Credit card frauds cost issuers and cardholders hundreds of millions of dollars each year. While theft is the most common form of fraud, it can occur in other ways as well.
Armed with high-tech devices — commonly referred to as ‘skimmers’ — and micro-cameras, crooks can steal the account data stored on the magnetic strip of your credit card and rip off thousands of dollars.
The data could be stolen from transaction terminals — or ‘point-of-sale (POS) terminals’ as they are commonly called in India — disposed transaction slips and even ATMs if you are not careful.
Skimmers act like POS terminals. While transmitting the details of your card for authorisation, they retain a copy which is subsequently retrieved and used to produce a duplicate card. Crooks are known to attack ATMs where they hide micro-cameras to record PIN numbers.
Credit card frauds are rampant in countries like Malaysia, Thailand and Indonesia. Recently, some foreign banks in India have asked their customers to change cards that they had used in Southeast Asia to guard against such ripoffs.
In India, the crooks have yet to graduate to such high-tech frauds. Because of credit limits, running a racket in India isn’t profitable. The average credit limit in India is Rs 35,000, whereas in countries like the US, most cards do not have a credit limit.
The credit card industry is fighting these frauds with innovations in technology. By 2006, all credit cards with magnetic strips will be replaced with cards bearing microchips that look similar to the SIM card in your mobile phone.
Stealing the account data is nearly impossible from microchips. The flip side is that most shops in India do not have the terminals that can read data stored on microchips. Migrating to the next generation card is going to take years as it involves a huge cost. For instance, all the POS terminals will have to be changed. Till then, banks are relying on hawk-eyed vigilance to stave off fraudsters. Banks normally scan your spending history and generate alerts when transactions involving big sums take place. Say, you go on a shopping spree and buy a watch worth Rs 20,000 for your wife at the Singapore duty-free outlet. In all likelihood, the bank will call up your family in India to check whether you are travelling. If a similar transaction takes place again, the bank could insist on speaking to you before authorising it.
Fighting these frauds isn’t too difficult if the cardholder is cautious. You should never leave your credit cards in hotel rooms, or dispose transaction receipts without shredding. And take care not to shop at shady stores.
On return, you should check your billing statement to ensure all transactions are your own. Retain receipts to verify the amount. If you find a billing that isn’t your own, alert the bank immediately so that it can cancel the card, and fill up a ‘Dispute Resolution Form’.
The bank will immediately investigate your complaint and if you can prove that you were defrauded, you are unlikely to have to foot the bill. Establishing this shouldn’t be difficult. It takes 10-15 days to produce a counterfeit card. So, you’d have reached India by the time crooks start using the counterfeit card. “What is more, the benefit of doubt normally goes in favour of the customer. In most cases,the bank picks up the bill,” says B. Madhivanan, ICICI Bank's head for credit cards.
Yet, if you are headed for one of the shopping destinations in Southeast Asia this Christmas, guard your plastic money like cash. If you are unfortunate, losing your credit card or the data stored on the dark film-like strip at the back could cost you much more than if you were mugged.