Fraudulent Credit Card Purchases

Criminals use fraudulent credit cards to steal billions of dollars in merchandise every year. In 2007 alone, U.S. businesses absorbed $3.2 billion in losses from online credit card fraud. This staggering number does not include fraudulent purchases made from retail stores.

Joseph Petrocelli Headshot

Criminals use fraudulent credit cards to steal billions of dollars in merchandise every year. In 2007 alone, U.S. businesses absorbed $3.2 billion in losses from online credit card fraud. This staggering number does not include fraudulent purchases made from retail stores.

An Unreported Crime

The biggest problem that police face in dealing with this crime is that victims seldom report credit fraud. Most credit fraud is reported directly to the credit card companies, who in turn rarely hold the card member responsible for the losses.

When the individual hears that he is not responsible for the payment, he is usually relieved and foregoes calling the police. Many card members assume that credit card companies work with the police to solve these crimes. Most credit card companies, however, handle the losses internally and do not contact law enforcement.

The easiest way to reduce credit card fraud would be for merchants to implement procedures to make it more difficult. But many merchants are reluctant to implement fraud prevention techniques, let alone call the police after a fraud has been committed. Store owners are afraid that fraud prevention techniques will slow down the checkout process and aggravate customers. Having police conduct fraud investigations in the store may also create a negative image for the store and affect sales.

Many stores do not report credit fraud to the police because they believe the police can't do anything about the crime. They do not think that police departments have the specialized skill set, knowledge, experience, and resources to deal with the complex security issues surrounding credit fraud. They also consider losses to fraud as a cost of doing business; the convenience granted by credit card use offsets any losses they incur.

With patrons and stores not motivated to report such crimes to authorities, a police agency may have a fraud problem in its community and not even know it.

Lucrative and Easy

Fraudsters are likely aware that only about 25 percent of fraudulent purchases are reported to the police. Research shows that credit fraud is easy to commit. In one study, 80 percent of respondents reported that credit card fraud was "easy" or "very easy" to pull off. Which means experienced fraudsters know there is a low chance of apprehension.

If on the off chance a cashier does detect credit card fraud, the fraudster usually runs from the store before being apprehended. When fraudsters are caught, punishment is usually mild. Furthermore, many criminals who perpetrate credit fraud feel little remorse because there is no incarnate victim at the scene (like at the scene of a robbery). They feel the victim is a faceless, greedy credit card company rather than a hard-working, fellow citizen.

Another obstacle that police face is the growing amount of technology available to fraudsters via the Internet. Although technology like microdot printing and hidden marking make fraud more difficult to commit, criminals have almost immediate access to techniques that can subvert such security systems. Large international organized crime syndicates with their massive resources have entered the credit card fraud business. Many of these groups lie outside the reach of local police departments.

Fighting Back

With so many factors going against you, what can you do to combat the growing crime of credit card fraud?

The first thing to do is to assess the magnitude of the problem.

For reasons previously stated, credit card fraud may be underreported. A department should conduct a brief survey of businesses in the community.

Ask the following questions: How often are you a victim of credit fraud? Do these offenses occur at certain times (weekends, closing time)? What items are obtained fraudulently? What types of establishments are being hit (large retail stores, supermarkets, small family stores)? When the crime occurs, to whom do you report it? If you don't report it to the police, then why?

Basic questions like these will help you determine if a problem exists, establish the scope of the problem, and give merchants an idea that their local police are preparing to respond proactively to the problem.

If a pattern is found, you can conduct a more intensive investigation into the factors that lead to the victimization. Your goal for this investigation is to answer some important questions. For example, how active are the fraudsters? Are the crimes committed by individuals or organized groups? Do they seem to be well organized or are the crimes carried out haphazardly? Do the crimes require any special skills or resources? Are many new items showing up in pawn shops? This should give the police an idea of whether they are dealing with low-level street criminals financing weekend parties or a sophisticated criminal organization.

Finally, you will want to interview victims whose credit was stolen. How did the victim become aware that his or her credit was being used improperly? Was the credit card stolen during the commission of another crime (auto break-in, home burglary, purse snatch)? To whom did the victim report the credit card fraud? When was the last time the user accessed the card? Did the user take the precautions recommended by the credit card companies?

Preventive Measures

The best way to fight credit fraud is to teach the people in your jurisdiction how to prevent it.

There is much that individuals can do to avoid being victims of credit card fraud. The first step is always to protect any PIN numbers associated with the account. Customers can write "CHECK FOR PHOTO ID" on the authorized signature line on the back of the card. They can also routinely check their card accounts for any unauthorized purchases.

Some fraud is perpetrated by employees of the store. So customers should remain alert as purchases are conducted and make sure that the card is swiped only once in a store-authorized machine.

Finally, online purchases should never be made from publicly accessible computers (i.e., in Internet cafes or libraries).

If people in your jurisdiction are not receptive to these tips, you may want to make them aware that companies ultimately pass the cost of credit card fraud on to the consumer. Though credit card companies do not charge the customer for fraudulent purchases, this crime results in higher card interest rates and prices passed on to the consumer.

Credit card fraud is tied to many factors outside of your control as a police officer. Just the sheer number of credit card purchases makes it extremely difficult to control. But law enforcement can educate potential victims (stores and customers) about ways to avoid credit card fraud, and should be proactive in getting this information out to the general public. Ultimately, it will take the efforts of law enforcement, credit card companies, retail stores, and credit card users to eliminate credit card fraud.

Det. Joseph Petrocelli is a 20-year veteran of New Jersey law enforcement. He can be contacted through


Credit Fraud Prevention

Here are some ways that police departments can work with businesses and consumers to reduce credit fraud:

  • Circulate flyers or conduct free classes to educate consumers who might not be aware of these simple facts and tactics about credit fraud.
  • Work with the local Chamber of Commerce to advise businesses of ways to reduce credit card fraud.
  • Suggest that cashiers ask for two forms of identification. This has proven to be an excellent deterrent to fraud.
  • Suggest that businesses post signs that state, "We require ID for credit card purchases."
  • Work with stores to come up with a generally accepted, police-issued identification card.
  • Train clerks on how to properly check ID and what to do when a suspicious card is presented.
  • Implement or streamline the process for conducting employee background checks. Almost 50 percent of retail loss is associated with employee theft.
  • Publish a regional newsletter that outlines credit fraud schemes, arrests, and pictures of those who have been arrested.
About the Author
Joseph Petrocelli Headshot
Detective (Ret.)
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