USE OF CREDIT CARDS ONLINE

The use of credit cards Online

How safe is the use of credit cards online?

Introduction

Credit card fraud has been a world-wide problem for years. The effect of this fraud hits not only the victims, but also the credit card companies and merchants. Perpetrators of this type of fraud are successful by implementing various schemes, but only three will be discussed in great detail: skimming, counterfeit cards and phishing. To deter credit card fraud, credit card companies and merchants have put into place various programs. Physical features of the cards have become more elaborate to eliminate counterfeit cards. Prevention programs such as the card verification code (CVC), advanced authorization, and card activation procedures have helped to decrease the effects of fraud. Merchants are also implementing programs to help deter credit card fraud. However, more steps need to be taken to prevent credit card fraud. This paper concludes with four recommendations for credit card companies, merchants and victims. If implemented, these recommendations will help to further reduce the losses caused by credit card fraud.

Identifying credit card fraud

There are alarming statistics relating to credit card fraud within the USA. The number of victims and extent of losses continue to grow, and it has become a major concern for all consumers who are fair game for these fraudsters. Certain industries are more susceptible to fraud than others, and we discuss those industries below.

The individual who falls prey to credit card fraud has a lot to lose. In many cases, it takes years to restore the damage done to an individual's credit ruined through fraud, not to mention the unwelcome amounts of time spent to regain a good credit standing. Unsuspecting merchants become victims of fraud and suffer monetary losses as well. Fraud can occur in many ways, either through the loss of a credit card or through other fraudulent applications by the perpetrator. We also describe the perpetrators along with some characteristics common to fraudsters. The hope in this paper is to build more awareness to the reader about this growing problem and to offer insight which will aid individuals and merchants from becoming victims of credit card fraud.

Statistics from the Association of Certified Fraud Examiners (ACFE) show that credit card fraud has reached the $1 billion mark and is growing. By the end of 2007, it is expected to reach the $3 billion mark in the US alone (ACFE, 2007, p. 1.104). The availability of shopping over the internet has raised new concerns. Internet shopping continues to grow and there has been a 22 percent increase in spending in 2005 as compared to spending in 2004 (ACFE, 2007, p. 1.104).

There are many different types of credit card schemes and applications, but one of the more simple methods involves the unauthorized use of a lost or stolen card. According to MasterCard International, while credit card fraud through the use of stolen cards comprises 22.4 percent, fraud through the use of lost cards comprises ...