How Does Credit Card Cloning Work

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What Is a Credit Card?

A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment. Credit cards impose the condition that cardholders pay back the borrowed money, plus any applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time. An example of a credit card is the Chase Sapphire Reserve

TYPES OF CREDIT CARDS

Balance Transfer Credit Cards

While many credit cards come with the ability to transfer balances, a balance transfer credit card is one that offers a low introductory rate on balance transfers for a certain period of time. If you want to save money on a high-interest rate balance on an existing card, a balance transfer is a good way to go.

Balance transfer interest rates vary — some are as low as 0 percent, but these usually have qualifiers such as a fee for each transfer.12 The lower the promotional rate (and longer the promotional period) the more attractive the card is. However, you’ll often need good credit to qualify.

Rewards Credit Cards

There are three basic types of rewards cards: cashback, points, and travel. Some people prefer the flexibility of cashback rewards, while others like points that can be redeemed for cash or other merchandise. Travel rewards cards remain a favorite among frequent travelers because of the ability to earn free flights, hotel stays, and other travel perks.

Student Credit Cards

Student credit card are those specifically designed for college students with the understanding that these young adults often have little or no credit history. A first-time credit card applicant would generally have an easier time getting approved for a student credit card than another type of credit card. 

Student credit cards may come with additional perks like rewards or a low interest rate on balance transfers, but these aren’t the most important features for students looking for their first credit card. Students generally have to be enrolled at an accredited four-year university to be approved for a student credit card.3

Charge Cards

Charge cards do not have a preset spending limit and balances must be paid in full at the end of each month.4 Charge cards typically do not have a finance charge or minimum payment because the balance needs to be paid in full. Late payments are subject to a fee, charge restrictions, or card cancellation depending on your card agreement.

You typically need to have a good credit history in order to qualify for a charge card.5

Secured Credit Cards

Secured credit cards are an option for people who don’t have a ​credit history or who have damaged their credit status. Secured cards require a security deposit to be placed on the card.6 The credit limit on a secured credit card is typically equal to the amount of the deposit made on the card,7 but it could be more in some cases — such as a major default such as defaulting on a mortgage payment. It’s worth noting that you’re still expected to make monthly payments on your secured credit card balance.8 

Subprime Credit Cards

Subprime credit cards are one of the worst credit card products. These credit cards are geared toward applicants who have a bad credit history and these cards typically have high interest rates and fees. While approval is often quick, even for those with bad credit, the terms are often confusing. The Federal government has made rules regarding the amount of fees subprime credit card issuers can charge,9 but the card issuers often look for loopholes and ways to skirt these rules.10

Despite the unattractiveness of subprime credit cards, some consumers continue to apply for the cards because they cannot get credit elsewhere. This is a situation where you have to proceed at your own risk.

Prepaid Cards

Prepaid cards require the cardholder to load money onto the card before the card can be used. Purchases are withdrawn from the card’s balance. The spending limit does not renew until more money is loaded onto the card.

Prepaid cards do not have finance charges or minimum payments because the balance is withdrawn from the deposit you’ve made. These cards are not actually credit cards, and they don’t directly help you rebuild your credit score. Prepaid cards are similar to debit cards, but are not tied to a checking account. A lot of people use them as a way to stay within budget.

Limited Purpose Cards

Limited purpose credit cards can only be used at specific locations. Limited purpose cards are used like credit cards with a minimum payment and finance charge. Store credit cards and gas credit cards are examples of limited purpose credit cards.

Business Credit Cards

Business credit cards are designed specifically for business use. They provide business owners with an easy method of keeping business and personal transactions separate. There are standard business credit and charge cards available.

Even for a business credit card, your personal credit history is considered because the credit card issuer still needs to hold an individual accountable for the credit card balance.

What Is Credit Card Cloning?

Credit card cloning refers to making an unauthorized copy of a credit card. This practice is also sometimes called skimming. Thieves copy information at a credit card terminal using an electronic device and transfer the data from the stolen card to a new card or rewrite an existing card with the information.https://7daef6cdc7eeb613157b08828edb3221.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Unfortunately, cloning and related forms of theft have become increasingly widespread in recent decades. Thankfully, security improvements—such as the use of personal identification numbers (PINs) and chip cards—have helped to protect against these types of attacks.

KEY TAKEAWAYS

  • Cloning is a type of credit card theft in which the thief makes a digital copy of the credit card information using a concealed or disguised electronic scanner.
  • Security improvements—such as the use of chip cards—have helped disrupt this type of theft.
  • Successful thieves can sell the cloned information on the underground market, or download it onto other credit cards in order to make unauthorized purchases.

How Credit Card Cloning Works

From the perspective of the thieves, cloning can be a very effective way to obtain credit card information, because it does not require the physical credit card to be stolen. Instead, they simply use an electronic device to covertly scan the card’s information and copy it into the device’s memory. The thieves can then access that information digitally, or else download the information onto a separate credit card that is already in their possession.

Once the information is recorded it can be transferred onto the magnetic strip of a new card or can be used to overwrite data on an already stolen credit card. For cards that use a personal identification number (PIN) number in addition to a magnetic strip, such as debit cards, the PIN would need to be observed and recorded. This is sometimes difficult to accomplish, adding additional protection against having your card compromised.

Of course, modern security enhancements have made it more difficult for would-be thieves to carry out cloning. Modern chip cards—which have embedded microchips that contain their sensitive information—are much harder to compromise because the data they contain is encrypted within the chip itself. This means that even if the thieves successfully access the chip card, they would not be able to use the information they stole. But even this type of technology isn’t foolproof.

HOW TO IDENTIFY A CONED CREDIT CARD

With the rise of technology, counterfeit, cloned, altered and forged (CAF) cards are up a reported 12% over last year. This article provides you a quick law enforcement-level primer on how to detect a fake card beyond just matching ID and verifying the card with the processor.

Symmetry

First, look at the numbers to ensure they are evenly spaced and aligned. A counterfeiter typically uses an aftermarket tipper/embossing machine that handles one number at a time. As such, numbers are often skewed.

Correlation

Next, check to see if the account number matches the card name. Amex will start with a 3, Visa with a 4, MasterCard (MC) a 5 and Discover with a 6. You would be surprised how many thieves fail to do their basic homework.

Magnetic Strip

Some thieves are lazy or cheap and fail to coordinate the magnetic strip data with the data on the front of the card. To get around this, bad guys will purposely damage the strip by scratching or demagnetizing it thereby forcing the merchant to manually enter the altered numbers on the front.

Receipt Match

If you don’t have access to a magnetic strip decoding device to check the strip, one easy way to verify the strip and number is to run a transaction and see if the last four numbers printed on the receipt match.

Hologram

Check the hologram sticker on the front of Visa and MC and the top back strip on an Amex card for the foil hologram. Forged cards often have a dull, 2D look.

Signature Strip

The signature strip requires a different material when creating a card and is also often overlooked when forging. The strip should be on the back and white.

UV Logos

If you are in a branch and have access to a ultraviolet or black light check the UV logo on most cards. “AM EX” will appear on front of an Amex card, “MC” on a MasterCard, a flying “V” in the lower left front and a dove logo in the middle of a Visa card and “Discover” will be written across a Discover card.

Microprint

Most cards have a microprint verification number that can be seen with a magnify glass. This gets about 80% of all thieves and the microprint can usually be found under the account number or on back. While it varies with different cards, usually the microprint duplicates the first or last 4 numbers of the account number.

Behavior

Finally, nothing verifies fraud like nervous behavior of the card holder. The most common tactic is for the thief to try to confuse or distract the clerk in order to take the attention off the CAF card.

If any of the above doesn’t look right, contact law enforcement as chances are high you are dealing with identity theft and possibly counterfeiting. Credit and debit card fraud is fairly easy to detect because of the above, while prepaid cards usually have only about half of the above fraud prevention mechanics and so are harder. While this article won’t make you an expert, it will provide you an above average knowledge.

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