card industry originated in charge accounts
that were maintained by individual shoppers
at certain stores. These were relatively
simple two-party arrangements involving
only the customer and the store extending
credit card industry, although it involves
complex relationships among several corporate
entities, can simply be described as a
three-party system in which the credit
card company occupies a position between
the customer and the store. Typically,
the credit card issuer pays the merchant
for charges made by a credit card holder,
then the credit card company bills the
card holder for the amount of the purchase.
Credit Card industry has grown at an enormous
rate during the past 20 years. Unfortunately
this rapid growth made it an easy target
and created many new opportunities for
individual criminals and crime syndicates.
No one can provide an exact figure for
the annual loss caused by credit card
fraud, but it exceeds R 50-million per
annum in South Africa. According to Chris
Trotskie, chairman of the SA Card Fraud
Forum, the four major banks in South Africa
R 5-million per month due to credit card
fraud. Visa’s global losses are about
$ 2-billion per annum. If this continues
at the same rate fraud will cost $ 11
per card by 2008.
A credit card is a convenient
method of payment, but it does carry risks.
There is a chance that you might become
a victim of credit card fraud. Credit
Cards or credit card information is usually
fraudulently obtained through methods
You can, however, protect
yourself by being aware of the risks involved,
the different types of credit card fraud
and by following these simple guidelines.
Think of credit
cards as cash, just carry the cards
Never leave your
Sign new cards
Report lost or
stolen cards immediately.
Protect your PIN
– memorise it.
Do not keep your
PIN and card in the same place.
Be careful when
giving your personal and credit card
information to unknown persons.
Destroy all financial
information (i.e. account numbers, bank
statements, ATM and sales receipts etc.)
before throwing it away
only in two in three respondents in
a UK study destroyed this information
before discarding it..
on your credit card statement with your
Ensure that you
get your card back after every transaction.
Keep a record of
the card account number, expiration
date and the toll-free number to call.
Keep an eye on
your card during all transactions
17% of respondents in a UK study said
that it did not worry them if someone
took their card out of their sight.
Do not use a credit
card to "validate" a cheque or any other
Do not sign a blank
credit card slip.
Do not give your
card to someone else to use-
19% of respondents in the abovementioned
survey had let someone else use their
card to buy something over the internet
Credit Card Tips For Merchants
Don’t let credit
card fraud eat up your profits. Watch
out for suspicious behaviour. Fraudulent
transactions have certain characteristics
in common. Although these characteristics
could never be conclusive proof of a fraudulent
transaction it will help you in identifying
Be extra careful when a customer:
Take the card from
a pocket instead of a wallet.
Purchase an unusual
amount of expensive items.
Make random purchases,
selecting items with little regard to
size, quality, or value.
Make several small
purchases to stay under the floor limit,
or asks what the floor limit is.
Signs the sales
draft slowly or awkwardly.
items on a newly valid credit card.
Hurries you at
Purchases a large
item, and insist on taking it immediately,
even if delivery is included in the
Be extra careful when a credit card:
or it seems as though the information
(i.e. expiry date, hologram, number,
embossed name etc.) thereon is altered.
The signature on
the card and sales draft differs.
have been tampered with. (Take a look
at the Security Features of common credit
of Credit Card Fraud
Statistics show that the
misuse of lost or stolen credit cards
is still the most popular type of credit
card fraud in South Africa. Counterfeiting
credit cards are, however, increasing
at an alarming rate. Fraudsters will typically
use fraudulent credit cards to buy cigarettes,
cellular phones and
is the most common types of credit card
Your personal information
is as good as gold to a fraudster or fraud
syndicate. If they get access to or get
hold of your personal information, they
do not even need your credit card. They
phone your Credit Card Company or Financial
Institution and change your address information.
They will then report your current card
lost and request that a new card be issued.
The card will then be sent to the new
address or they will receive information
on where to collect the new credit card.
They then make use of false identification
to collect the card. Your statements will
be sent to the new address and you will
be unaware of the fraud that is occurring
on your credit card. Your credit card
account has now been taken over by a criminal.
It is therefore important to contact your
Credit Card Company or Financial Institution
if you do not receive your statements
Another method used by
criminals to get hold of your credit card
and take over your account is through
postal theft. Crime syndicates have agents
within the postal service and courier
companies who will assist them in getting
hold of credit cards before they are delivered.
When you receive notification to collect
your credit card, do so as soon as possible.
The longer you take to collect it the
better chance criminals have to steal
it. If your card expired or will expire
soon and you haven’t received notification
to collect a new card, contact your Credit
Card Company or Financial Institution
Counterfeit Credit Cards
Crime syndicates use the
latest technology, including computers,
embossing and lamination to create more
realistic looking credit cards. Today’s
counterfeit credit card will often have
a complete hologram and a fully encoded
magnetic strip. Most of the tools used
to create counterfeit cards are manufactured
in the Far East and smuggled to developed
and developing countries throughout the
world. To the untrained eye these cards
will appear to be completely legitimate.
do you then identify a counterfeit credit
card? The hologram holds the key to identifying
counterfeit cards. In most instances the
hologram on a counterfeit card is fixed
on top of the card, whereas the legitimate
hologram is embedded in the plastic during
the manufacturing process. On closer inspection
you will be able to see or feel that the
hologram on a counterfeit card rises slightly
above the card. The only way to combat
this type of fraud is to be aware of the
security features built into credit cards.
This will enable the recipient to identify
the slight differences between genuine
and counterfeit cards. Counterfeit cards
are rarely used more than 3 times.
Credit Card Skimming
Credit Card Skimming is
a method by which encoded information
from the magnetic stripe of a credit card
is gathered by an electronic credit card
reader (skimmer). This information is
used legitimately when processing a transaction.
In the hands of a criminal the electronic
credit card reader becomes a handy tool
to gather information to use later in
illegal transactions and purchases. Usually
a criminal connects this "skimmer" to
the credit card machine or a portable
"skimmer" could be used to swipe your
card when you are not looking. If you
make a purchase, your information will
automatically be stored in the "skimmer".
At a later stage the criminal will use
this information to make unauthorised
purchases or encode this information on
the magnetic stripe of a counterfeit card.
Credit card skimming often
occurs in businesses where credit cards
are used regularly, such as restaurants
and other entertainment venues. In restaurants
you will normally lose sight of your card
when the waiter takes it to pay your bill.
Some skimmers are as small as your hand,
which makes it extremely easy for waiters
to keep in their pouches.
During 2003 a crime syndicate
was detected in New York, Connecticut
and Massachusetts in the USA that smuggled
Chinese immigrants into the US. The immigrants
were forced to work as waiters in various
Chinese restaurants to pay back money
they owed to smugglers that assisted them
to get into the country illegally. As
waiters working in these restaurants they
were forced by the crime ring to carry
pocket-sized credit card skimmers and
collect data from the cards of unsuspecting
customers. The information they gathered
was then handed over to the crime ring
to pay off their debt.
The ease with which credit
cards with magnetic stripes are used in
defrauding companies, financial institutions
and individuals have necessitated banks
and other card issuing companies to implement
microchip card technology. This
is due to the fact that cards with magnetic
stripes can to easily be cloned.
The cardholder’s information will be stored
on a microchip, which will be much safer
than the magnetic stripe. The new standard,
to which all role players must adhere
to, will come into operation on the 1st
January 2005. This new standard
was dubbed EMV, which was taken from the
first letter of the three companies that
initiated it, namely Europay, Visa and
MasterCard. This technology was introduced
in France more than 10 years ago. According
to the credit card industry in this country
card fraud dropped by 80% after the new
technology was introduced.
This new prevention method
does not come cheap and banks are spending
millions changing from the old magnetic
stripe cards to the new generation microchip
cards. It is estimated that the conversion
process in South Africa will entail issuing
new cards to 16-million users, upgrading
9000 ATM’s throughout the country, upgrading
130 000 point-of-sale terminals and upgrades
on back-end processing systems to handle
the new technology. This will come at
a price tag of between R 1,5bn and R 2bn
extended over a period off 10 years. Converting
a top of the range ATM can cost as much
as R 30 000.00. This technology will,
however, require the customer to pin in
a code every time they use the credit
This is safer due to the fact that
merchants or cashiers will no longer have
to verify signatures.
Studies in Europe have
shown that signature based products are
more susceptible to those that are PIN
based. One advantage of smart card technology
is that a credit card will be able to
hold a considerable amount of information.
This will ensure that even merchants in
rural areas will be able to accept payments
without telephonic access to a bank. Some
of the major banks have started issuing
the new cards to their employees for internal
trials and to certain clients.