Plastic fantastic transactions will no longer be signed off on as a proof of identity, but will require a PIN number to authorise. In the news today, VISA has announced it will phase out signature payments by April 1, 2013. We look at this decision, and address credit card fraud, and the ways in which your credit rating can be compromised because of it.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

It was reported by the Sydney Morning Herald today ‘Signing off: credit card giant ditches pens for PINS’, the movement to PIN and card-chip only transactions has been prompted by the need for increased security on credit cards.

The move is expected to reduce signature-based credit card fraud which has been on the rise over the last two years – from 38 out of 100,000 transactions in 2010 to 52 out of 100,000 transactions in 2011.

Visa spokeswoman Judy Shaw said the change was part of a comprehensive security plan to phase out the use of signatures in favour of PIN and card chips, which are already widely used by customers in stores and ATMs.

“At the moment we’re working with financial institutions and other card schemes to discuss a uniform approach to chip and PIN use across the industry,” she told the Sydney Morning Herald.

“It will include a communication program so that cardholders are aware of their PINs and know how to use them,” she said.

But rival American Express will still allow customers to confirm purchases with signatures although cards are issued with chips.

Garry Duursma, Vice President at eftpos services company Tyro, told SMH abandoning signatures will reduce the incidence of card-based fraud, but warned it could potentially open a new risk if the restaurant’s eftpos system isn’t properly integrated with the restaurant’s bank account system.

This demonstrates that credit cards are not always the safest way to pay.

In instances of credit card fraud, it is not always as simple as reimbursing the victim for unauthorised transactions.

Whenever a criminal is able to access a person’s credit card details, or any of their personal information – there is a chance the victim can have not only unauthorised transactions issued in their name, but possibly new credit taken out as well.

Credit card fraud can take on a myriad of forms – but it can be quite sophisticated, and in those instances criminals may gain access to additional forms of credit – new cards, loans even mortgages.

If the victim is unaware of the fraud right away and their credit file ends up with defaults – they can be blacklisted from obtaining credit for 5 years. That one instance of credit card fraud can end up financially crippling the victim. They can’t borrow for anything – they can’t even take out a mobile phone plan.

Here is one way someone may be a victim of identity theft through their credit card:

In October last year, New York Police made major arrests of 111 people involved in five separate identity theft rings involving counterparts in China, Europe and the Middle East.

The victims had credit cards skimmed at many New York shops, restaurants and even banks dating back to 2010.

Then details on the credit cards where on-sold and duplicate cards were made that were then used to purchase and re-sell high-end goods such as electrical items.

The Herald Sun reported at the time that authorities had calculated more than $US13 million ($13.4 million) was spent by the fraudsters on iPads, iPhones, computers, watches and fancy handbags from Gucci and Louis Vuitton.

The ACCC’s SCAMWatch says a credit card scam can come in many forms. For example, scammers may use spyware or some other scam to obtain their victim’s credit card details. A scammer might steal or trick someone into telling them their security code (the three or four digit code on the card) and then make purchases over the internet or the telephone. If they know their PIN, they could also get cash advances from an ATM using a ‘cloned’ credit card (where the victim’s details have been copied onto the magnetic strip of another card).

Of course, there is also a danger of someone using a credit card if it has been physically lost or stolen.

Many types of fraud can also directly threaten the victim’s credit rating – such as account takeovers by fraudsters, and instances where criminals take out new credit in the victim’s name. It doesn’t even have to be for a large sum in some cases to be a massive blow to the victim’s ability to obtain credit. I have seen people get refused a home loan due to a default for as little as $100.

Here are the ACCC’s signs to be aware of in relation to credit card fraud:

Warning signs

There are transactions listed in your credit card statement that you don’t understand.
You have given your credit card details to someone you now suspect may not be trustworthy (perhaps over the internet).
You have lost your card.
You have kept your security information (eg your PIN or the access code on your card) written down somewhere near your card and you find that it is missing

Some preventative steps against credit card fraud

– Always check the ATM or EFTPOS terminal before using it. Look out for any suspicious boxes that could be skimming devices. If in doubt – don’t use it.
– Always cover your PIN when making transactions.
– Never let anyone walk out of sight with your credit card.
– Consider paying cash on nights out and leave the cards where they are safe.
– Always check your card statements and report any unauthorised transactions – however small – to the bank immediately. Sometimes ‘test’ withdrawals are made by criminals to see if the unauthorised transaction goes undetected, before more significant amounts are stolen.
– Regularly keep up to date with what is on your credit file – which would reveal if defaults have been issued without your knowledge. People can check their credit file by obtaining a written report for free every 12 months, from each of Australia’s credit reporting agencies. But if they are suspicious of or vulnerable to fraud they can also for a fee obtain a credit report more often.
– If there are any discrepancies of credit or adverse listings that should not be there they should act immediately to notify Police. This crime is not very widely reported. But it is only through people reporting it that any real statistics get collated. Likewise, if people want to try and repair their credit rating, the first thing I tell them is to make sure they have a Police report.

For more information on restoring a credit rating following credit card fraud or any form of identity theft, contact MyCRA Credit Repairs on 1300 667 218 www.mycra.com.au.

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