How credit card fraud detection works

12 thoughts on “How credit card fraud detection works”

  1. Really interesting article Steve! I’ve had fraud on my credit card that was caught before I noticed but also a time when I caught it before the bank. It also happened on my debit card. It’s actually very common, as you laid out in the article here. When I was a credit analyst, we looked high level for suspicious charges, but usually just forwarded those accounts on to the fraud department. One additional thing I’d look for, that’s extremely rare but a HUGE hit is check kiting. This is where people use a stolen credit card to write access checks (they also can just use a stolen check from your mailbox) to write against the line of credit. They write the check to themselves, usually for far more than the credit line allows, get the cash at a bank, and disappear. I’d encourage everyone reading this article to call their credit card companies and stop getting access checks delivered to their mailbox. It’s dangerous and an an easy way for criminals to make fraudulent charges on your card. Thanks again for this Steve – very helpful!

    1. Thanks for the comment, Chris. Agreed, those checks are annoying to get and, like you mentioned, introduce a potential risk if stolen. I had never thought about that particular element of this topic. Appreciate your thoughts!

  2. Ugh — Just dealt with this a few weeks ago, and it seems like it’s happening more and more often. Used to have a credit card fraud situation every couple of years, and now it seems like it’s once or twice every year. Sigh.

    What is amazing is how the credit card companies are continually stepping up their game to find the fraudulent transactions. I travel constantly, so charge things all over the place. I charge amounts large and small, and my bills vary hugely month to month, depending on how much work travel I’m doing. This should make it hard for Chase to know when a charge isn’t legit, but they nail it every time. The fraudulent charge this last time: a $1 charge at a website hosting site, which is definitely in the range of possibility for what I would charge. It seems this was the thieves’ “test charge,” and I’m just glad Chase caught it before they went off and bought the stereo system! 🙂

  3. We’ve also had real fraud discovered by the bank, and charges of our own that were tagged as fraud by the bank, but were legit. (Didn’t realize we should tell bank we were going on vacation to another state). As you mention though, the inconvenience of having to get a new card (for the real fraud) is worth the added protection. Since our fraudulent transactions were all online so far, we have one credit card that we use for all online purchases, and nothing else. If it is used fraudulently, and the bank cancels it, it doesn’t disrupt our finances too much.

  4. I love that they are good at catching it. I hate that they always have to send me new credit cards and I have to change the number on things (lazy). But I agree it’s worth it. Once, I purchased $40,000 worth of airplane tickets for an event (which was certainly over my highest spend month ever of around $5000) and nothing was flagged, but then the next day, I bought $200 worth of ferry tickets and those I had to approve.

  5. I’ve never understood why America is behind the times with something like chip and pin cards (the same goes for cheques as well, as I’ve written about recently here http://insideraccountant.com/2015/08/23/when-will-cheques-finally-die-out/), especially when the US leads the way in so many other things.

    We had our cards skimmed in 2008 and it cost $15k (which our bank repaid to us), and shortly thereafter Australia began switching to chip and pin cards. The UK had this technology well before this too, so it bewilders me that the US hasn’t rolled this technology out to all cards. The same goes with contactless payments, which for some reason the US is really onot starting to ramp up now when other countries have had them for ages.

    1. Sadly, the United States – with all the technology that we have at our disposal, still suffers from using older technology. This is just one example, unfortunately.

  6. I had my credit info stolen twice, and the bank didn’t catch either. They recognized it immediately when I called to ask why I was suddenly overdrawn. There had been a deposit of 1 cent at an atm to test if they picked a legit account and when it worked, they spent over $1200 in rural NY in less than an hr. I should note I was living in Denver and had used my card to get gas that morning in Denver… Bank fail. 🙂
    The second time, was similar but the bank caught it before approving the first attempted charge. It was all refunded to my account immediately, but still a pain to deal with. Fortunately, I haven’t had any crazy ID theft to go along with it. That sounds like a nightmare and a half!

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