June 13, 2014

Credit Card Fraud Statistics: Why You Should Worry

Credit card fraud can mean a wallet stolen from a gym locker and $2,000 in electronics charged to your account before you're out of the shower. Or it can mean 40 million credit card numbers stolen from the databases of the aptly named retailer Target.

All kinds of credit card breaches can do major damage — by harming cardholders’ credit histories, necessitating expensive investigations, and costing billions of dollars a year to the various parties involved. Fortunately, there’s a lot we can do, as individuals using the cards and as a society, to reduce these threats.

Just how bad is it?

In 2012 alone, institutions involved in providing credit, debit, and prepaid cards, including banks that issue the cards and merchants who accept them, lost $11.27 billion, according to payment industry newsletter the Nilson Report. That added up to 5.22 cents for every $100 in total volume processed.

Card issuers lost 63 percent of that money, while merchants and acquirers — the banks that work with the merchants to handle credit payments — took the rest of the hit. Card issuers are generally responsible for the loss on point-of-sale payments, while merchants and acquirers are left holding the bag for online, call center, and mail order transactions.

The American Bankers Association notes that debit cards are by far the largest source of fraud against bank deposit accounts. Of the $1.77 billion in losses to bank accounts in 2012, debit card fraud made up 54 percent, compared with 37 percent for check fraud and 9 percent for online banking and electronic transactions.

According to the Federal Consumer Sentinel Network, 13 percent of identity theft complaints are related to credit card fraud.

Related: Identity Theft Statistics

Are we concerned enough?

A CreditDonkey survey found that more than a third of respondents have been victims of credit card fraud, while 53 percent are worried that it could happen to them. Interestingly, CreditDonkey also found that women are significantly more likely to worry — 57.6 percent of them expressed concern, compared with 48.2 percent of men.

The CreditDonkey survey also revealed that credit card companies aren’t super accurate in gauging whether a particular purchase should raise alarms: 63 percent of respondents said they’ve been called about a questionable charge, but it was a real issue only 28.5 percent of the time. In most cases, the credit card companies handle fraud fairly well — more than 75 percent of issues were resolved within a week, and 34.9 percent of them were handled in 24 hours or less.

What about debit cards?

Legal protections for purchases on credit cards and debit cards are different. Under federal law, unauthorized credit card charges can’t cost the cardholder more than $50, and customers can withhold payment of the challenged amount while it gets investigated. For debit cards, though, the $50 cap applies only if you report the card lost or stolen within two days. After that it rises to $500, and if you wait 60 days, you could be forced to pay for all the fraudulent charges. Since the money from a debit card comes directly out of your bank account, fraudulent charges can also mean a temporarily empty account and the possibility of bounced checks.

Will the situation improve?

One interesting finding from the Nilson Report was that 47.3 percent of global fraud losses came from the U.S., even though the country represents only 23.5 percent of total volume. That’s partly because an unusually low percentage of U.S. transactions are cash withdrawals, which are less likely to be a source of fraud, but it also reflects the way our cards are different than those used in many other countries. U.S. credit cards typically use a magnetic strip, whereas many other countries have less-vulnerable electronic chips. U.S. credit card companies and merchants are in the process of switching over to the safer system, with much of the transition set to be completed by October 2015.

Other helpful resources:

More from CreditDonkey:

Have you ever been a victim of credit card fraud?

Survey: Credit Card Fraud Statistics

Identity Theft Statistics

Infographics: Credit Card Dispute Process

Dispute Credit Card Charge

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