Definition: What is Credit Card Fraud Detection?
Credit card fraud detection refers to the various methods used by credit card providers and users to prevent, identify, and manage credit card fraud. These systems are typically digital and utilize automatic checks, such as the source location of purchases.
In recent years, artificial intelligence has been incorporated into credit card fraud prevention, tracking spending habits and behaviors to identify unusual transactions. Both providers and credit card users have an obligation to monitor transactions to detect fraud.
Definition: What is Consumer Credit Insurance (CCI)?
Consumer credit insurance, known as CCI, provides an additional layer of protection for credit card users. This supplemental insurance policy protects against monetary losses from fraudulent purchases and identity fraud.
Credit card companies do not require CCI when taking out a card, so you should evaluate if the expense makes sense for your situation. For example, if you’ve already been a victim of identity fraud, CCI might provide peace of mind and extra assurance.
Processes: How Does Credit Card Pre-Authorization Work?
Credit card pre-authorization is a temporary hold placed on your credit card by merchants to ensure you have sufficient credit for the transaction. For instance, you may notice a $1 pending charge when filling your car with gas, which is a pre-authorization charge.
Pre-authorization charges do not clear your account but instead serve as a pending transaction until the full amount clears. Fraud detection systems aim to catch unusual and suspicious pre-authorization charges before the transaction is posted to your account.
Application: Understanding How to Use a Digital Wallet
A digital wallet is a type of virtual payment linked to your credit card. Instead of swiping your physical card, you can use your digital wallet and "tap" the payment. Not all credit card providers offer this feature.
Beyond convenience, digital wallets can aid in credit card fraud prevention. Most wallets have encryption and authentication requirements that make it difficult for hackers to breach.
Additionally, digital wallets can help safeguard against losing a physical card. While a card can easily fall out of a purse or wallet, it's much more difficult to lose a phone. Many phones also have tracking features and locks if they get lost.
Moreover, scammers can access your credit card numbers through devices attached to payment modules. Swiping your card might put you at greater risk for fraudulent credit card transactions.
Strategy: Keeping an Eye on Transactions
Preventing identity theft and fraudulent purchases relies on closely monitoring transactions. It's important to know the difference between posted and pending items.
Pending items are transactions that have been initiated but are waiting for the fund transfer. Pre-authorizations appear in your pending transactions. Posted transactions are those that have completed the fund transfer.
For example, if you go out to eat at a restaurant and your bill is $25 with a $5 tip, the server will usually swipe your card before you leave the tip, resulting in a pending transaction of $25. Afterward, the server will enter the tip, and the payment processor will adjust your pending transaction from $25 to $30 and post the transaction.
Proper fraud prevention requires consistently reviewing your pending and posted transactions for any signs of credit card fraud. If a pending transaction doesn't reflect the correct amount, wait until the transaction posts, as the merchant might make an adjustment.
Insights: How is Credit Card Fraud Detected?
Credit card fraud is detected with the help of artificial intelligence and consistent monitoring. Credit card networks and providers use artificial intelligence to monitor transactions and compare them to historical data.
For example, if your credit card details are used to make a purchase in Alabama but you reside in Michigan, your provider might flag the transaction. Additionally, you should review each credit card statement and set up alerts when your card is used.
Security: Credit Card Fraud Detection Security Features
Credit card fraud detection systems are designed to alert you promptly if there are any suspicious charges. For cardholders, this might come in the form of push notifications and texts from your provider.
Remember, if you get a text to confirm a charge, verify it through your app. Don’t click on any suspicious links or re-enter your card number. Merchants are alerted of fraud by the user and through their artificial intelligence systems.
Action: What to Do If You Think Your Card Has Been Compromised
Digital apps make it easy to lock, block, or freeze your card at a moment’s notice. If you notice anything unusual, freeze your card right away through the app or by calling a representative to block any other charges. This is also true if you lose your credit card.
If you notice a posted transaction that you don’t recognize, you will need to dispute the credit card transaction. If you believe the charge is fraud, alert your credit card provider immediately. If the transaction is from a credible merchant but for the wrong amount, you can submit a dispute through the app or by calling a representative.
Protection: How to Keep Your Credit Card Safe from Scammers
The fraud rate has been increasing over the past few years, making credit card fraud prevention extremely important. Know where your credit card is at all times and promptly alert your provider of any suspicious or unusual activity. Keeping your credit card safe relies on taking swift action.
In Summary
Credit card fraud occurs when an unauthorized third party gains access to your credit card numbers.
Credit card fraud detection and prevention is conducted with the help of artificial intelligence.
Make it a priority to consistently review your credit card statements and transactions for fraudulent purchases.
