Credit card skimming is an international problem accounting for losses of
over one-billion dollars a year. This type of credit card scam is common in
Europe, Asia and Latin America and is starting to show up more in the United
States.
This scam is easy to run - it can happen when you give your credit
card to a store employee to make a purchase. That employee may not only
swipe your card for payment, but also swipe the card with a small machine
they hold in their hand known as a skimmer. This small device will store the
information from your card into its system. The skimmer is equipped to hold
information on hundreds of credit cards and from this information, the
crooks are able to produce counterfeit cards.
There are skimming rings working all over the world and once your
information is put into the skimmer, it is then downloaded into a computer,
ready to be emailed to anyone worldwide.
A decade ago, this fraud was not as easy to accomplish as it is today,
due to the fact skimmers were very large and had to be hidden under
counters. However, with the advance of technology in the past ten years,
they have been able to streamline the skimmer, making it small enough to be
hand-held and out of sight of the unwary customer making a purchase. These
skimmers are easy to buy; in fact, they can be purchased over the internet
at around $300. The machine needed to make counterfeit credit cards is a
much larger investment - costing $5,000 to $10,000.
Another form of this scam is done by actually pulling information
directly from the credit card terminals. A skimmer bug is placed into the
terminal and later retrieved with credit card information on it. Only the
older terminals can be violated in this way and with the onset of new credit
card terminals, this has alleviated much of this bugging.
As soon as the crooks have their needed information on you, they will
start their shopping sprees using your credit card number. They purchase all
types of merchandise and charge it to your credit card. Over half of credit
card fraud is done over the internet with online purchases. With shopping on
the internet becoming more and more popular, card fraud on the internet has
also increased.
The crooks will also use the internet to verify the card information is
valid. They will purchase many low-ticket items through various websites,
checking to see if the card is active. Internet processing of card purchases
is done by real-time processing and not handled by a person; thus, no chance
of them being caught trying to use a stolen card number.
The cardholder is a victim of this crime and is responsible for up to $50
of the total amount charged on his card, while the real victim in all of
this is the merchant whose employee did the skimming. The merchant is held
100% responsible and risks losing the merchandise, and is responsible for
paying the fees of the investigation. Investigation fees paid by consumers
and businesses in 2003 amounted to an estimated half-billion dollars in
annual revenue for credit card companies. This money is used by the card
companies to offset costs to investigate charge back claims by their
customers.
The crook who perpetrates this card fraud, for the most part, goes
unpunished. There is a limit of $2,000 before a criminal investigation can
be started; the crooks know this and will not exceed $2,000 on their
purchases from any one business. Thus, they are pretty much free to continue
to victimize consumers and businesses.
