Debit Card Fraud: Types & How Banks & Consumers Can Avoid It

Debit Card Fraud

Maybe it was a charge for Popeye’s chicken. Maybe a Walmart shopping spree tipped you off. Unusual charges look different for everyone, but they can be glaring red flags to debit card fraud. If you catch fraud early enough, however, your liability may be slim to nil. Often, the inconvenience of waiting for a replacement card can be the biggest annoyance. Luckily, a few tools help you avoid debit card fraud as a consumer. Banker tools are set up to help as well.  

Debit cards allow bank and credit union account holders to draw available funds from their checking accounts to make purchases. Prepaid debit cards offer the same features for those who may not have a bank account or do not want to link it to the prepaid card, preferring to pay for it upfront and separately. 

When it comes to popularity, debit cards have begun to outpace the use of credit cards according to research published by S&P Global Market Intelligence. Considering Federal Reserve reports of 87.8 billion payments made by non-prepaid debit cards in 2021 alone alongside the report of less popular prepaid cards alone reaching $0.61 trillion, it is clear that these debit-based payment methods have become a cornerstone in how consumers prefer to spend. 

With such widespread use, scammers have found a ripe area for targeting efforts in fraud. Nilson Reports feature stats claiming that $32.34 billion was lost to fraud in 2021 around the globe, with projections of $408 billion in worldwide losses over the next decade. Luckily, becoming a victim of debit card fraud is not a foregone conclusion. 

What is debit card fraud?

Debit card fraud happens when a cardholder’s account number or pin is stolen, then used for purchases by someone other than the account holder. If the victim of the crime notices quickly, then he can report it immediately. The cardholder’s liability is often small in these cases. That timeframe for reporting the fraud, however, is crucial to both banks and consumers.  

Types of Debit Card Fraud

Debit card scammers might skim your card at a point-of-sale terminal or ATM. They could steal the physical card, or find it and use it to make purchases. Intercepted mail containing cards is one way to do this, but old unshredded cards are another entry point. 

Keeping a tight hold on your card may not necessarily prevent someone from using it to steal money, since purchases online can happen without the piece of plastic.

Additionally, fraudsters may try to steal information by posing as a bank, charity organization, governmental body, website for purchases, or any number of people to get customers to turn over their card numbers and PIN. 

Preventing Debit Card Fraud for Banks

You’d expect banks to push for safe use of the most advanced technology available, and today’s banks certainly do, using AI and biometric data in addition to end to end encryption, antivirus protection, automatic logout, and two-factor authentication. 

Machine learning and AI can create a robust algorithm if banks use it well, quickly detecting recognizable patterns in fraud such as a change in passwords and contact information, unusual buying habits, and more. Biometrics are already being used by some banks who report that voice detection has contributed to a huge reduction in fraud executed through call centers. 

Preventing Debit Card Fraud for Customers

Customers should monitor their bank accounts regularly by checking that transactions do reflect purchases they have made. Banks often alert their customers if fraudulent charges are suspected or detected. 

Paperless banking creates fewer places where bank information could show up in print, and fewer sheets to carefully shred to avoid that information being carefully fished from your trash. Yes, shredding is an important step in disposing of any sensitive bank information. 

To access cash, consider using the bank ATMs instead of others for greater security around the use of your card. When paying at swipe-to-pay stations, make a physical inspection of the device before you insert your card. Gas stations have become notorious as card skimming hotspots. Card skimming is a way to install a device over a point-of-sale card reader which will steal the information contained in the magnetic strip. The device may even be combined with a camera to record the associated PIN. 

Look at the reader and physically touch it to see if it wiggles and jiggles. It should be stable and solid. Forbes reports that skimmers are often installed on top of a card reader so the new reader will be positioned in angles which are awkward or unexpected. If you see any of these telltale signs, skip the card reader altogether. Likewise, if an ATM’s buttons seem unusually hard to press, do not use them. 

Education is one of the best ways to start preventing debit card fraud. Former Federal Reserve Bank of Atlanta senior analyst Terri Sands has had an impressive career in payments and fraud prevention. A proven industry leader, Sands leads our course on debit card fraud, and we invite you to decide if this course may serve you or your institution. 

AML Monitoring System Customization and Optimization

July 23, 2024 @ 12:00 pm – 1:00 pm – This session will discuss why you should customize/optimize your systems and how to accomplish your goals through real examples that demonstrate the benefits of getting it right at the very beginning and keeping it tuned thereafter.

Read More »

More Posts

Credit Risk Management

What is Credit Risk Management?

Credit risk management is how financial institutions and other lenders assess the likelihood of a borrower defaulting on their debt obligations. It involves identifying, measuring, and mitigating risks associated with

Wire Transfer Fraud

What is Wire Transfer Fraud?

Wire transfer fraud is a critical concern for businesses globally, involving the unauthorized transfer of funds from one bank account to another through deceitful means. This type of fraud exploits