The Dark Side of Credit Card Fraud

Call it the Attack of the (Credit Card) Clones.

As you read this, a thief anywhere in the world could be using a counterfeit credit card with your name and account number on it.

Here's how he got it:

Someone, somewhere made an extra swipe of your credit card. It could be a waiter or a store clerk or anyone you've handed your credit card to for payment.

Instead of just charging your card, the thief made an extra swipe of your credit card into a small hand-held device known as a skimmer.

"Think of a skimmer as a net. It takes information right off the card itself," says Brian Marr, a spokesman for the U.S. Secret Service.

The skimmer pulls the data from your card, giving the thief all the information needed to make a counterfeit card. A skimmer can hold card data from hundreds of different credit cards.

"Once this information has been downloaded into a skimmer it can be downloaded into a computer and e-mailed anywhere in the world," Marr says.

Credit card skimming has become a worldwide problem. Card losses due to skimming exceed $1 billion a year.

"You're seeing this anywhere credit cards are put into a point-of-sale database," Marr says. "With technology, there's really no boundary."

Skimming and counterfeit credit card scams are widespread in Europe, Asia and Latin America. They're growing problems in the United States.

"A Far East factory will do as many as 5,000 cards a night, and the next day those cards are in a suitcase on the way to Europe," says George Wallner, chairman and chief strategist at Hypercom Inc., a leading provider of point-of-sale card payment terminals.

Smaller-scale skimming operations are common as well. Consider this scam ring in Florida, in which seven people were indicted in April.

Two waitresses skimmed a large number of credit cards from an Orlando restaurant. The waitresses then sold the credit data to a middleman who sold the information to a group making counterfeit credit cards in Miami.

"Technology giveth and technology taketh away, and we're seeing the dark side of some of that," says Robert Finkbeiner, an assistant statewide prosecutor in Orlando, Fla. "It's a pretty insidious thing."

Skimmer technology improves
Ten years ago, skimming was much less common. Skimmers were too bulky to carry around and had to be hidden under counters.

Smaller skimmers, roughly the size of a pager, hit the scene two or three years ago. These skimmers are easy to carry, easy to hide and easy to buy.

"A few years ago you had to make a skimmer yourself. Now you can go out on the Internet and buy one," says Lou Struett, executive vice president of Magtek, a manufacturer of magnetic stripe card readers.

Everything needed to pull off this crime is available on the Internet. A skimmer costs about $300, and the equipment to make a counterfeit credit card costs about $5,000 to $10,000.

If all this weren't bad enough, there's another kind of skimming going on as well. A thief slips a small, skimming bug into an older credit card terminal. The bug pulls credit card data from the terminal. A few days later the thief removes the bug.

"The bad guy comes and take out the bugs and no one's the wiser," Wallner says.

What's happening to fight skimming? For one thing, newer credit card terminals can't be bugged. And portable terminals, which would enable a waiter to swipe a credit card at a customer's table, are available, although not widespread.

The U.S. Secret Service is working with the credit card industry to track down skimming rings by assembling a database of locations where scams have occurred.

As with any kind of credit card fraud, a consumer victim is not on the hook for the bill. Someone living in San Diego won't have to pay for a thief's $5,000 shopping spree in Hong Kong with a counterfeit credit card.

Know your rights
The Truth in Lending Act limits consumer liability to $50 if a credit card is lost or stolen. And most issuers waive the $50 fee.

The hardest part for a fraud victim is straightening out their credit report after a thief piles up charges in their name. It can take months to sort out.

And that's why it's so important to monitor credit card bills carefully and report any suspicious activity immediately.

"Look at credit card bills line by line," Finkbeiner says. "If something looks suspicious, you can catch it before it gets out of control."

It's also important to guard your credit card number. Be sure to shred old receipts and credit card bills.

"The number is the thing," Finkbeiner says. "You want to take whatever steps you can take to keep your numbers from getting out."

Keep a close eye on your credit card when paying in a store, restaurant or gas station. Finkbeiner knows of a skimming victim who won't let his credit card out of his sight. He'll even follow a waiter back to the payment terminal in a restaurant.

"It's awkward and silly and makes people uncomfortable, but it's what he feels he needs to do," Finkbeiner says.

Original Article HERE