Credit card theft is a growing concern for merchants, especially as more transactions shift online. Criminals use various tactics, such as phishing, skimming, and hacking, to steal credit card information, which they can then use to make unauthorized purchases. For merchants, this can lead to significant financial losses through chargebacks. That’s why understanding and preventing credit card theft is essential to protecting both a business’s bottom line and its reputation.
What Is Credit Card Theft?
Credit card theft is when someone gets a person’s credit card information and uses it to buy goods or withdraw cash from an ATM. Theft of this kind can happen in many ways, from the card being stolen directly to more complex methods like skimming, cloning, or online scams.
Criminals can use stolen card information to make false purchases by either making a copy of the card or taking advantage of card-not-present (CNP) situations, in which the card number is used to make purchases without having the card in hand. This type of theft can immensely hurt the cardholder, but at the same time, it can damage merchants, who often have to pay for fraudulent purchases through chargebacks and lost sales.
What Is Felony-Level Credit Card Theft?
Felony-level credit card theft typically occurs when the stolen card is used to commit fraud involving large sums of money or when the theft is part of a larger scheme. While the threshold varies by state, in many cases, fraud involving amounts above a specific value, such as $500 to $1,000, can elevate the charge from a misdemeanor to a felony. Additionally, factors like the number of stolen cards, prior criminal history, or whether the theft is part of an organized crime operation can also lead to felony charges.
What Happens When You File a Police Report for Credit Card Theft?
When you file a police report for credit card theft, law enforcement will typically start an investigation to gather details about the theft. They may request information such as the time and place the card was stolen any unauthorized charges, and the steps you’ve already taken (for example, reporting the theft to your bank or card issuer).
The police will use this information to trace the theft and, in some cases, collaborate with financial institutions and retailers where the fraud occurred. This report is essential for disputing fraudulent charges with your card issuer, and it can also be used to help clear your name if you’re accused of not paying for purchases you didn’t make.
How Long Do You Go to Jail for Credit Card Theft?
The jail time for credit card theft varies depending on whether the crime is charged as a misdemeanor or a felony. Misdemeanor offenses may result in up to one year in jail, while felony credit card theft can lead to much harsher penalties, including several years in prison – often between 2 to 5 years or more, depending on the amount stolen and the specific laws of the state. Repeated offenses or involvement in organized fraud rings can result in even longer sentences.
Do Police Investigate Credit Card Theft Under 500 Dollars?
Police will investigate thefts involving amounts under $500, though the level of investigation can depend on the circumstances and local resources. In cases of small-scale theft, the priority may be lower than for larger fraud cases, but filing a report is still important for documentation and to dispute the charges with your bank or card issuer. If the theft is part of a broader pattern of fraud, or if other serious crimes are involved, the investigation may become more intensive.
Common Types of Credit Card Theft
This type of theft comes in different forms, and for merchants to protect their businesses, it’s essential to understand the main methods used by criminals.
Card-Not-Present (CNP) Fraud is a type of fraud that happens during online or phone transactions, where the card isn’t physically present. CNP fraud has surged due to the rise in e-commerce, which has become a prime target for cybercriminals. Since there’s no physical interaction with the card, merchants are particularly vulnerable and bear the responsibility of verifying the legitimacy of the transaction.
Skimming credit cards involves criminals using hidden devices to capture card data during physical transactions, often at compromised ATMs or point-of-sale systems. Once obtained, the card data is cloned onto a new card and used for fraudulent purchases. Merchants using outdated magnetic stripe readers are especially vulnerable to this type of theft.
Most Famous Cases of Credit Card Theft
Some of the most famous credit card theft cases involve massive data breaches, organized crime, and sophisticated cyberattacks that affected millions of people and businesses globally. These examples were done on a massive scale, and show the sophistication of credit card theft operations.
TJX Data Breach (2007)
The TJX Companies (which owns retailers like T.J. Maxx and Marshalls) suffered one of the largest data breaches in history, where hackers stole details of over 45 million credit and debit cards. This breach involved sophisticated hacking methods, and the stolen information was used to make fraudulent purchases across the US and other countries. The incident led to tighter cybersecurity regulations for retailers.
Heartland Payment Systems Breach (2009)
In one of the largest breaches targeting a payment processor, hackers infiltrated Heartland Payment Systems, exposing millions of credit card details. The breach, which affected over 100 million cards, was traced back to a sophisticated hacker, Albert Gonzalez, who was also linked to the TJX breach. Gonzalez was sentenced to 20 years in prison for his role in orchestrating these attacks.
Operation Get Rich or Die Tryin’ (2011)
This case involved an international ring of cybercriminals who used stolen credit card information to purchase luxury goods, withdraw cash, and make fraudulent online purchases. The group, which operated across multiple countries, caused millions of dollars in losses. Authorities eventually cracked down on the operation, arresting members from countries like the US, Russia, and Latvia.
Target Data Breach (2013)
During the holiday shopping season in 2013, hackers accessed Target’s point-of-sale systems, compromising the credit card information of over 40 million customers. Hackers installed malware on Target’s system, leading to one of the largest retail data breaches at the time. The breach cost Target hundreds of millions in settlements and upgrades to its security systems.
Home Depot Data Breach (2014)
Similar to the Target breach, hackers compromised Home Depot’s point-of-sale systems and stole over 56 million credit and debit card numbers. The breach, one of the largest in retail history, was believed to have been executed using custom malware. Home Depot spent over $179 million to resolve the breach, including settlements and improvements to its security infrastructure.
How to Prevent Credit Card Theft Online
As you can see, the risk of this type of theft can be great, and it can have severe consequences, both for customers and merchants. However, there are certain steps that merchants can take to protect their customers’ sensitive information. Here are some key strategies to minimize risks:
- Merchants should implement secure payment gateways and other credit card processing solutions that comply with the Payment Card Industry Data Security Standard (PCI DSS). Using services with built-in encryption ensures that credit card data is transmitted securely between the customer and the merchant.
- For both merchants and consumers, enabling multi-factor authentication (MFA) adds an extra layer of security. This requires a second form of verification, such as a text message or app-based confirmation.
- AVS and CVV are tools that help authenticate the legitimacy of a transaction. AVS matches the billing address provided by the cardholder to the one on file with the card issuer, while CVV requires the user to input a unique code on the back of the card that is not stored in databases after the transaction.
- Tokenization replaces sensitive credit card information with a random token during transactions. On the other hand, encryption converts data into an unreadable format that can only be deciphered with the appropriate decryption key so both these preventions are important.
- Employees and customers are often the weakest link in cybersecurity. Merchants should provide regular training to employees on how to spot phishing attacks and other cyber threats. Similarly, customers should be informed about the importance of using secure websites and avoiding public Wi-Fi.
- Finally, implementing automated fraud detection systems that monitor transactions in real-time can help identify suspicious activity. These tools flag transactions that appear unusual based on location, purchase amount, or frequency, which allows businesses to take action quickly.
PCI Security Standards Council or fraud prevention guides from leading security organizations can provide further insights into various prevention techniques.
The Impact of Credit Card Fraud on Merchants
The impact of this type of theft can be felt by merchants primarily through financial losses incurred from chargebacks, which can be substantial and ongoing. When fraudulent transactions happen, a merchant can lose sales, while facing additional fees and potential loss of goods on top of it. It can damage a business’s reputation, and finally, merchants may face penalties from credit card processing companies for failing security standards or for maintaining high chargeback rates.
Prioritize Security for Your Business With Our Credit Card Processing Company
Credit card theft remains an extensive threat, with global losses projected to reach $397.4 billion over the next decade. The increasing sophistication of cybercriminals has made it imperative for merchants to prioritize security measures to protect their businesses and customers. With 65% of cardholders experiencing fraud at least once, the risks are too significant to ignore.
At Merchant Chimp, we understand the challenges merchants face in safeguarding their transactions. Our secure and compliant credit card processing services are designed to help you minimize risks and build customer trust. Contact us today to learn all about merchant services, credit card processing, and our discount program.
