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Credit Card Fraud in the US

Updated on September 23, 2011

The U.S. has overtaken France as the number one place where fraudsters can convert U.K. credit and debit card details into cash.

To blame is the absence in the U.S. of "chip-and-pin" technology, where credit and debit cards with an embedded microchip are authenticated with a PIN (personal identification number) during purchases and cash-machine withdrawals. In Portugal, for example, we already have chip-and-pin cards!

As a result, fraud involving U.K. cards overseas jumped a staggering 126 percent for the first six months of this year over the same period last year, according to the latest figures from APACS. On a brighter note, domestic fraud conducted during face-to-face transactions fell 11 percent, the group said.

Criminals often commit fraud by copying the magnetic stripe on the back of a card and obtaining a person's PIN. They do this by installing "skimmers" -- unobtrusive devices attached to a cash machine that read a person's card details, as well as using small cameras to capture PINs.

But most U.K. banks block transactions on cash machines with cards that lack the microchip, which prevents someone from making a fake card with the magnetic stripe details captured from the skimmer.

The U.S., however, has not deployed chip-and-pin technology, so criminals are capable of withdrawing money from cash machines there. In 2006, U.S.-based fraud using U.K. cards amounted to £16.7 million (US$34 million).

France used to be a prime destination, but is now less so as the country has mostly replaced its own proprietary chip-and-pin technology with the one now widely used through Europe. Other countries where U.K. card details were frequently used are Spain and Italy.

APACS also reported a 44 percent rise in number of card-not-present frauds, where credit-card details -- obtained through phishing or other scams -- are used to buy goods online where the merchant never sees the card. But merchants and card companies are trying to shore up their e-commerce security.

About 20,000 U.K. merchants, which represent about a third of those who do business online, have integrated an additional password check into their sites, Smith said. The systems, including MasterCard SecureCode and Verified by Visa, directly connect a cardholder with the issuer for password verification before a transaction.

The systems reduce the possibility that retailers will get charged when the credit-card company reclaims money from the retailer for processing a fraudulent transaction.

Very important, ask your bank for a safer credit card!

A fraud example in a U.S. Campus

Recently, a University department was contacted by a person claiming to represent a firm called America One, who indicated that credit card rates were going up, resulting in the need to reprogram their credit card machines. This representation is fraudulent. All maintenance of credit card machines is handled by Income Accounting and Student Loan Services. Unless instructed otherwise, all contact regarding credit card processing on campus will come through this office. Please be aware that the credit card machines on campus are programmed remotely and do not require someone to actually re-program the machine.

If anyone contacts you or your department requesting that you provide credit card information, please take their name, phone number, and company name, and report the incident to the Income Accounting and Student Loan Services Department, at 581-3968. Do not provide confidential information regarding credit cards to anyone without first contacting Income Accounting and Student Loan Services.

Any questions you may have concerning credit card issues can also be referred to this phone number. Please make sure that this information is passed on to the appropriate people within your organization.

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    • lbramos profile imageAUTHOR

      Luis Bivar Ramos 

      7 years ago from Porto, Portugal

      Yes, signature based systems are more likely to be broken... The chip and PIN and not perfect, but provide better safety!

      I'm sure the US will move to that system soon, unless they're developing some new brand system... What do you think?

    • profile image

      Richard 

      7 years ago

      This was an interesting read for me because I didn't think France would be a prime place for card fraud as it is where Chip and PIN was first developed? It would be nice to see the U.S. finally upgrade to Chip and PIN though because it really is outdated that customers should be signing for transactions. This http://www.chipandpin.uk.com site has a blog which talks about how card payment technology is evolving, there are too many vulnerabilities with signature verification and even mobile apps like square have been found to be manipulated by playing magnetic strip data into a microphone as a sound file.

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