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

Come on

[2.7182]

you have to give them credit for originality.

Simple (sort of) solution:

[Z80xxc!]

Just don't use credit cards. Really. Using credit gets you into debt anyway. True, there are other ways to get scammed, but if you don't have a credit card, they can't rack up the charges. If you were to use a debit card instead, then you stand to loose something, but once it runs out, it's gone and they can't keep charging more. Credit is necessary in some circumstances, but for day-to-day purchases, you might be better off without one.

Re:Simple (sort of) solution:

[andy666]

True, but the fact of the matter is that people DO get into debt more when they use credit cards. But maybe one way to look at this is that a credit card is a easy way to get a short high interest loan, and people are fine with that. On the other hand, most people don't treat it that way and it turns into a long term high interest loan. So it is sort of psychological reasons that get people into trouble. Many people are not disciplined enough to do what you recommend.

A lot of people gamble and get into trouble because of bad judgement. It's sort of like that. Basically a lot of adults act like kids, and you have to expect that as the norm.

Re:Simple (sort of) solution:

[ejdmoo]

Just don't use credit cards. Really. Using credit gets you into debt anyway.

Wrong. Using credit gets you into debt, maybe, but not me. Credit does not get you into debt; debt comes from not repaying your creditors.

People these days just can't accept personal responsibility for things; it's ridiculous.

Re:Simple (sort of) solution:

[AK Marc]

Using credit gets you into debt anyway.

Hmmm, I have about $150,000 of debt to three separate institutions, and not a single one of them is a credit card company. Well, not counting credit cards paid off within 30 days with no finance charges as "debt." I have about $50,000 available on my cards, and use it like a convenient checkbook that pays me money for using it and takes nothing from me in return. Anyone not using credit cards for all possible purchases is losing money.

If you were to use a debit card instead, then you stand to loose something, but once it runs out, it's gone and they can't keep charging more.

Debit (tied into your bank account) gives you less protection than a credit card. Also, if there is a problem and your charge account is frozen, if you have credit cards, you pull out another. Most people don't have a full backup checking account in case the first one doesn't work.

Credit is necessary in some circumstances, but for day-to-day purchases, you might be better off without one.

The way I see it, using a credit card for all purchases gives me rebates (cash, airline miles or whatever) protects my checking account from loss, and leaves a more trackable account history than checks or cash. Using credit cards is something people should do, not avoid. Now, the question of paying it off is a completely separate issue. Just like you shouldn't write a check your account can't cash, neither should you charge something more than what you can write the check for when the bill comes.

Re:Simple (sort of) solution:

[Firethorn]

True, but the fact of the matter is that people DO get into debt more when they use credit cards.

Of course they do. Then again, with things like payday loans and rent to own(effective interest: up to 400%!), there's plenty of people who get into trouble even without credit cards with an interest rate generally less than 30%.

Many people are not disciplined enough to do what you recommend.

True, of course even though I do the same thing, there are things I could theoretically do to increase my earnings/save money even more, but even though it should be fine, I consider it too dangerous or too much work.

For example, I could get a home mortgage for ~6%. My investment returns are averaging 10%. So I could theoretically make more money keeping my house mortgaged(essentially renting it), and going for that 4% marginal. Sure, I'd have to pay income tax on the 10%, but the interest for the house is deductible. Still, that means risking my house - for a measly 4% on average. Sure, some people do it, but I don't like it.

We'd probably be better off teaching fiscal responsibility and budgeting in HS, but even then - we can't make people listen, and that 52" plasma TV looks real good...

Here I am driving a 5 year old car(bought new, paid off, I plan to drive it at least 10 years. $300/month pays for a lot of repairs. Stuff left over once I decide to get rid of it can go towards buying a new car - possibly entirely. I also have a 7 year old 32" TV I bought on special, etc...

But there's people who make less than me running around with HDTVs and expensive cars etc... My only consolidation is that I'm much more likely to be able to retire early and with a better standard of living than them. My goal is to be one of those 'quiet millionaires'. You know, live modestly, but have no real financial worries.

Re:Simple (sort of) solution:

[Anonymous Coward]

Talk about cutting off your nose to spite your face.

When you get scammed with a credit card, you call your card company, explain the situation, they say "Thank you Mr. X, we'll investigate it", and then a month or two later you'll get a refund. At no point during this situation did you actually lose any money. At worst your credit limit was artificially low for this period.

When you get scammed with a debit card, you call your bank, explain the situation, they say "Thank you Mr. X, we'll investigate it", and then a month or two later you'll get a refund. In the intervening period you have no money. If you are like many people and have no significant liquid assets outside your checking account, you may end up not eating for a while.

Also note that if you lose your debit card and someone starts using it with your PIN (that they may have scraped off a keypad you used just before they stole the card from you) then you are liable for the charges right up to the point where you call the bank. If a credit card is stolen then you are never liable for any charges you did not personally make unless your signature is present, and even then you are limited to $50/charge.

I personally never use my debit cards because the possibility of having the information stolen is too scary. On the other hand I use credit cards freely have no worries about getting them stolen, because even if someone steals my information the process for resolving it is painless. Of course I also watch what I spend and pay off my cards every month, so that I never get any finance charges. Some people are not capable of staying out of debt when carrying a credit card, and to them I would recommend sticking to cash or checks.

Re:Simple (sort of) solution:

[nilbud]

All very well for addition, even subtraction but multiplication and division are gateway processes and can lead to differentiation and even (lord help us) statistics. Kids there is no such thing as a "standard" deviation.

Re:Simple (sort of) solution:

[davetd02]

I'm trying to understand where the "scam" is here. You officially became a joint owner of the account. Presumably there were some documents and signatures involved. You never told Wells Fargo that you were no longer the joint owner of the account. Wells Fargo, thinking you to still be the joint owner of the account, did exactly what "joint owners" do. You get all of the benefits AND all of the drawbacks.

The right thing to do would have been to do more than return the ATM card to your ex-, but also remove yourself from the account.

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...

who would cross-sell with such losers?

[Greenisus]

i don't know about most e-commerce operations, but where I work, we make a point to not tie ourselves in with the kinds of companies that would do these sorts of cross-sell scams. TFA says some people think of this as free money, but it's not at all. when you hand control of what your users see to a third party, that's not free.

Virtual Account Numbers

[RootWind]

Like the article mentioned, virtual account numbers are great for online purchases. It's one of the first features I look for. Citibank and Bank of America's virtual card services are both pretty nice, allowing you to set a spending limit for each number, as well as expiration dates. I believe Citibank also locks the number to the first merchant who charges to the virtual account.

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.

Re:you won't be a 'quiet millionaire' with that mi

[Firethorn]

First, I suggest not posting AC, you deserve to be heard. I hope to hear from you again.

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).

Your acceptance of risk is higher than mine. I'm a bit scarred in that I first started investing just before 9/11. Lost half my initial investment. On paper, I didn't pull it out, and it eventually recovered. Now, I will admit that I'm paying the minimum on my mortgage and investing instead. Then again, I got a sweetheart interest rate, much better than the 6% I could otherwise get. Still, I'm building equity in the house - which I want. Worst case I can still make it - it's just going to take a bit longer.

Having a fixed-rate mortgage on your house does not risk your house in ways different from those.

I have insurance for the other events. Home Owner's association? I could practically set up a firing range in my yard and the neighbors are more likely to come over and shoot with me than call the cops. As for fixed rate mortgage what I was really talking about was manipulating loans such that you have zero equity most of the time - think 'interest only loan'.

This way I still own my house if the stock markets crash and I lose my job.

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.

I think you misread me - the $300 payment that represented my car payment when I was still paying it off. What I'm doing now is placing that money into investments each month earmarked 'car'. It's a little more bookkeeping to keep track of the number of shares for that purpose, but whatever. It's a somewhat nebulous fund that's meant to pay for major vehicle expenses - not including gas or routine maintenance, but including buying a new car. Basically, I know that some major maintenance will probably be required between now and 10 years. That $300/month will more than cover that. If the maintenance is too bad, or the car no longer meets my needs, then the fund goes towards a new car; ideally buying it 100% cash. The 10 year point is merely a goal, not a end point. If I still like the car, I could drive it for 12. It's just that I figure after 5 I'll have plenty of money, even assuming some repairs, to buy a new car. The way I look at it - if I end up spending $900 in year 8 to get to year 10 I'm still ahead of the game.

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's what I meant. $300 monthly payment ceased going into GM's pocket and into my portfolio, earmarked 'car'. I just don't feel the need to mark it exclusively for 'new car', instead choosing to allow it to also be used for sane repairs on my existing vehicle - after all, I'm still ahead as long as it's costing less than $300/month to keep running in a suitable condition. Heck, if it reached $100/month to keep going, I'd be car shopping.

I'm firmly on my way to a somewhat early retirement - I'll have the $1million, after starting with essentially 0 as a teen. I could do it faster, but I do like some luxuries, like my $1200 gaming machine(built myself to save money). Of course, my last gaming computer was four years old when I replaced it, so it ends up being a lot cheaper than drinking at a bar.