11/27/2013 5:45 PM ET|
How card companies spot fraud before you do
Advances in technology help credit card companies notice irregularities first.
You might not know it, but your credit card company is tracking your every move. Advances in how card providers and networks process massive amounts of data from card usage means they often alert consumers to potential fraud before consumers notice anything amiss.
That's what happened to Ted Sindzinski, a digital marketer who lives in Orange County, Calif. A few months ago, out of the blue, his card provider called and asked him if he had recently made a purchase at the women's retailer Anthropologie. He hadn't. The company immediately shut down his card and denied several more online charges. "I was surprised when [the card provider] called me. I know card fraud can happen to anyone, but I didn't think I'd have an issue given how diligent I am," Sindzinski says. He still doesn't know how or where the fraudster got his card number.
Banks are increasingly responding with that kind of aggression. While card providers and networks have long analyzed shoppers' spending data to look for problems, they now have more automated systems in place as well as more sophisticated methods of sorting through data. And by the end of the year, consumers will start noticing an even newer technology that will almost completely shut down point-of-sale fraud.
"[Card companies] look for patterns and search for anomalies," says Kurt Helwig, president and CEO of the Electronic Funds Transfer Association. "If you typically use your card in the D.C. area, and then suddenly it's being used in Eastern Europe, they'll flag that. Or if you usually keep your spending under $1,000 a month, and then there's suddenly a purchase for $6,000, it will raise flags," he says. The card provider will then call the customer and ask him or her to verify the purchases.
Companies are often first alerted to problems from customers themselves, and the information can then be used to identify other instances of fraud. "As consumers recognize fraud on their accounts, they call in, and [card providers and networks] note that in their system, and then they'll build a sort of heat map of all the areas where they are seeing consumers report fraud," says Julie Conroy, a research director at Aite Group, a Boston-based research and advisory firm. After the card providers and networks identify hot spots, like a certain merchant that keeps coming up, then they will proactively notify customers, she explains.
While much of that data analysis is automated, once computers pick up on a potential problem, a manual review is initiated, which is when customers get notified. Conroy says companies are increasingly moving to automated systems for customer notification, too. Instead of a phone call, customers might get a text message, for example, asking them if a transaction was really made by them and to respond "yes" or "no." Conroy says, "Some credit card issuers give consumers the ability to set their own preferences, so if something over $500 hits your card, we'll let you know … Companies are putting that power in the hands of consumers."
Doug Johnson, American Bankers Association vice president of risk management, says card companies and networks have long been evaluating massive amounts of data and looking for changes in patterns, but they are getting better at finding problems. "They have increasing abilities to monitor larger amounts of data to quickly search through the data to find trends," he says.
Johnson experienced the efficiency of that system over Christmas, as he made a purchase from an unfamiliar website. "I took a chance because I wanted the present … I hit the key to make the purchase, and my phone rings. It's my bank, asking if I made the transaction, and if I also agreed to an additional monthly fee for a club of some sort," Johnson recalls. He had not agreed to any such monthly fee, so the card company shut down the transaction. It had acted so quickly because that particular retailer had already been flagged for making secondary fraudulent transactions on customers' accounts.
One potential problem is when card companies incorrectly flag legitimate purchases. In the worst case scenario, a customer who doesn't usually travel overseas might be on his first major international trip and have his card shut down because the card provider notices unusual activity and is unable to contact the customer directly. Usually, though, companies verify the fraud first with the customer before shutting down the card. Companies can also allow some types of transactions, like monthly automated bills, to continue for a period of time until payments can be set up on a new card.
New technology, dubbed EMV, which stands for Europay, MasterCard and Visa, is already widely used in Europe and is poised to move into the U.S. market later this year. The technology involves a computer chip inside credit cards, which creates a dynamic transaction code for each purchase – making it impossible to create counterfeit cards at the point of sale. Toward the end of this year, consumers will begin receiving these new types of cards from issuers, Conroy says.
In the meantime, consumers can take extra steps to protect themselves against what Aite describes as an increasing amount of fraud since 2011, partly a result of large data breaches. ABA's Johnson says every customer should monitor transactions regularly by checking accounts online more than once a month. "Don't wait for the monthly card statement to come in the mail," he says. He also suggests using a credit card, not a debit card, for daily and online purchases because unauthorized transactions on debit cards can affect the balance available.
Johnson adds that customers should alert their card providers to any international trips in advance to avoid having a card flagged for suspicious activity. "If you're in Europe, it's inconvenient to have those transactions questioned," he says.
Helwig also says you should beware of emails purporting to be from your bank that ask you to enter personal information on a website. These so-called "phishing scams" use fake emails and websites to steal personal information and money. Instead of clicking on URLs within emails, always visit your financial institution's website by typing in the URL yourself, and make sure you're on the correct website.
"Customers really still are the first line of defense, and a lot of the analytics in place rely on getting those in-bound calls from consumers," Conroy says. She checks her own accounts at least three to four times a week to make sure there are no unauthorized transactions. She also suggests being particularly careful about browsing the Internet on mobile devices. "Mobile fraud is increasing more quickly, partly because consumers don't treat their mobile devices as the tiny computers they are. Put a password on your device so if you lose it, someone can't transact," she says.
In almost all cases, banks cover the cost of any fraudulent purchases, but victims can still find themselves inconvenienced by temporarily frozen accounts and cancelled cards. That inconvenience, though, is far less off-putting then being the ongoing victim of identity theft.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
How about if stores simply check for ID????
Those are the stores I will go back to regularly.
It would prevent so much fraud,but they rarely do it.
They just want the transaction to pass through not caring who it is.
If that weren't true,many more stores would ID.
This was a well written article! Half the time, this site has a skew on some facts in their articles, but I really liked this one. One thing, which I absolutely agree with....check your purchases to the card online at least a couple times per week. It's the best way to avoid hassle down the line, saves the CC company time and money, and us consumers a lot of headaches!
Example: My husband travels for business so a charge that appeared on our card from NM in a restaurant did not seem abnormal. Turns out a waiter swiped my husbands card for cash in addition to the actual food bill. Because we caught it within two days, the charge was reversed, a new credit card was sent, and there were very few hassles.
Again, good article!
Nobody cares about credit card fraud. Once you're a victim of it, you'll realize that. The cops don't investigate, they issue a police report number and go eat a donut. The credit card company just credits your account. Everyone just acts like it's a victimless crime. No wonder it's so rampant... there's no risk of getting caught.
This is a case of efficient free markets. Companies care about losing money. Now take the U.S. government, each year they pay 100 billion in fraudulent Medicare payments. What the hell, it is only your money, no sense in the government trying to figure out and stop the fraud! And each year the government pays billions in fraudulent tax refunds, what the heck, it is only tax payers money. I sure am glad the "efficient" U.S. government is now controlling 15% of the US economy through Obamacare. Just think of how much money we will all save now, because they will care so deeply about all future fraud in that program. And hey did you here that nearly 2/3 of all Obama free phones are given to fraudulent requests. Oh, and did you know. ......
I think we should hand all of these programs over to the credit card companies.
I had a card once where I asked the card company to make retailers ask for identification of my card and the signature against like a driver's license. I had lost a card and was being charge for things in places that I never been. Sure as you know it, the person who was using that card, could not verify the signature against that of my driver's license and they could not verify the correct SSN that went with the card. What was funny was that at that time my Driver's License number and my SSN were the same. However, this person had neither. This account was closed my me and I was reissued another card, and I didn't have to pay for anything but $50.00 of purchases which would have been mine anyway. Needless to say, this person was prosecuted for stolen cards, as mine was not the only one. However, because I did make an arrangement on that card to find out who was charging, it put some woman behind bars.
I think banks need to still do this especially during holidays when people are apt to use their credit cards for purchases.
They also shut down your cards when you use them outside the country for large purchases, even if you contact them first and notify them that you will be out of the country and using the card.
They might have sophisticated fraud detection systems in place, but they don't pay any attention to what their customers are telling them.
On Thanksgiving evening this year I listened while my mother in law called her credit card company and informed them that she would be making large purchases on the card Friday and Saturday. She still had to call them three times on Saturday to get her card reactivated, and an online purchase was cancelled without her knowledge.
I'm all for the fraud prevention technology and the vigilance of the credit card companies in keeping it going. But if a customer calls and tells them that purchases over the next few days are going to be large and legitimate there is no reason to put someone through that kind of hassle.
So the purpose of this website is to expose "alleged" employers of illegal aliens. In this effort we need your help. First, if you know of a suspected employer of illegal aliens report them .
Illegals make up 80% of Credit card theft and ID theft!
I always call my credit card company when I will be out of town. It can get irritating in a way, because I know where I am going, just don't know where I will be driving through. I definitely tell them the correct dates of departures and arrivals when going overseas. By now, I am sure they know where I go.
I appreciate a credit card company who called me when I returned from a forray at the gem show in Tucson as there were purchases from various part of the country (that happened to be in Tucson). Nevertheless, I check my credit card statements every month.
When I made my first online purchase a few years ago my phone rang about two seconds after I hit the final transaction key. It was my card company questioning the online transaction.
Another credit card was shut down after two purchase attempts in a city where I had never used the card. The card was used for an $800 purchase from Walmart and I had never previously used that card in that store.
Someone the card companies screw up. I notified my card of an upcoming overseas trip. I arrived overseas tried to make a transaction and they canceled my card. What was the point of telling them ahead of time? Fortunately, I had another card and I later found out that the first card company discovered their mistake and reactived my card for the rest of the trip.
usually the card companies are amazing and cancel my cards at the first fraudulent charge.
This is a case of efficient free markets. Companies care about losing money. Now take the U.S. government, each year they pay 100 billion in fraudulent Medicare payments. What the hell, it is only your money, no sense in the government trying to figure out and stop the fraud! And each year the government pays billions in fraudulent tax refunds, what the heck, it is only tax payers money. I sure am glad the "effiencent" U.S. government is now controlly 15% of the US economy through Obamacare. Just think of how much money we will all save now, becuaes they will care so deeply about all future fraud I that program. And hey did you here that nearly 2/3 of all Obama free phones are given to fraudulent requests. Oh, and did you know. ......
I think we should hand all of these programs over to the credit card compnies.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON CREDIT CARDS
Nearly half of family caregivers spend more than $5,000 a year, plus caregiving affects their jobs and retirement plans.