Credit Card Fraud - The Consumer Is Protected - But Are They?

Online credit card fraud is projected to grow to $2.6 billion in 2007 at a rate of 37%. With the growth of the internet, and the difficulty for law enforcement to track and enforce, criminals are learning to leverage this tool to commit more crimes.

As a credit card holder, you are ultimately protected from financial loss. The credit card issuers such as American Express, Diners, Discover, Visa and MasterCard can legally hold you responsible for $50 in the event of a fraud committed with your card, but don't often apply this fee. They want card users to be confident in using their cards, as they generate revenue from the selling business every time a card is used.

Also, in the cases of online fraud, the credit card companies get back any losses from the selling business, thus financial loss to the credit card company is limited to time and administrative resources.

Aside from the hassle of calling the credit card company to report fraudulent transactions, and be temporarily out of use of a credit card, there are other problems. The online fraud is big business, and is only the final crime in a string of many. The actual use of a credit card to obtain merchandise from sellers is the final act of a string of crimes which have a ripple affect throughout our lives.

The Impact Of Online Credit Card Fraud

In 2003, according to the FTC, more then one in ten Americans (nearly 25 million adults) were victims of some type of consumer fraud. The criminals goal here is to obtain credit cards for use in purchasing goods fraudulently. In doing so, they affect us in many ways:

Break & Enter and Petty Crimes - identity theft (click to report identity theft to the FTC) by break and enter is a growing trend. These days criminals are not just looking for the TV, Jewelry or DVD player, they often look for credit cards or personal information that can be found in mail so that they can be used to obtain cards fraudulently in the victims name.

Skimming - describes when a dishonest employee swipes the magnetic stripe on a customer card to steal the electronic information stored. With online fraud, it could be as simple as scribbling down the card number on a piece of paper.

Hacking - Computer savvy criminals will often times steal information from company databases and sell the information through an underground network. Once this information is lost, the persons identity that has been taken can be potentially a victim again and again. If enough personal information is taken, the victim can be red flagged, finding it difficult to obtain credit or succeed in other applications that require a background check.

Phishing - working on the trust of consumers, fraudsters create false web sites that appear exactly like a real company such as Bank of America, Chase, American Express, Paypal etc. They then send mass emails and hope to direct victims to log in personal information on the fake web site which will allow them to gain entry into accounts.

Auction Fraud - Craigslist is one of the internet's most popular and highly trafficked sites. Used to assist buyers and sellers, it has become a target for criminals hoping to steal from unsuspecting and trusting sellers. In fact, Craigslist has created a highly visible page on the home page of their site called "Avoiding Scams And Fraud" to help stop these crimes from succeeding. Other sites such as Ebay are also highly targeted and have provided steps to buyers and sellers in preventing Ebay fraud.

What Do Credit Card Issuers Do?

Credit card issuers (like Visa, MasterCard, American Express, Discover, Diners) allow shops to process transactions from shoppers who want to pay by credit card. When a fraud takes place, the seller assumes 100% responsibility for the cost of the item lost. As the merchant seller takes the loss, the credit card issuer has no reason to pursue criminals. In fact, their internal security services leave it up to the business victim to fend for themselves.

Businesses usually take the loss and do not pursue criminals as it is too cumbersome a process and they do not have the time or expertise to coordinate prosecution of a fraud. In most cases, frauds continue to occur, unchallenged. So criminals continue to commit fraud related crimes and so on.

Let's Stop Fearing Fraud

Online credit card fraud has wide implications. From the break & enter criminal, who steals information to sell to others to fund his drug habit, to the organized criminal element who coordinates the schemes and ultimately plays a large part of problems in our cities today.

Online fraud happens because criminals can gain profit from it. When goods are stolen, they have to be sold for money. If there are no buyers, there would be less crime. Again, if criminals could not sell what they stole, they wouldn't steal. Sites like Ebay or Craigslist are great for honest people, but are often used to fence stolen goods to unsuspecting buyers. When you buy something, make sure you know where it is coming from, look for a receipt, take the attitude that if something is too good to be true, it probably is. If you still want to check it out, tread carefully. If you are offered goods you know to be stolen, don't buy it. Not only can you be charged for possessing stolen goods, you feed the very criminals you fear yourself.

We all fear being a victim of crime to some degree or another, even though it may never happen to us, this is the world we live in. As such, we take precautions in our daily lives to avoid it and act in distrust in many situations that may not call for it. This will likely never change as there are always bad apples in the world. Crime of all sorts, generates this fear.

As for the internet, it is becoming more a part of our lives then anything ever before us. As for consumers, technology breeds fear because of the criminal element. Fear holds consumers back, which ultimately holds businesses back, who in turn are our employers and drivers of the economy. Allot of work is going into alleviating this fear from technology companies like Microsoft, AOL, Symantec to name a few, but criminals remain ahead.

It will be a long ongoing battle, but consumers and businesses should remain vigilant, report and prosecute crimes. This will help law enforcement to locate criminals who should ultimately pay the price and turn the tables on fear back to them.

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