Famous Credit Card Frauds

Many of the critics of the credit card system point out as its main weakness its vulnerability to fraud and scams of different types. While it is true that issuers and regulative organs do make efforts to reduce the amount of frauds, the results are not very encouraging because when in addition to a weak system there are clever attackers, it is obvious that any victory over fraudsters is only temporary.

One of the problems with credit card frauds is that victims do not report them. Sometimes the victims feel that it is their fault that they have been tricked into the scheme and that is why they keep silent – why add insult to the injury. The most common types of frauds are stealing credit card info and making unauthorized purchases, identity theft and pumping money out of the victims. The third case is not limited to credit cards only but it is becoming more and more popular, partially because the victims do not report it. It is also a case of fraud but since the victim has given his or her consent and has sent money voluntarily, very often they are reluctant to admit the fraud because they consider it more their mistake (they were foolish enough to trust the scammer) and not a crime against them.

The first group of frauds – stealing credit card data and making unauthorized purchases is the most common. Every now and then there are reports of hackers having stolen tens of thousands of credit card numbers. There are even special black markets for selling this kind of information, so you can imagine how popular this is. And the worst is that there is hardly anybody sentenced and thrown in jail because of stealing credit card data!

There have been many known scams in the recent decades and the advent of the Internet stimulated them further. One of the most famous scams is the so called Nigerian scam, also known as “Advance Fee Fraud”, “419 Fraud”. This is not exactly a credit card fraud because money was pumped out of the victims in many other ways in addition to through their credit cards. Still, credit cards were one of the primary instruments and after the victim's data was collected by the criminals, credit cards were used for unauthorized purchases. The unauthorized use was secondary. The primary goal of the Nigerian scam was to obtain payment in advance for goods that would never be delivered. The result was that billions of dollars have been stolen by the criminals!

The Nigerian scam is only one of the many scams that use some kind of bait to trick users into paying for it. The victim gets burned twice – once because they pay for something they never get and once because they disclose their credit card data to a fraudulent company. As already mentioned, since these actions are done voluntarily, many of the victims prefer to keep their mouth shut than to be further humiliated, which in turn makes it easier for criminals to find new victims.

A similar scam is the bad credit one. This scam uses the techniques of social engineering. The fraudsters send letters to potential victims, informing them that despite their poor credit rating they can get lucrative credit card offers – with low interest rates and high limits. But in order to make the deal, you need to pay in advance - $100, $200 or even more. The outcome is the predictable – you lose the money and you don't get the card.

Credit cards might be full of risks but debit cards are no better, especially if you have money in your account. There have been many cases of theft from debit cards. Criminals somehow manage to get card numbers and PINS, make duplicates and spend your money. But unlike credit cards, with debit cards there are no limits for responsibility for unauthorized purchases and there have been cases when the victims have lost thousands of dollars from their debit accounts. So, if you have a combined card that can operate in both debit and credit mode, when you make purchases in the supermarket, you'd better use it in credit mode because this way is your data is compromised, you minimize the damage.