Credit card fraud: a Scarecrow to an online business

Posted on 18.11.2016
Written by Eva Ciga

One of the biggest threats of running an online business is credit card fraud. If you want to fight fraud effectively, it is important to understand the mechanisms of how fraud is executed. There are various ways how can fraudulent activity may  appear on your credit card.

Simply said, Credit Card Fraud is when an individual uses another individual’s credit card for personal reasons. Of course leaving the owner of the card completely oblivious. Furthermore, the individual using the card has no connection with the cardholder. In addition has no intention of either contacting the owner of the card or making repayments for the purchases made.

Credit card fraud can be committed in various ways

  • Mail Intercept
  • Stolen Cards
  • Results in Internet Order /Mail Fraud
  • Skimming
  • Carding
  • Institutional Identity Theft

Mail Intercept

This is one of the most common methods of  how credit card fraud  crime is carried out. Fraudsters will  always stake out mailboxes they can easily access. Once a target is identified, they peruse through the ‘unsecured’ mail, checking for any existence of credit card-related info, like a a paid bill or a statement.

Stolen Cards

Stolen cards refers to when  a debit card or a credit card is stolen or  lost. A lost or stolen card is a pot of gold for fraudsters, until the cardholder cancels their card. This is why most financial bodies have a 24-hour hotline dedicated for stolen or lost cards (tip: check the back of your card).

Results in Internet Order /Mail Fraud

In today’s card-not-present marketplace, consumers order products through the Internet as well as via mail without ever entering a shop. This makes credit card fraud more prone and very simplistic to conduct. In these cases, the merchant relies on the cardholder to provide accurate information for the order since they cannot physically observe and verify the card/cardholder.


Skimming, also referred to as cloning is an increasing form of credit card fraud theft, to the tune of over $350,000 in losses per day just in the United States alone. It is where tiny electronic devices, recognized as skimmers, are applied and used to capture all of the credit/ debit card’s details within the few seconds someone takes to swipe the card through the machine.


Carding describes a process which authenticates  a stolen card data. For instance, if a criminal attains stolen card info using a means such as phishing, this where someone determines whether or not the card is still activated. To achieve carding, criminals create smaller purchases on “real time” websites where they will be able to determine whether or not the card is still ´live´. After which, they can move on to other fraudulent transactions.

Institutional Identity Theft

This is another common type of fraud that occurs when fraudulent sites modify some portion of their domain name system that governs the Internet.

Contrary to popular belief, merchants are far more at risk from credit card fraud than the cardholders. While consumers may face trouble trying to get a fraudulent charge reversed, merchants lose the cost of the product sold, pay chargeback fees, and fear from the risk of having their merchant account closed.


See also: What is an Automated Clearing House?

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