April 23, 2008 | posted by Pam Atherton in Banking, Credit Cards |

Fraudulent use of debit and credit cards, via phone and online transactions, cost credit card companies and retailers an eye watering £290.5m in 2007.

But an undercover study conducted by BBC journalists shows that the figure would be nearer to £500m, if failed attempts by fraudsters to purchase goods and services online were taken into account.

Getting hold of someone’s credit card details is pretty easy. There are websites selling this type of information and machines which can clone  cards with just one swipe, not to mention the interception of credit and debit cards in the post.

Having had my Goldfish credit card compromised three times in the space of one year, I can testify to how prevalent this particular crime is. All the fraudulent transactions were for ‘card not present’ purchases - many of which were for hotel bookings and train tickets where it would be hard to track down the end user.

According to the Association of Payment Clearing Services (APACS), there was an overall rise in the fraudulent use of UK credit and debit cards in 2007 of 25 per cent, with losses totalling £535m.

While £290.5m of this was ‘card not present’ fraud, representing a 37 per cent rise on the previous year, the increase in online card fraud is less than the growth of online shopping.

In fact,  the bulk card fraud is due to stolen and counterfeit cards used abroad.

It still makes you wonder how the credit card companies and the banks manage to make any money, given the ease and growing nature of this crime.

So what are the banks and card issuers doing to fight back?  

APACs spokeswoman Sandra Quinn says: “We have a joint payment industry and police intelligence unit and we share data on points of compromise where a large number of goods have been delivered to the same  address. But in an environment where the police need to prioritise their resources, cyber crime is not top priority.”

So it looks like there is no escaping the need for cardholders to scrutinise their card statements ever more carefully and to think twice before using cards in non-mainstream outlets. 

According to Sandra Quinn, 25 per cent of the top retailers have superior security systems which makes them less vulnerable to fraud by staff.

Quinn also suggests that shoppers use one card for online purchases, another for overseas usage and a third card for all other transactions. “That way, you can spot fraudulent activity and where it took  much more quickly,” she says.