The Evolving Face of Credit Card Scams

An anonymous reader writes "The 12 Angry Men have a followup to their piece on the cross-sell scam credit card companies have begun using. Their new article concerns another evolving scam being employed, where users are racking up huge fees and charges on cards that have never even been activated. The article goes deep into the standard way the scam plays out, as well as detailing some interesting history on how credit applications are processed, and where they are typically (and frighteningly) subject to tampering."

Comments

Re:Simple (sort of) solution:

[Osty]

I pay off the card in full every month, if not more often (if I've made a large purchase) to keep the balance down.

Unless you're paying off a large purchase in order to make room for another large purchase within the same month (in which case you may want to rethink what you're doing), paying your credit card bill multiple times per month is costing you money. As long as your bill is paid off at the end, it doesn't matter whether the charge sat on the card for 1 day or 30 -- you're not going to get a finance charge. At the same time, the moeny that you used to pay off your bill in the middle of the month could've been generating you interest for another couple weeks before spending it to pay the bill at the end of the month. While the amount of interest you're going to make in that amount of time is minimal unless you're talking about large dollar amounts, over time that amount can add up. And even if you are just throwing away a couple of cents each time, that's real money you're losing.

Re:Virtual Account Numbers

[teslatug]

The only reason why I still use my MBNA (now Bank of America) credit card is due to their ShopSafe functionality similar to the one you mention. I don't know why more CC companies don't do this. I have two Citi CCs and neither is eligible for this functionality. It just boggles my mind as I'd be more likely to use them (and probably ditch the MBNA one).

My rules of thumb....

[lena_10326]

• Get on the OPTOUT list to stop preapproved offers.
• Don't accept a card with a yearly fee, unless there are travel or purchase rewards that you're sure you will use.
• If you have good credit, ignore all offers above 10-12% (excepting rewards cards). I have a 7.9% national city card.
• Don't open new credit card accounts if you're about to buy a house or car.
• Reject offers at the register. There's no possible way you can read the fine print at the checkout.
• Only consider accepting an offer at the register if the discount is at least $50. 10% of $500+. Deactivate the card after a few weeks or so.
• Don't ignore a bill sent to you on a deactivated card. It won't go away on its own.
• Don't signup for insurance through your credit card company. Buy insurance directly from an insurance company.
• Don't transfer debt onto a new card unless its free. No percent fee and no minimum fixed fee.
• A free transfer to a low or zero interest card is not a bad thing, so long as the introductory rate is long enough to be worth it, such as 9-12 months, and the non-introductory rate is fair.
• Don't use convenience checks tied to the credit card. After the temporary rate expires, they nearly always apply as a cash advance (which is much higher rate).
• When not traveling, don't use ATMs outside the bank's network.
• Use a debit card for cash advances and groceries. Use a credit card for travel, online purchases, shipping, and other purchases.
• Occasionally check your online statement history for unexplained purchases. I do this at least 3-4+ times a month, usually at work as an excuse to goof off for a moment.
• Setup a minimum fee payment schedule on all your credit cards within each respective card company even if you rarely carry balances. Don't use a 3rd party bill-pay for credit cards. If the bill-pay is down, you'll be held responsible if you're late. You have a stronger case for dropping late fees if it's your own credit card company's fault.

I pretty much stay out of trouble following those rules.

you won't be a 'quiet millionaire' with that mind

[Anonymous Coward]

Dude, I *am* a 'quiet millionaire' (or at least I was until last year when I stopped being as quiet about it), was *raised by* 'quiet millionaires' (who became such after having lost almost everything when I was still an infant) and I can tell you -- if you refuse to take an easy, reliable >4% return on an amount as large as those involved with a mortgage you will not become of one us (hint even if your tax rate is currently so low that the tax advantages accompanying the mortgage interest do not boost your marginal return above the 4% difference you cited, your tax rate will go up in time to add that bonus).

The fundamental risk in owning a house lies in the ownership itself, not whether you have a mortgage. If you live in a state where you can be forced to join a "homeowner's" association even after buying your house, then your house is at risk. If you aren't providing your own water and sewage service, then your house is at risk. Hell, if anybody else ever sets foot on your property (with or without your permission), then your house is at risk. Having a fixed-rate mortgage on your house does not risk your house in ways different from those. The currently-fashionable term for that 4% you're stupidly passing up is 'carry trade', btw. Yes, a few years ago the mortgage officer reacted like I was a three-headed alien when I insisted on a 30-year, fixed-rate, no-prepayment-penalty mortgage but that's the difference between 'safe risks' and 'Alan Greenspan risks'.

If you think buying your car outright means that you can budget the $300/mo that would have been a car payment for repairs instead of considering that money as not-yet-spent funds to purchase the car that will replace the one you're currently driving -- you will not become one of us. Financially, the difference between buying your car for 'cash' vs. on credit is that you save the interest costs and (if you did it right) had benefited from the returns made on the not-yet-spent funds but you still need to include that 'car payment' in your budget *every* month rather than just the months after your current car dies.

That said, you'd have to have rocks in your head to believe you will be able to average 10% investment returns over (roughly) the next two years.

One big tick for ANZ

[ribman]

Different scam, but here's one that just happened last 24h. (AU)
Last night, wife ordered some kids' name stickers from a company that the kindy had a flyer for on the bulliten board - paid $30 for it over the internet by credit card.
She then went browsing for antique books and visited a number of such sites locally and internationally, no payment forms started on any.
Wife is lovely by all measures, bar tech-savvy.
Phone call next morning from our bank - ANZ - "we believe you have been scammed".
Yep, sometime in the small hours two transactions ran up on her card. $1100 and $700 from western EU country locations.
ANZ detected it, called us, cancelled the card and the bad transactions, and issued new cards. Hence the plug.
Still thinking about how the card details got swiped. Maybe the site had an unencrypted form for cc details? Maybe through the IE browser session not being closed between paying on a weak site and then visiting a trick site? Maybe the sticker co's banking plug-in is working some cheat? Maybe the w2k pc is compromised with a keystroke swiper?
Have quarantined the pc, yet to work it over.

Re:Simple (sort of) solution:

[kryten250]

I am in the rental business on the side and do pretty well I'd say, no foreclosure risks. I go into tenant apt's all the time for various reasons and it's always the people close to default or that are late that have the best stuff, 52'' LCD screens, 2+ laptops, new king size bed and bedroom set, sub zero fridge. One tenant that had those things was being 100% subsidized by social services. It's crazy, but just like you I live below my means to have no financial worries but it always seems like the ones who default and break the rules make out in the short term, I guess it's monkey see monkey do at that point...