How to protect your credit cards from the fraudsters

The latest plastic card fraud figures are enough to make you abandon convenience and go back to paying for goods and services by cheque and cash where possible. But there are ways of protecting your cards.

Credit and debit card fraud increased by 53% in the year to May 2000 to reach total losses of £226m, according to figures from the Association for Payment Clearing Services (Apacs).

The major growth area is in counterfeit cards and in fraud on mail order, telephone or internet transac tions where the card is not physically presented to the retailer. Counterfeit fraud grew by 104% during the year to cost £68m while card-not-present fraud grew by 146%, costing £40m.

"The most worrying counterfeit method, 'skimming', involves copying genuine data from the magnetic strip on one card, without the cardholder's knowledge, and putting it on to another card," says Melanie Hubbard of Card Watch, the banking industry's campaign launched in 1992 by Apacs to reduce plastic card theft and fraud. "This can happen where corrupt staff have access to customer cards and the information is usually then passed higher up the ladder of organised crime."

Andrew Brown of the National Criminal Intelligence Service (NCIS) says: "Organised criminals may use sophisticated methods of card crime as a comparatively low-risk way of raising revenue that later funds other more violent crime. The penalties for card crime are often substantially lower than, for example, those where revenue is raised directly through the sale of drugs."

A key way to protect your cards from skimming is to keep a close eye on how they are being handled and not to let them out of your sight when making a transaction at a retail outlet, hotel or restaurant.

An unscrupulous shop assistant, for example, can quickly and easily record all the data on your card using a simple magnetic strip reader costing around £50. Once put through a computer, the details can then be copied on to a blank card using another cheap and readily available gizmo for use by fraudsters.

Geoff Wortley, fraud investigator for the UK's largest credit card provider Barclaycard, says alarm bells should ring and you should contact your card provider immediately if you spot a retailer swiping your card for a second time into a separate machine at the point of sale.

And to play safe in restaurants, don't let the waiter take your card away but get up and pay at the cash desk yourself.

Further protection is also in the pipeline from card providers. The banking industry is gradually replacing existing cards with so-called 'smart' cards containing computer chips full of infor mation which is, so far, impossible to copy and transfer to forged cards. Apacs says that by the end of 2002 most of the bank-owned infrastructure will have been upgraded in the UK and smart cards will be the norm.

Banks and retailers are also considering introducing a new verification system - already used in France - where consumers will type their special four-digit personal identification number (pin) into keypads at the point of sale, either instead of or as well as signing receipts. Fraudsters would then only be able to use stolen or forged cards if they had also acquired a cardholder's secret pin, something which should be memorised and never written down or revealed to anyone else, even bank personnel or the police. This also applies, of course, to cash machine pins.

The main cause of card-not-present fraud is where criminals somehow acquire your card details (the number and expiry date) and use them to buy goods and services via mail order, by phone or over the internet.

Contrary to the fears of many consumers, internet transactions account for a very small percentage of the rise in fraud losses. "Most of it is to do with mail order where you can carry out an increasing number of quite high value transactions without you or your card being present," Mr Wortley says.

"In fact, there's nothing more technologically sinister about card fraud over the internet than there is about card fraud via mail order or phone," says Ms Hubbard.

Again the credit card industry is working with retailers on new fraud detection and prevention measures. By April next year, retailers will have access to two new ways of checking that the online or phone purchaser is the genuine cardholder.

First, they will ask users to give three security digits which are printed only on the signature strip at the back of a card. So, unlike the main card number which can be found out through other means such as via computer programmes which appear on certain internet websites, you will only have access to these security digits if you have physically got the card.

Second, there will for the first time be a system in place which will allow retailers to check whether the address they are given to send goods out to is the same address as that of the cardholder.

In the mean time, self-protection is the name of the game. The main security guidelines are:

• Keep a record of all mail order, phone and internet transactions and check them against your card statements. Query any unfamiliar transactions immediately with your card issuer.

• Guard your cards as carefully as you would cash. Don't think of them simply as pieces of plastic that can be replaced.

• Use cards discreetly at cash machines. Beware of "shoulder surfers", who are out to observe your pin number and card details.

• Don't give your card information to unsolicited callers. Only give details to merchants if you called them.