Preventing credit card fraud is a priority for financial institutions including Addition Financial. We always strive to protect our members from fraud in any way we can.
Credit card fraud is a problem around the world but the United States experiences a disproportionate amount of fraud according to a recent article from CNBC. Here’s what you need to know about the credit card fraud frequency in the United States, how it relates to the COVID-19 pandemic and what you can do to protect yourself.
How Big a Problem is Credit Card Fraud?
Credit card fraud costs billions of dollars every year. As of 2019, the total amount of credit card fraud on a global level was $28.65 billion. There’s no denying that’s a huge amount.
Fraud can happen in a variety of ways. We’ve all heard about hackers accessing credit card information being stored by retailers such as Target. These breaches get a lot of attention because they impact thousands – or even millions – of cardholders at once.
However, fraud also occurs on a smaller scale. Would-be thieves send out phishing emails, install skimmers on ATMs and create spoof websites to collect credit card information. Anybody who falls victim to one of these scams may be a victim of credit card fraud.
How Much Credit Card Fraud Happens in the United States?
According to the same CNBC article, credit card fraud in the United States in 2020 is estimated to be $11 billion dollars. That’s more than a third of the global total. Considering that the United States makes up only about 4.25% of the world’s population, it’s clear that this country accounts for a disproportionate percentage of global credit card fraud.
One reason that we experience more than a proportionate share of credit card fraud may be that we have more credit card holders than some other countries. As of 2017, approximately 65% of all American citizens had at least one credit card. By contrast, the global average was just over 19%.
However, the relatively high percentage of people with credit cards still doesn’t fully account for the difference. Other countries, including Canada, Japan and Norway, have higher percentages.
How Has the COVID-19 Pandemic Affected Credit Card Fraud?
Everybody who is currently living through the COVID-19 pandemic understands that it has caused a significant economic downturn. Unemployment numbers are on the rise and there’s no question that many people are feeling a financial pinch.
One of the most interesting quotes in the CNBC article was from Julie Fergerson, the CEO of Merchant Risk Council. She said:
“What happens in every economic downturn is that the attacks start to become more successful. So over the next two to three years, I fully expect credit card fraud numbers to increase in a pretty meaningful way.”
During difficult financial times, it isn’t surprising that some people become desperate. People who wouldn’t normally consider stealing may feel that they have no choice. Others, who are purely opportunists, may simply see the pandemic as a chance to make money.
There’s also a simple factual explanation for the increase in fraud to be a natural offshoot of the increase in credit card transactions that has occurred as a result of the pandemic. People who normally don’t do much shopping online have been stuck at home. As a result, they’re doing a lot more online shopping – and that means that there are more chances for thieves to steal their credit card information.
What Are Financial Institutions Doing to Combat Credit Card Fraud?
As you might expect, there’s a strong incentive for financial institutions – including credit unions, banks and credit card companies – to figure out ways to prevent credit card fraud. Some are turning to technology.
According to the CNBC article, VISA has developed technology powered by artificial intelligence (AI) to prevent credit card fraud. The company’s senior vice president and regional risk officer for North America is Mike Lemberger. He told CNBC that the company had used AI technology to prevent $25 billion in fraud in 2020 alone.
There’s a constant push and pull between hackers and thieves and security experts. As soon as one technological advance works to prevent credit card fraud, would-be thieves figure out a way to get around it.
Who is Most Harmed by Credit Card Fraud?
While breaches at big corporations often get the most attention, the truth is that individuals and small businesses often bear the brunt of credit card fraud. A loss of about $10,000 may be enough to put a small local company out of business.
Fraud can be extremely harmful to individuals as well. While federal law limits fraud liability for credit card holders to $50, the same is not true of debit cards, where money is taken directly from the card holder’s bank account. Reporting fraud immediately – within 48 hours – will limit liability to $50. However, the liability amount increases to $500 after 48 hours have passed and is unlimited after six months have passed.
The key for anybody who wishes to avoid being a victim of fraud is to take precautions to protect their credit cards, debit cards and other personal information from would-be thieves. Some suggestions include:
- Using strong passwords online and using unique passwords for each account
- Enabling two-factor authentication (fingerprint, facial recognition or a texted code) whenever possible
- Loading your credit card or debit card into a mobile wallet for additional security
- Never sharing your card number, PIN or other personal information with anyone
- Enabling credit alerts for your account where you’ll receive a text any time your card is used
- Paying for a credit monitoring service to alert you of potential fraudulent activity
Taking some simple precautions will minimize the chances that your card information will be stolen or used to make fraudulent purchases. Based on the news regarding recent increases in credit card fraud, our recommendation is to be extra vigilant, so you don’t become one of the growing number of people whose credit cards have been used without authorization.
