Moneywise24 Personal Finance

As I was watching the news this morning, I saw a report about a large number of credit cards, of which the data had been stolen in spain, and how this impacted many cardholer, who had made purchases in Spain. Being a specialist within the industry myself, I could not resist to write an further article on credit card data theft, and how you can deal with it as a credit card holder. This article is based on Visa and MasterCard issued credit cards only.

Each credit card transaction follows a strict procedure and a number of steps. As soon as a cardholder walks into a store, hotel, or car rental company, and wants to purchase an item or service, the credit card is usually swiped at the credit card terminal. The data on the credit card is read by the terminal, and then sent to the company’s bank, the so-called acquiring bank. The acquiring bank will receive the data, and the request for the transaction, and it will check with the issuing bank (the bank that issued the credit card, or the cardholder’s bank) whether there is enough credit availabe on that card, and whether the transaction is allowed. If the result is positive, the issuer will give the green light to the acquiring bank, which is passed on to the terminal in order to complete the transaction. Various methods exist today for completing a transaction, from the classic signature-based transactions to the more secure PIN & Chip.

In this particular case, fraudsters had stolen the credit card data directly from the acquiring bank, so there is nothing the cardholder could have done in order to prevent this from happening. Some credit card issuers have already started to block impacted cards. Nevertheless, there are a few things I believe each and every cardholder should be aware of in similair events.

Block your card immediately

If you are in Spain, or were in Spain recently, you may want to check with your issuing bank whether or not your credit card may have been impacted. If so, you should block your card immediately. Issuing banks are usually able to send replacement cards worldwide. Each issuer has a 24/7 hotline for such events, and you should call a service representative  in order to discuss with them the further proceedings.

Do not panic

I know it might sound weird, but many people do panic if they suspect credit card fraud, or if fraud had already occured; many people already start imagining losing thousands of Dollars at their own expense, even before anything has really happened. The first fact, however, is that once a credit card is blocked, the cardholder usually has no liability as to any losses occuring after having blocked the card. Secondly, if fraud occurs before the card has been blocked, the maximum liability to the cardholder is usually limited to a specific amount. Should this not be applicable in your case, perhaps you may want to think of changing your credit card issuer.

Transaction are regulated

What many people forget, is that the entire transaction process is regulated up to the smallest detail. These regulations describe the obligations and the rights of each party involved in the credit card transaction, from the cardholder to the merchant, from the issuer to the acquirer, and/or any other involved third party. If a fraudulent transaction occurs, regulations allow cardholders and issuers to initiate a dispute. A dispute is much like an investigation, in which the correctness of the entire transaction process is investigated. Should a party not have lived to its obligations, he may be required to stand in for the fraudulent transaction amount. In many cases, errors in the transaction process occur at the side of the merchant, which let fraudulent transactions go through. In this case, merchant will often be liable and need to stand in for the amount.

Tipps for merchants

If you are a merchant yourself, there are a number of things you can do in order to limit the number of fraudulent transactions:

1. Always use a POS terminal if available, and swipe the card. If not available, make a real imprint of the card using an imprint device, not just a copy. Copies will often not be valid as proof in a dispute case, that the credit card was physically present.
2. If a terminal is not available, always call your acquirer to verify the limit of the cardholder.
3. Ask the cardholder for an ID, and check the details with that on the credit card. Are the name and date of birth identical? Has the card not yet expired? Does the name on the credit card correspond with the gender of the cardholder?
4. Compare the cardnumber on the receipt with the imprinted cardnumber on the credit card. Are they identical?
5. Verify the signature on the back of the credit card with the cardholder’s signature on the receipt. Are they identical?

In order to get in-depth advice, you should definitely contact your issuing or acquring bank. They are able to tell you more about their fees, things to watch out for, and how they deal with credit card fraud; this might differ from bank to bank.