by Jim Marasco, CPA, CIA, CFE

Fraud Matters, Fall 2011

Hundreds of millions of dollars are lost to credit card fraud each year.  For consumers using credit or debit cards, adopting certain safeguards can be critical to avoid becoming another statistic. Recent Events Earlier this year, Michael’s Stores announced they and their customers were the victims of a massive debit card fraud perpetrated against their stores located on the east coast.  Data thieves had hacked into their processing equipment, stealing debit card accounts and PIN numbers.  Thieves created bogus cards and proceeded to make ATM withdrawals on unknowing victims’ bank accounts. Common Safeguards As a charge card user, certain precautions can be extremely helpful in minimizing your exposure to fraud.  These include:

• shred credit card applications and all receipts and statements once reconciled
• sign cards when they are received
• keep a record of your credit card accounts and contract phone numbers in a secure location
• put lines through blank receipts or total all receipts while signing
• compare all receipts against the billing statements as soon as your statements are received and reconcile any unknown charges
• report any questionable charges
• timely notify charge card companies of address changes
• refrain from lending out your credit or debit cards
• don’t leave your cards lying around
• shop on-line at sites that are legitimate and secure

Types of Credit/Debit Card Fraud A common misconception is that your cards must be stolen for someone to charge on them.  Data thieves have become increasingly sophisticated in their practices.  Dishonest clerks are using skimmers or readers to scan your information while processing your cards for purchases.  Others are taking pictures of the cards/security codes.  Stores or on-line merchants retaining account numbers/security codes have been hacked into, exposing this information to thieves who quickly resell it. Minimizing Your Risk There are numerous ways to decrease your risk as a consumer and credit card user.  For example:

• keep an eye on your cards  at all times and get it back as soon as possible.  An increasing number of merchants are allowing consumers to scan their own cards to alleviate the concern with a card actually leaving the owner.  Smart phones are also becoming popular in this capacity, acting as a replacement for a charge card.
• while shopping on-line, use either temporary charge cards or a service like PayPal, which offers another layer of security and limits your exposure.
• utilize fraud alerts on your accounts.  For example, ensure that your card issuer notifies you (via telephone, text or email alerts) of purchases made on your account from outside your geographic area or exceeding certain established thresholds before they process them for payment.

Increased Use of Charge Cards 75% of consumers currently use credit and debit cards for purchases.  In 2010, over $1.3 trillion were processed through VISA and Mastercard debit transactions alone.  As we continue to move towards a “cashless” society, safeguarding electronic transactions is critical to maintaining the integrity of the system. – James Marasco, CPA, CIA, CFE