How to Prevent Credit Card Fraud?
80% of US credit cards in circulation have been compromised. And the losses from credit card frauds in the US alone were USD 11 billion in 2020! And it is not a user/ credit card owner problem alone. Credit card frauds are even more damaging for online businesses, merchants, banks, and financial institutions that face massive losses. This article delves deeper into credit card fraud and discusses ways to prevent fraud on your credit cards.
A Snapshot of Credit Card Frauds
Almost 25% of all digital transactions in 2020 were attempted frauds. The common credit card fraud types include:
- Physical theft of cards
- Card-not-present attacks
- Card-not-received frauds
- Counterfeiting and skimming frauds
- Account takeover
- Phishing and other social engineering attacks
- Identity thefts and false application frauds using stolen details
- Carding and cashing out (especially dangerous for businesses)
Physical thefts and card-not-received frauds aside, attackers may run targeted phishing and social engineering campaigns to gather credit card information for further use. Or they could simply purchase the information on the dark web for as little as USD 5.
The Cost of Credit Card Fraud
The average loss from credit card fraud is USD 311. Though this may seem like a small number, remember that it is just the average and that a significant number of losses over USD 10000 were also reported (39,734 reports to be specific).
While most credit card providers and banks offer zero-liability policies, the federal laws limit cardholder liability to USD 50 if they report the fraud within 60 days. So, credit card frauds do not cost you much per se. However, when threat actors access credit card information, they do much damage.
Credit card frauds, from the merchant/ e-commerce business perspective, lead to financial damage from chargeback penalties, high processing fees, authentication costs and product loss, among others. They also end up facing blocked transactions, if they get flagged as high risk and this causes genuine transactions to get blocked, thereby causing massive reputational damage.
For banks and financial institutions, credit card fraud invites financial losses from the zero/ limited liability clauses and reputational damage.
Ways to Prevent Fraud on Your Credit Card
What Can Banks and Merchants Do to Shield Customers?
Banks and e-commerce merchants must deploy a next-gen WAF that is endowed with global threat intelligence, self-learning systems, intelligent automation and analytical capabilities. Self-learning systems and ML-based tools are effective in anomaly detection as they continuously assess transactions against a baseline (that keeps getting augmented and improved overtime as the system keeps learning) and raise red flags. Then, banks can thoroughly assess the situation and block the transaction or freeze the account.
The WAF must engage in reputation monitoring to detect and automatically block traffic from known bad sources and malicious IP addresses. It must be capable of continuously monitoring and blocking bad bot traffic with the help of bot intelligence feeds, behavioural analysis, pattern and heuristic analysis, fingerprinting, velocity checks and progressive challenges.
E-commerce merchants and banks can engage in geo- and rate-limiting to prevent credit card frauds. By building custom-rules, they can automatically block traffic from certain geographical areas where they don’t do business. Similarly, they can use rate limiting to restrict the number of attempts within given timeframes from single IP addresses. This way, bot-based credit card frauds can be prevented.
Lastly, banks and e-commerce merchants must leverage the expertise of certified security professionals to custom-build policies that help prevent business logic flaws and to keep fortifying the security posturing.
What Can Individuals Do to Protect Themselves?
1. Take the Physical Safety of Credit Cards Seriously
The most basic step for credit card fraud protection is keeping all your credit cards physically safe and secure. Report immediately to the card issuer when your card is stolen or if you have lost your wallet.
2. Effective Credit Card Fraud Detection
One important way to prevent fraud on your credit cards is proactive detection of credit card fraud. It is critical that you detect frauds early to limit the damages and avoid the hassles of getting your card re-issued.
Here are a few credit card fraud detection tips to follow:
- Review billing statements on your cards carefully every month.
- Look out for suspicious, inconsistencies, inexplicable, and unauthorized transactions. The size of these transactions does not matter since attackers tend to attempt smaller transactions to validate the cards.
- If you note any inexplicable/ unauthorized charges or activities, immediately report them to the card issuer.
- While you can and must manually monitor your financial accounts and card transactions, you should sign up for real-time alerts on transactions that most banks and financial institutions offer. You can set transaction limits, get alerts for international payments, balance transfer requests, etc.
3. Beware of Phishing
Phishing is an increasingly sophisticated and lethal threat vector widely leveraged by cybercriminals to collect sensitive information from you.
- Be wary of all requests for credit card details and verify the legitimacy of anyone requesting this information, even if it’s your bank.
- Do not ever share CVV numbers, passwords, or login credentials with anyone – on call, email, chats, social media, or otherwise.
- Do not click random links requesting your credit card information
4. Prioritize Safety in Online Transactions
This is another critical way to prevent credit card fraud. Be a smart and informed online shopper. Verify the legitimacy of the website/ online platform before making purchases. Look for the SSL certificate and check its validity. If there are warnings from the search engine on the site’s security/ legitimacy, avoid transactions. Exercise caution and always double-check online transactions.
Some other ways to prevent fraud on your credit cards
- Don’t use public Wi-Fi to make online transactions
- Don’t engage in these transactions in public places
- Shred all card-related documents before discarding them
- Strengthen passwords and PINs on all cards and related accounts. Always avoid default and obvious passwords.
These are some effective ways to prevent fraud on credit cards. In addition, individuals must ensure that they choose credit cards from banks and financial institutions committed to card and data security. The bank must leverage self-learning, AI-powered systems to detect and prevent credit card fraud. From the merchant and financial institution perspective, strengthening credit card security through intelligent, managed, next-gen security solutions is critical to prevent astronomical financial and reputational losses.