typically, the credit card issuer pays the merchant for charges made by a credit card holder, then the credit card company bills the card holder for the amount of the purchase.




The Credit Card industry has grown at an enormous rate during the past 20 years. Unfortunately this rapid growth made it an easy target and created many new opportunities for individual criminals and crime syndicates. No one can provide an exact figure for the annual loss caused by credit card fraud, but it exceeds R 50-million per annum in South Africa. According to Chris Trotskie, chairman of the SA Card Fraud Forum, the four major banks in South Africa loose approximately R 5-million per month due to credit card fraud. Visa’s global losses are about $ 2-billion per annum. If this continues at the same rate fraud will cost $ 11 per card by 2008.


Preventing Card Fraud


A credit card is a convenient method of payment, but it does carry risks. There is a chance that you might become a victim of credit card fraud. Credit Cards or credit card information is usually fraudulently obtained through methods such as:

  • Card swapping at ATM’s

  • Theft – often out of motor vehicles or houses

  • Skimming

  • Pick-pocketing 

  • E-mails purporting to come from the credit card service provider (Phishing)

  • Bogus Internet web sites

You can, however, protect yourself by being aware of the risks involved, the different types of credit card fraud and by following these simple guidelines.

  • Think of credit cards as cash, just carry the cards you’ll need.

  • Never leave your cards unattended.

  • Destroy expired cards.

  • Sign new cards immediately.

  • Report lost or stolen cards immediately.

  • Protect your PIN – memorise it.

  • Do not keep your PIN and card in the same place.

  • Be careful when giving your personal and credit card information to unknown persons.

  • Destroy all financial information (i.e. account numbers, bank statements, ATM and sales receipts etc.) before throwing it away – only in two in three respondents in a UK study destroyed this information before discarding it..

  • Verify transactions on your credit card statement with your receipts.

  • Ensure that you get your card back after every transaction.

  • Keep a record of the card account number, expiration date and the toll-free number to call.

  • Keep an eye on your card during all transactions – 17% of respondents in a UK study said that it did not worry them if someone took their card out of their sight.

  • Do not use a credit card to "validate" a cheque or any other transaction.

  • Do not sign a blank credit card slip.

  • Do not give your card to someone else to use- 19% of respondents in the abovementioned survey had let someone else use their card to buy something over the internet or telephone

Credit Card Tips For Merchants

Don’t let credit card fraud eat up your profits. Watch out for suspicious behaviour. Fraudulent transactions have certain characteristics in common. Although these characteristics could never be conclusive proof of a fraudulent transaction it will help you in identifying suspicious behaviour.


Be extra careful when a customer:

  • Take the card from a pocket instead of a wallet.

  • Purchase an unusual amount of expensive items.

  • Make random purchases, selecting items with little regard to size, quality, or value.

  • Make several small purchases to stay under the floor limit, or asks what the floor limit is.

  • Signs the sales draft slowly or awkwardly.

  • Charges expensive items on a newly valid credit card.

  • Cannot provide photo identification.

  • Hurries you at closing time.

  • Purchases a large item, and insist on taking it immediately, even if delivery is included in the price.

Be extra careful when a credit card:

  • Seems counterfeited or it seems as though the information (i.e. expiry date, hologram, number, embossed name etc.) thereon is altered.

  • The signature on the card and sales draft differs.

  • The validation date expired.

  • Security features have been tampered with. (Take a look at the Security Features of common credit cards).

Types of Credit Card Fraud


Statistics show that the misuse of lost or stolen credit cards is still the most popular type of credit card fraud in South Africa. Counterfeiting credit cards are, however, increasing at an alarming rate. Fraudsters will typically use fraudulent credit cards to buy cigarettes, cellular phones and computers. The under mentioned is the most common types of credit card fraud.


Account Take-over


Your personal information is as good as gold to a fraudster or fraud syndicate. If they get access to or get hold of your personal information, they do not even need your credit card. They phone your Credit Card Company or Financial Institution and change your address information. They will then report your current card lost and request that a new card be issued. The card will then be sent to the new address or they will receive information on where to collect the new credit card. They then make use of false identification to collect the card. Your statements will be sent to the new address and you will be unaware of the fraud that is occurring on your credit card. Your credit card account has now been taken over by a criminal. It is therefore important to contact your Credit Card Company or Financial Institution if you do not receive your statements on time.


Another method used by criminals to get hold of your credit card and take over your account is through postal theft. Crime syndicates have agents within the postal service and courier companies who will assist them in getting hold of credit cards before they are delivered.  When you receive notification to collect your credit card, do so as soon as possible. The longer you take to collect it the better chance criminals have to steal it. If your card expired or will expire soon and you haven’t received notification to collect a new card, contact your Credit Card Company or Financial Institution immediately.


Counterfeit Credit Cards


Crime syndicates use the latest technology, including computers, embossing and lamination to create more realistic looking credit cards. Today’s counterfeit credit card will often have a complete hologram and a fully encoded magnetic strip. Most of the tools used to create counterfeit cards are manufactured in the Far East and smuggled to developed and developing countries throughout the world. To the untrained eye these cards will appear to be completely legitimate.


How do you then identify a counterfeit credit card? The hologram holds the key to identifying counterfeit cards. In most instances the hologram on a counterfeit card is fixed on top of the card, whereas the legitimate hologram is embedded in the plastic during the manufacturing process. On closer inspection you will be able to see or feel that the hologram on a counterfeit card rises slightly above the card. The only way to combat this type of fraud is to be aware of the security features built into credit cards. This will enable the recipient to identify the slight differences between genuine and counterfeit cards. Counterfeit cards are rarely used more than 3 times.  


Credit Card Skimming


Credit Card Skimming is a method by which encoded information from the magnetic stripe of a credit card is gathered by an electronic credit card reader (skimmer). This information is used legitimately when processing a transaction. In the hands of a criminal the electronic credit card reader becomes a handy tool to gather information to use later in illegal transactions and purchases. Usually a criminal connects this "skimmer" to the credit card machine or a portable "skimmer" could be used to swipe your card when you are not looking. If you make a purchase, your information will automatically be stored in the "skimmer". At a later stage the criminal will use this information to make unauthorised purchases or encode this information on the magnetic stripe of a counterfeit card.


Credit card skimming often occurs in businesses where credit cards are used regularly, such as restaurants and other entertainment venues. In restaurants you will normally lose sight of your card when the waiter takes it to pay your bill. Some skimmers are as small as your hand, which makes it extremely easy for waiters to keep in their pouches.


During 2003 a crime syndicate was detected in New York, Connecticut and Massachusetts in the USA that smuggled Chinese immigrants into the US. The immigrants were forced to work as waiters in various Chinese restaurants to pay back money they owed to smugglers that assisted them to get into the country illegally. As waiters working in these restaurants they were forced by the crime ring to carry pocket-sized credit card skimmers and collect data from the cards of unsuspecting customers. The information they gathered was then handed over to the crime ring to pay off their debt.


Card Skimming - Read more


New Prevention Methods


Microchip technology


The ease with which credit cards with magnetic stripes are used in defrauding companies, financial institutions and individuals have necessitated banks and other card issuing companies to implement microchip card technology.  This is due to the fact that cards with magnetic stripes can to easily be cloned.  The cardholder’s information will be stored on a microchip, which will be much safer than the magnetic stripe. The new standard, to which all role players must adhere to, will come into operation on the 1st January 2005.  This new standard was dubbed EMV, which was taken from the first letter of the three companies that initiated it, namely Europay, Visa and MasterCard. This technology was introduced in France more than 10 years ago. According to the credit card industry in this country card fraud dropped by 80% after the new technology was introduced.


This new prevention method does not come cheap and banks are spending millions changing from the old magnetic stripe cards to the new generation microchip cards. It is estimated that the conversion process in South Africa will entail issuing new cards to 16-million users, upgrading 9000 ATM’s throughout the country, upgrading 130 000 point-of-sale terminals and upgrades on back-end processing systems to handle the new technology. This will come at a price tag of between R 1,5bn and R 2bn extended over a period off 10 years. Converting a top of the range ATM can cost as much as R 30 000.00. This technology will, however, require the customer to pin in a code every time they use the credit cardThis is safer due to the fact that merchants or cashiers will no longer have to verify signatures.


Studies in Europe have shown that signature based products are more susceptible to those that are PIN based. One advantage of smart card technology is that a credit card will be able to hold a considerable amount of information. This will ensure that even merchants in rural areas will be able to accept payments without telephonic access to a bank. Some of the major banks have started issuing the new cards to their employees for internal trials and to certain clients.