How to Detect and Avoid Credit Card Reader Fraud
A full 40% of Americans used no cash in 2022, 11% have stopped using cash altogether, and 64% of Americans think that our country will go cashless entirely in their lifetimes. This trend makes cards – not cash – the king of transactions and customers more subject to fraud than ever. In fact, according to FICO, 2023 saw a whopping 96% increase in compromised debit and credit cards, costing financial institutions and customers over $1 billion a year. Ouch! Two common ways these compromises happen: through credit card skimming and shimming.
What is Skimming?
Skimming involves installing a small device on card readers, usually gas pumps or ATMs. Often these are stand-alone machines in convenience stores or street side as opposed to those in the lobbies of financial institutions, which are closely monitored. However, even those relatively safe spaces remain vulnerable.
The device is placed over the slot into which the card is inserted and looks like a component of the ATM. It captures data from the card’s magnetic stripe – just like those found on hotel key cards or gift cards – which the thieves use to create counterfeit cards. Then, they either run up balances on a purchasing spree or withdraw the maximum amount of cash permitted by ATMs – and again the following day, as well as the day after that, until the cardholder becomes aware or runs out of cash to be pilfered, whichever comes first.
This form of fraud has been somewhat thwarted by chip cards, though not entirely, of course. Users no longer have to swipe their cards. Instead, the end of the card with the chip is inserted face up into a reader and the purchase or withdrawal is completed. Chip cards are difficult to counterfeit, but thieves notoriously put a considerable amount of effort into staying ahead of the game.
What is Shimming?
Shimming is a variation of skimming. A shim, which functions much like the sliver of wood homeowners use to level appliances, enables contact with the chip and copies the information it contains. Thieves cannot make a counterfeit chip card, but they can use the stolen data for online purchases or to make a counterfeit stripe card.
Unlike skimmers, which are relatively bulky, shimmers are more difficult to spot because they are super-thin and positioned inside the machine’s card reader slot – making them relatively undetectable to anyone using the terminal. Once the device has shimmed data from unsuspecting cardholders, the crook then retrieves and downloads the stolen data.
Unfortunately, criminals keep up with technology, too. Some devices use wireless and Bluetooth technology to collect card information, allowing the criminals to collect the data remotely without having to return to the scene of their crimes.
Warning Signs
There are signs that might indicate to a customer that a machine has been compromised, precautions that can help prevent customers from becoming victims, and simple steps they can take if they unfortunately do.
How to tell
- The card slot is slightly misaligned.
- The card does not slide in smoothly.
- The card reader is slightly loose.
- The buttons are harder to push and slower to react.
Precautions to take
- Use contactless payment, such as Apple, Android, or Google Pay, which allows transactions to occur on mobile devices.
- Utilize tap-to-pay when that option is available.
- Use ATMs in high-traffic areas, at Kansas City Credit Union, or at another financial institution.
What to do if you get ‘skimmed’ or ‘shimmed’
- Contact your financial institution. Card access will be cut off, and refunds and a new card will be issued.
- Check all accounts for unauthorized or suspicious transactions.
- Contact the business where the incident occurred so they can check their card readers.
- File a report with the police and the Federal Trade Commission (FTC).
As we move towards what will probably be an almost cashless society, staying aware of ATM and card reader fraud will be more important than ever. Understand how skimming and shimming work, recognize the warning signs, and take preventive measures to greatly reduce the risk of becoming a victim. Staying informed and cautious helps protect one’s finances – and peace of mind.
