Credit Card Fraud Detection: How to Protect Your Finances in India

Credit cards have become a staple in our financial lives with benefits from payment flexibility and cash withdrawal to rewards and travel benefits. But did you know that financial fraud in India has been on the rise, with credit card fraud being one of the most prevalent?

According to a report by the Reserve Bank of India, during the fiscal year ending March 2024, cyber fraud in India grew by 14.57 billion rupees ($175 million) in a year. This makes it crucial for cardholders to be aware of the risks and protective measures available.

In this guide, we aim to help you get a better understanding of what credit card fraud is, the types of credit card fraud, and some of the most effective credit card fraud detection techniques. Let’s read.

What Is Credit Card Fraud?

Credit card fraud is when someone hacks your credit card information like the passcode, card number, etc, and uses these details to make purchases or transactions without your consent. Often, physical theft of the card can lead to credit card fraud.

Several techniques and technologies can also be used to hack credit cards; criminals can digitally acquire card details required to make a transaction. An individual’s personal information and card details may be compromised as the result of a data breach or cyberattack. Therefore, knowledge about credit card fraud detection is critical for all credit card users.

Types of Credit Card Fraud

Credit card frauds fall under two main categories – card-present fraud and card-not-present fraud. Let’s read about both in detail.

1. Card-Present Fraud

   This is a typical case of stealing where someone has your credit card and decides to use it at a physical outlet. As the name says, the card is present, which means that the card is either stolen or duplicated.

   1. Lost or Stolen Cards

      This is a theft where a criminal gets hold of the physical card and uses it until the card is either frozen or has hit the credit limit. In this case, the card may have been stolen or lost. In case you decide to stop using a credit card, make sure to cut or cancel it before discarding it.

   2. Credit Card Application Fraud

      This type of credit card fraud is a growing concern. It is the result of your personal information or documents being stolen to get a credit card under your name. Moreover, this credit card fraud may go unnoticed until you apply for credit or check your credit report. So, always make sure to shred the copies of your IDs and other necessary documents before discarding them.

   3. Hacking

      This is the type of stealing where hackers use advanced technology and methods to hack your credit card information or the bank database. This may also involve data leaks from websites or payment gateways. So, always be careful when sharing your card details on the web.

2. L Card-Not-Present (CNP) Fraud

   In a card-not-present fraud, the criminal uses card details like card number, CVV, and the account holder’s name to make transactions online.

   1. Credit Card Skimming

      In this method of stealing, the fraudster uses a skimmer at the payment point to read or record details like card numbers and PINs. This is quite common at frequented payment points like ATMs and petrol stations. This type of hacking is extremely sophisticated and is very hard to notice.

   2. Phishing

      This is a form of credit card fraud where hackers send emails or texts with links to fraudulent websites to get cardholders to share their personal details. The fraudsters use look-alike websites to coax users into sharing their information.

   3. Account Takeover

      In an account takeover, a fraudster may pretend to be the legitimate cardholder and change information like phone number and password to get illegal access to the account. This will allow them to authenticate transactions through a simple OTP or one-time password. In India, with the increasing use of digital banking, account takeover frauds are becoming more common.

What Is Credit Card Fraud Detection?

Credit card fraud detection is the process of identifying fraud before it causes much harm to you both financially and emotionally. It includes the use of tools, methods, practices, and policies by financial organisations to combat this problem.

With the advancements in technology, we are witnessing a wide use of artificial intelligence (AI) and machine learning technology in the credit card fraud detection process. Methods like predictive analysis and AI-based decision-making can be a huge aid through the medium of fraud alerts and remediation activities.

Credit Card Fraud Detection Methods

Several credit card fraud detection methods may be employed to detect credit card fraud. For example, a cardholder can safeguard themselves with the use of transaction monitoring, which is a basic exercise of keeping track of daily transactions to be able to notice any unwanted activity and act timely.

Similarly, a credit card company may use behavioural analytics to understand your spending pattern or spending behaviour. They may use AI to identify large or suspicious transactions and alert you immediately. Rule-based fraud detection may be a sub-category where the actual cardholder is informed about a transaction higher than the set limit.

How to Prevent Credit Card Fraud

Here are some steps you can take to protect yourself from credit card fraud:

• Be cautious with your card information and never note your card details as well as passwords in a place where they may be accessible to others
• Always check the authenticity of the online platform where you make a transaction
• Utilise mobile wallets since they can hold small amounts of money so that even if fraud occurs, the loss is minimal
• Do not entertain unsolicited texts or emails since it may be a phishing attack
• Monitor your charges regularly to identify fraudulent charges immediately
• Don’t get tempted by offers and deals that require you to first make a payment
• Try to use separate cards when sending money online
• Set a transaction limit on your card so the fraudster cannot make any huge purchases
• Report the loss of a card as soon as you notice that it’s missing

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Conclusion

In today’s digital age, credit card fraud is a serious concern, especially in a country like India which is in its growing phase. This is the reason it is very crucial for cardholders to have all the necessary information to safeguard themselves from such frauds. You can always come back here and read about credit card fraud detection. Stay safe, stay aware!

Frequently Asked Questions (FAQs)