One of the most common ways in which credit card information is stolen is the simplest-physical theft. A thief steals a wallet or purse with the credit card inside, or she steals the credit card itself.
Dumpster divers look through dumpsters in search of canceled credit card transactions that have been thrown in the trash. In this instance, they don’t have the physical credit card, but they do have the credit card number and the name of the owner, so they can use it in telephone and Internet transactions.
Those who work in service industries may steal credit card information when it is given to them over the telephone. For example, someone taking hotel reservations or waiting on you in a restaurant might copy your credit card information and use it.
The Internet has become one of the primary ways for stealing credit card information. A scammer might set up a phony retailing website, claiming to sell goods. When the credit card information is sent, the scammer then steals the information and makes use of it.
Phishing scams are increasingly used to steal credit card information. In a phishing scam, a phony email is sent to someone claiming to be from her financial institution or credit card company and asking her to log on to a website and her credit card number. The site is designed to look real but in fact is a fraud; the scammer then-steals the credit card information.
The vast majority of credit card theft is not done by stealing individual cards, but instead by hackers breaking into systems that hold large numbers of credi cards. Break-ins have resulted in hundreds of thousands-and in some cases up to tens of millions-of credit cards being stolen. In some instances, people working inside the institution steal the information or are involved in the theft. For example, insiders stole tens of thousands of credit card numbers from Teledata Communications, lnc., which provides information to banks from the three commercial credit history bureaus, Equifax, Experian, and TransUnion. Therefore, Teledata workers had access to millions of credit card numbers. In the biggest incident in history, a hacker broke into a company called CardSystems Solutions, lnc., and stole 40 million credit card numbers.
In some instances, credit card theft occurs because companies who have credit card information are extremely careless with that data. Some companies, for example, have lost CDs filled with the credit card numbers of individuals. The Boston Globe was guilty of one of the more incompetent handlings of credit card information. It printed credit card information of 240,000 of its subscribers and then used those printouts to wrap newspaper bundles distributed to retailers and newspaper carriers. The printouts with the credit card information went to 2,000 retailers and 390 carriers.
Credit card companies lose billions of dollars each year in fraud, so they’ve installed automated systems to detect potential fraud. The systems use artificial intelligence (AI) and run on powerful computers, often neural networks, which are large collections of powerful processors that work in tandem to process and solve problems.
Many types of AI systems detect potential fraud. They compare individual transactions to overall spending patterns. looking for transactions or patterns that seem anomalous or unusual. Some of the most sophisticated systems create spending profiles of each individual credit card user and compare new transactions against that profile.
Every credit card transaction for every individual is automatically sent into the system. Each transaction is compared to the individual’s profile and is given a numerical rating that measures the likelihood that the transaction is fraudulent.
Most transactions get a low fraud rating. and nothing is done with them.
Some transactions, though, receive a rating that means the transaction is questionable. No action is immediately taken, but multiple transactions with these ratings can cause the credit card company to take action.
When a transaction receives a rating that signals potential fraud, the credit card company contacts the individual to verify that the transaction is valid. If it is valid, no action is taken. If the individual cannot be contacted, or if the individual says that the transaction is fraudulent, the credit card is immediately canceled and can be used for no further transactions.
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