Credit and Debit Card Ratings

The Crime Of Our Century – Prepaid Card Identity Theft

The current boom in identity theft was predictable, maybe even inevitable. It’s a natural result of what we might call “identity inflation.”

Not so long ago, the information on file about the average American consisted of a fairly small number of paper records, stored in metal cabinets in far-flung offices. People’s financial particulars were usually revealed only to a discreet local banker. Criminal impersonation took time and effort, not to mention lock-picking skills.

Today, thanks to electronic communication, we routinely share our most sensitive data – whether we know it or not – with people around the world. This information is continuously being collected, organized and stored in cyberspace. All a would-be impostor has to do is locate it.

By no means are prepaid debit cards immune to this growing threat. In fact, prepaid cards have been involved in some of the most brazen recent cases of identity theft. In May 2013, for instance, the U.S. government alleged that an international ring of crooks had used prepaid cards to loot $45 million from banks in the Middle East. The scheme, as described by the feds, was a blend of high-tech and grass-roots larceny. Hackers “tricked” cards into drastically raising their cash limits. Then a worldwide army of accomplices fanned out to withdraw the money from ATMs before security experts spotted trouble. Most prepaid debit card fraud is not so elaborate. But no one denies that the nature of these cards makes them especially appealing to lawbreakers.

Crooks are clever
The well-known 2012 study by the Pew Charitable Trusts noted that “perceived anonymity” is one of the things people like most about prepaid debit cards. And it’s more than just perceived. These cards, once they’re loaded with money, are self-contained spending instruments. Because they are not linked to checking accounts or credit accounts, they don’t help reveal customers’ financial histories or allow for easy tracking.

An honest consumer’s desire for such anonymity is understandable. But thieves crave anonymity, too, and for all the wrong reasons.

Taking advantage of the “here-and-gone” potential of prepaid cards, crooks often use them to move ill-gotten funds. More sophisticated scammers, as in the alleged Middle East case, can forge data to temporarily “create” electronic assets, then hurriedly convert them into cash or goods. Once the ruse is recognized, a merchant or financial institution is left holding the bag. Because prepaid card transactions rarely involve big sums, this kind of scheme requires lots of manpower, but recruitment is apparently easy.

Heists hurt the economy. But should fraud be a concern for you, the law-abiding individual with a prepaid card? Are you personally at risk? The answer, unfortunately, is yes.
Nationally recognized credit expert John Ulzheimer, no fan of prepaid debit cards, says bluntly, “They facilitate fraud,” he says. “If anyone were to steal or find your card, or otherwise compromise the account information, they could easily use the card or steal its value.” That danger is the flip side of anonymity: A card that acts like cash can be used by anyone. Some cards have fraud protection, but as Ulzheimer points out, many do not.

What would James Bond do?
The good news, if there is such a thing, about this fraud vulnerability is that it’s limited. The amount of money on a prepaid debit card is rarely large, and once that money is spent, there’s no more damage the thief can do to you. Ulzheimer acknowledges that “the exposure is relatively low, unless you’re irresponsible and leave the card lying around.”
Carelessness is obviously foolish. But these days, even ordinary caution may be insufficient. Instead, assume that someone is always spying on you, and treat your prepaid debit card as classified information. Get the safest card you can, especially in terms of fraud protection. Don’t share it or lose sight of it. Don’t even talk casually about having it, any more than you would chat about carrying cash. Use the card only in situations where you feel secure, and beware of bystanders monitoring your actions.
Don’t feel embarrassed about being vigilant. Scammers who can scoop up millions of dollars in a few hours can bilk you if you give them the least opportunity. If all this talk of identity theft and stolen data makes you feel besieged by mysterious forces beyond your control, Ulzheimer has a realistic reminder about prepaid debit cards. Maybe it’s reassuring. Or maybe not.

“Most fraud is perpetrated by family and friends,” he says.

Category: Best Low Fee Prepaid Cards

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  • The Crime Of Our Century – Prepaid Card Identity Theft

    The Crime Of Our Century – Prepaid Card Identity Theft

    The current boom in identity theft was predictable, maybe even inevitable. It’s a natural result of what we might call “identity inflation.”

    Not so long ago, the information on file about the average American consisted of a fairly small number of paper records, stored in metal cabinets in far-flung offices. People’s financial particulars were usually revealed only to a discreet local banker. Criminal impersonation took time and effort, not to mention lock-picking skills.

    Today, thanks to electronic communication, we routinely share our most sensitive data – whether we know it or not – with people around the world. This information is continuously being collected, organized and stored in cyberspace. All a would-be impostor has to do is locate it.

    By no means are prepaid debit cards immune to this growing threat. In fact, prepaid cards have been involved in some of the most brazen recent cases of identity theft. In May 2013, for instance, the U.S. government alleged that an international ring of crooks had used prepaid cards to loot $45 million from banks in the Middle East. The scheme, as described by the feds, was a blend of high-tech and grass-roots larceny. Hackers “tricked” cards into drastically raising their cash limits. Then a worldwide army of accomplices fanned out to withdraw the money from ATMs before security experts spotted trouble. Most prepaid debit card fraud is not so elaborate. But no one denies that the nature of these cards makes them especially appealing to lawbreakers.

    Crooks are clever
    The well-known 2012 study by the Pew Charitable Trusts noted that “perceived anonymity” is one of the things people like most about prepaid debit cards. And it’s more than just perceived. These cards, once they’re loaded with money, are self-contained spending instruments. Because they are not linked to checking accounts or credit accounts, they don’t help reveal customers’ financial histories or allow for easy tracking.

    An honest consumer’s desire for such anonymity is understandable. But thieves crave anonymity, too, and for all the wrong reasons.

    Taking advantage of the “here-and-gone” potential of prepaid cards, crooks often use them to move ill-gotten funds. More sophisticated scammers, as in the alleged Middle East case, can forge data to temporarily “create” electronic assets, then hurriedly convert them into cash or goods. Once the ruse is recognized, a merchant or financial institution is left holding the bag. Because prepaid card transactions rarely involve big sums, this kind of scheme requires lots of manpower, but recruitment is apparently easy.

    Heists hurt the economy. But should fraud be a concern for you, the law-abiding individual with a prepaid card? Are you personally at risk? The answer, unfortunately, is yes.
    Nationally recognized credit expert John Ulzheimer, no fan of prepaid debit cards, says bluntly, “They facilitate fraud,” he says. “If anyone were to steal or find your card, or otherwise compromise the account information, they could easily use the card or steal its value.” That danger is the flip side of anonymity: A card that acts like cash can be used by anyone. Some cards have fraud protection, but as Ulzheimer points out, many do not.

    What would James Bond do?
    The good news, if there is such a thing, about this fraud vulnerability is that it’s limited. The amount of money on a prepaid debit card is rarely large, and once that money is spent, there’s no more damage the thief can do to you. Ulzheimer acknowledges that “the exposure is relatively low, unless you’re irresponsible and leave the card lying around.”
    Carelessness is obviously foolish. But these days, even ordinary caution may be insufficient. Instead, assume that someone is always spying on you, and treat your prepaid debit card as classified information. Get the safest card you can, especially in terms of fraud protection. Don’t share it or lose sight of it. Don’t even talk casually about having it, any more than you would chat about carrying cash. Use the card only in situations where you feel secure, and beware of bystanders monitoring your actions.
    Don’t feel embarrassed about being vigilant. Scammers who can scoop up millions of dollars in a few hours can bilk you if you give them the least opportunity. If all this talk of identity theft and stolen data makes you feel besieged by mysterious forces beyond your control, Ulzheimer has a realistic reminder about prepaid debit cards. Maybe it’s reassuring. Or maybe not.

    “Most fraud is perpetrated by family and friends,” he says.

  • The Battle Over Swipe Fees

    The Battle Over Swipe Fees

    When the so-called Dodd-Frank law passed in 2010, one of its measures was pretty easy to quantify. A sprawling, complicated and controversial piece of legislation aimed at taming the most egregious of abuses perpetrated by the financial services industry in the years before the 2008 financial collapse, Dodd-Frank also addressed the amount of money debit card issuers could charge retailers when a customer made a purchase with plastic. The Federal Reserve was tasked with deciding what the cap should be and eventually settled on a number just below 25 cents per transaction. Estimates on the impact of the ceiling on that fee– known as a swipe fee because it’s a charge that gets racked up when a retailer swipes a card – on banks and card processors come to around $8 billion annually, a hefty chunk of change.

    According to a recent report from Bloomberg News, banks and payment networks are working hard in state capitals around the country in an effort to prevent restaurant and clothing storeowners from charging their clients more to pay their tabs with credit cards than they do for debit card and cash transactions. According to the Bloomberg story, written by reporter Carter Dougherty, banks and their allies have already been successful in banning surcharges on credit card purchases in Utah, and around 20 other states are also considering bills related to swipe fees.

    In a nutshell, what the legislative initiatives in Utah and other states is aimed at doing is preventing retailers from urging – particularly through the use of surcharges – their customers from opting for cash or debit cards over credit. At issue, of course, is money. Banks and card processors are eager to keep as many customers as possible in the habit of using their credit cards when they buy a meal or an iPod; according to the Bloomberg report, card issuers earn between 1 and 3 percent of a transaction whenever someone uses their Visa, MasterCard or American Express card.

    Not surprisingly, retailers want to see swipe fees associated with credit cards as low as possible, contending that they are already too much of an unfair cash cow for banks. “I view the banks and credit-card companies as unwanted business partners. They do not work anywhere near as hard as I do, yet they collect nearly as much in fees as the average restaurant earns in profit,” wrote Ted Burke, the co-owner of the Shadowbrook Restaurant in Capitola, California, in the San Francisco Chronicle. “Business owners like me can negotiate virtually all of our costs, but we are powerless to negotiate swipe fees.” If banks and card processors are successful on the state level, many retailers also won’t be able to encourage customers to opt for lower fee debit cards. Under federal law, business a credit card transaction can cost a consumer more than a debit or cash purchase.

Credit and Debit Card Ratings