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Small Charge Credit Card Fraud Busted by the FTC

by on September 2, 2010

A successful and very lucrative internet scam that has been in progress for about four years now has been busted thisSmall Charge Credit Card Fraud Busted by the FTC week by the United States Federal Trade Commission.  This scam was designed by some savvy internet thieves who utilized a massive fraud network of very small charges across a large number of card holders, resulting in the theft of millions of dollars from unsuspecting consumers across the United States.  This is one of the many scams that have occurred over the last few years.  The credit card industry continues to remain vulnerable to the threat of hackers despite advanced security systems used to protect data.

The Scam

The details of the scam and the specifics of who was behind it have yet to be determined.  What authorities do know is that it has provided a very valuable and expensive lesson about the importance of secure credit card systems and protecting consumers from this type of fraud.

What happened was that the scam artists responsible for the theft found loopholes in the credit card processing systems. These loopholes in security allowed this group to set up fake companies in an effort to make money off of credit card holders. The stolen money from millions of cardholders was then moved to accounts in offshore countries to keep it under the radar.

Although the credit card processing systems were legitimate the scammers were not using this information for legitimate purposes. The sole purpose of setting up these companies was to steal confidential credit card information and then little by little charge the consumers and move this money to offshore countries.

It is still unknown how the scam artists were able to get a hold of many of the credit card numbers that were charged.  It is suggested that this information may have been obtained from the online black market where there is a setup that allows the exchange of stolen credit card information for a  price. This stolen information is then used for scams, such as this one.

Small Charges Offer Big Returns

Interestingly, this scam yielded millions of dollars in theft for the criminals behind it.  It is estimated that 94% of the cardholders involved did not contest the very small charge. Most of the cardholders involved did not notice or contest the very minimal charges on their card. These scam artists stole millions of dollars by slowly and carefully pulling a few dollars here and there until they were able to accumulate large sums of money and then move it out of the country.

This scam went on for four years successfully.  Most of the cardholders whose information was compromised may not have even noticed the bogus charges on their statements because they were in very small increments that took the form of feeds and charges that many people may just ignore when they receive their statement. Typically the credit card systems designed to detect fraud and suspicious activity do not detect small amounts of cash.  Ten dollar charges or $2 fees often go unnoticed not only by the security systems but also by the cardholders.  The small fees offered big returns for the scam artists responsible for draining people’s accounts.

Pay Attention to Fees

The convenience of credit cards is contributing to the frequency in which consumers use cards for small purchases such as a cup of coffee or the parking meter. Credit cards are accepted at most locations and consumers have fallen in love with the convenience of not having to carry cash. This convenience can be dangerous if no one is checking to make sure that security is at a maximum.

In the case of this most recent case, by  creating a scam that sneaks small amounts of cash from millions of credit cards eventually results in a great deal of money over a few years. These scammers were smart, patient and remained under the security radar of the credit card processing systems and of the unsuspecting victims of these card holders that feel victim to the theft.

Credit card holders should be aware of any and all charges that are being applied to credit cards. Regardless of how small these charges are, cardholders should check that they are legitimate to avoid being a victim of a scam.  What is worse than having a few dollars stolen is the threat of having your confidential information out there in the universe, or worse yet being sold on the black market.

Although the security around credit card and merchant accounts is becoming stronger there is always the risk that a system can fail or a very savvy hacker can find a way to obtain this information and use it.  Identify theft is on the rise and cardholders have a shared responsibility to secure confidential information and pay attention to the fees and charges associated with their credit card.

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