Problem

Credit card fraud

Other Names:
Cheque card fraud
Plastic card fraud
Transaction laundering
Nature:

Credit card fraud is a wide-ranging term for theft and fraud committed using or involving a payment card, such as a credit card or debit card, as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also an adjunct to identity theft. According to the United States Federal Trade Commission, while the rate of identity theft had been holding steady during the mid 2000s, it increased by 21 percent in 2008. However, credit card fraud, that crime which most people associate with ID theft, decreased as a percentage of all ID theft complaints for the sixth year in a row.

Although incidences of credit card fraud are limited to about 0.1% of all card transactions, they have resulted in huge financial losses as the fraudulent transactions have been large value transactions. In 1999, out of 12 billion transactions made annually, approximately 10 million—or one out of every 1200 transactions—turned out to be fraudulent. Also, 0.04% (4 out of every 10,000) of all monthly active accounts were fraudulent. Even with tremendous volume and value increase in credit card transactions since then, these proportions have stayed the same or have decreased due to sophisticated fraud detection and prevention systems. Today's fraud detection systems are designed to prevent one-twelfth of one percent of all transactions processed which still translates into billions of dollars in losses.

In the decade to 2008, general credit card losses have been 7 basis points or lower (i.e. losses of $0.07 or less per $100 of transactions). In 2007, fraud in the United Kingdom was estimated at £535 million.

Incidence:
In the UK, the annual cost of credit card fraud was estimated to have risen from £50 million in 1989 to £165 million in 1993. In 1992, two million cards were list or stolen in the UK. In the USA in 1993, credit card fraud was expected to cost US$1.5 billion where an estimated 10,000 cards are stolen from 5,000 people every day. Other ways which criminals have used to obtain card information are filming users at teller machines and requiring people to swipe their credit cards in order to participate in a sales event. Fraudsters also make use of telephone, and now the Internet, offering services and asking for card numbers or ordering goods with someone else's name and number. A more recent form of credit card fraud is transaction laundering whereby fraudulent representatives inform businessmen that they need to have their card sales processed by another credit card merchant for tax or other reasons, promising to pay a fee for the service. These firms specialize in supply goods that are either sub-standard or non-existent, leaving the original merchant liable for the cost.
Related Problems:
Compulsory identity cards
Problem Type:
E: Emanations of other problems
Date of last update
15.06.2018 – 09:52 CEST