The credit card is system is an electronic process. A credit card has certain unique information on it which allows it to buy goods. If this unique information is stolen, the credit card can be misused and the true owner of the card and the bank can be cheated. The credit card number, date of expiry and its CVV number form that unique information required to buy goods. An individual having this information can not only buy goods but can also transfer funds from the credit card account to some other account or even withdraw cash. This information on the credit card can be stolen either by physically stealing the card or copying the data on a card electronically after which it can be misused.

Electronically data theft from a credit card is more lethal than a physically stolen card. When a card is physically stolen, the user can report it to the bank and have it blocked however if the data on the credit card is compromised electronically, the user does not get to know about it. In that case, person stealing the information can use the card anytime in the future and cheat the user. 
 

Various types of Credit Card Fraud

Credit card transactions are made online (internet), over the phone, via mail and in person. The biggest issue that comes in the process is that the merchant does not know if the person swiping the credit card or giving the information is the true owner of the credit card. The following are the various types of the credit card:-

1. Credit card Application fraud
In credit card application fraud cases, the applicant provides fake or stolen documents to get a credit card. After receiving the credit card, he/she uses it for buying goods and does not pay the amount back to the bank. Since the documents provided initially are fake, the user can easily flee away after cheating the bank.

2. Takeover of credit card account
This is a long planned fraud where a criminal takes over another person’s credit card account. The 1st step that the criminal takes is that he/she collects information about a user and applies for a change of address. Once the address is changed by the bank, the criminal asks for a new card or 2nd card which is then sent to the new address. In this way the credit card account is taken over by the criminal. By the time the true owner realizes this, it is too late.

3. Theft at merchant’s place - Skimming
Skimming happens when a user after buying goods gives the credit card to the merchant to swipe the card on the credit card terminal. At this point a dishonest employee can steal the information on the credit card and use it in the future.

4. Lost credit cards
If a user loses his/her credit card, he/she has to report the same to the credit card issuer to block the card. However, in the meantime if the card falls in wrong hands, it can be misused easily.

Need for Credit Card Fraud prevention

Credit card fraud is definitely unhealthy for any society. As per RCMP (2007), the credit card loss suffered in Canada in the 2006 was $304, 255, 215. As per Celent Communications (2005), the total cost of credit card fraud in the USA was over 2660 million dollars. Credit card frauds are in billions globally every year. This is bad as it is liquid cash being stolen. Thousands of merchants are feeling the pain because of it and many credit card users have to go through a long, unwanted and undesirable process for something which is not their fault. This brings in the need and urgency of credit card fraud prevention.

Every bank or credit card issuer is taking steps in order to stop it; however, the frauds are still being committed on a daily basis. Governments in most countries have made strict laws to punish the criminals; however in the world of technology, it is not easy to catch the criminal every time. The safest way out of credit card frauds is prevention of frauds from taking place. Although prevention sounds easy, but there are many road blocks and obstacles in the path. Banks, credit card issuers and many companies are working full time to stop credit card frauds and many good solutions have been found, however that ultimate problem solving solution is yet to be found.