Credit card fraud has many faces and is more prevalent than you would think. It involves traditional and modern techniques, used by sophisticated fraudsters. Fraud is committed by both low skilled cons and highly educated criminals. Fraudsters use mail redirect, BIN attacks, skimming and phishing techniques, and other methods.
Victims are tricked in many different ways, and the consequences can be catastrophic. The financial security of many Canadians is jeopardized, as illustrated by the credit card fraud infographic. Millions of dollars are lost due to fraudulent applications, account takeovers, and other types of fraud. Some $4.2 million are lost due to fraudulent applications alone. Besides being a matter of inconvenience, fraud can have far reaching consequences. Many people use credit cards for medical and other emergencies, with card funds being their safety net. Financial institutions replace the stolen funds eventually, but some borrowers are strapped for cash and need money immediately.
Debt due to fraud may ruin one’s life and credit score while credit card companies and retailers suffer considerable losses. Card issuers increase the cost of borrowing to recover the money lost to credit card fraud. Faced with higher interest rates, cardholders tighten their belts and borrow less, and this affects the financial sector. Then, according to a report by preCharge, the costs associated with managing credit card fraud exceed by 300 percent the losses due to fraudulent transactions.
The scope of fraud is widening, and fraudsters use a variety of innovative schemes to victimize credit card users. Sophisticated fraudsters use software and different schemes to trick innocent people. Some cons pretend to be bank officers collecting credit and debit cards for replacement. This and other credit card scams cost millions of dollars to card issuers and consumers. In Canada alone, $366 million were lost to credit card fraud in 2010.
Infographic courtesy of Credit Card Review.
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