Nearly Half of Credit Card Fraud Happens Without the Card

Fraudulent credit card activity increased 17% in a two-year period, according to FICO data released last week.

Between January 2011 and September 2012, card-not-present (CNP) fraud soared, growing 25% to make up nearly half (47%) of all credit card fraud. CNP fraud occurs when the physical card is not used during a transaction, such as online or over-the-phone purchases.

Some good news: The fraud dollar to non-fraud dollar ratio held steady, and compromised accounts lost an average of 10% less during the time frame FICO analyzed.

While the credit card fraud incident rate jumped, debit cards fared better. The incident rate among debit cards didn’t change, and losses per compromised account dropped by 3%. Debit card fraud occurs most often at ATMs, grocery stores and gas stations, FICO said.

In a news release about the data, T.J. Horan, vice president of global fraud solutions at FICO, said CNP transactions are very convenient, but present great challenges when it comes to fighting fraud.

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“We have been evaluating massive volumes of credit and debit card data for 20 years, looking for changes in consumer buying patterns,” he said in the release, “and we have invested in innovations that quickly identify CNP fraud, without delaying legitimate purchases and unnecessarily inconveniencing consumers.”

Getting the information needed for a fraudulent transaction isn’t all that complicated: billing address, name, card number, expiration date and security code. And while constantly advancing technology helps banks and security companies ward off hackers, technology also makes it easier for crooks to steal the personal information they need to commit fraud.

While thieves and companies go back and forth in the technology battle, consumers should take time to closely review their card statements. Fraudsters often start by making small purchases to see if the rightful cardholder is paying attention. If those go through without any issues, the thief may move on to bigger purchases.

Not only is credit card fraud incredibly inconvenient for the consumer, it can harm one’s credit score, which in turn impacts their ability to qualify for loans and decent interest rates. For these reasons, consumers should prioritize monitoring their credit (and Credit.com offers a tool that allows you to check your credit scores for free) for drops in scores that can signal a problem, and check their credit reports for signs of fraud.

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