November 04, 2010

Credit Card Scam

Dear Consumer Ed:

I received a call from someone claiming to be from the fraud department of my credit card company.  They already had my name, address, and credit card number, so I assumed the call was legitimate.  They told me my card had been flagged for an unusual purchase pattern and asked me to give them the 3-digit security code on the back of my card to verify that I was in possession of my card.  I went ahead and gave them the code; now I’m questioning whether that caller was actually scamming me.  What do you think?

Consumer Ed says:

It’s certainly possible.  A check with three of the primary credit card companies reveals that not only are there scams that use this technique, they’re not new.  The security codes that appear on credit cards (3 digits on the back near the magnetic strip for Visa and MasterCard, 4 digits on the front of the card near the last 5 digits of the number for American Express) are enhanced security measures adopted to protect not only consumers, but the issuers of the cards; merchants cannot process online or telephone transactions without these codes.  The purpose of the scam is to get that 3-4 digit security number, so that the scammer can use the account.

You should know that neither Visa nor MasterCard will ever call to ask a customer for their security codes or to verify possession of a credit card, because these companies don’t actually issue their own cards--other financial institutions (banks, credit unions, etc.) do.  Since only the issuer of the card would be initiating any security-related calls, if you’re contacted by a caller claiming to be from MasterCard or Visa, rather than the bank or other institution that issued the card to you, you shouldn’t trust that the caller is who s/he claims to be.  Companies like American Express that issue their own cards do sometimes “flag” their customers’ accounts for “unusual” activity (e.g., they notice an especially large purchase, or a charge made in a town or country that is not near your home); when this happens, your card may be blocked or suspended until the company can confirm your identity.

However, it’s never a good idea to give out your security codes or any other information that could identify and/or give access to your account over the telephone, unless you have initiated the contact, or have been able to independently verify that the caller is who s/he claims to be.  The best way to do this for any credit card is to call the toll-free telephone number on the back of the card, and once you’ve established that you’re actually speaking with a representative of the issuer, verify whether the contact in the earlier call to you was legitimate.

If you’ve already given out sensitive information without first taking any of the aforementioned precautions, or if you suspect your account has been compromised (e.g., you start seeing strange entries on your credit report, or purchases you didn’t make are showing up on your credit card statements), there are still things that you can do.  First, contact the credit card issuer as soon as possible.  The good news is that credit cards are insured and protect you against such scams, as long as you are vigilant in spotting and reporting the unauthorized use of your card.  The Fair Credit Billing Act limits your liability for unauthorized charges to $50.  (If fraudulent charges were made while the card was still in your possession, there is no liability fee.)  You must report the theft of your credit card or card number, however, as soon as possible after you discover the suspect transaction(s).  Be sure to have the issuer change your card number, and monitor your statements to make certain no additional fraudulent charges occurred.  Remember, it may not always be convenient to take these extra steps, but it’s always better to be safe than sorry when it comes to protecting your sensitive financial information.

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