Credit and debit card fraud soarsNew figures show increase of a quarter

12 March 2008

Credit cards

Companies need to be more open about how penalty charges are worked out

Fraud on credit and debit cards soared by 25% last year to reach a record high despite the introduction of chip and Pin, figures showed today.

The cost of fraud on UK issued cards totalled £535.2 million during 2007, with losses rising for the first time since 2004, according to payments body Apacs.

The group said the rise was largely driven by a 77% jump in fraud carried out abroad, with criminals using stolen UK card details overseas, typically in countries that have not yet upgraded to chip and Pin.

Overseas fraud

It said overseas card fraud accounted for 39% of losses, totalling £207.6 million last year.

But there was also a 6% increase in card fraud losses in the UK during the year, which was largely driven by so-called card-not-present fraud.

£207.6 million

Amount lost in overseas card fraud last year

This type of fraud, which involves criminals using stolen details to buy things by telephone, mail order or over the internet, soared by 37% during the year to £290.5 million, possibly as criminals migrated to other types of fraud following the introduction of chip and Pin.

Online shopping

But Apacs said that while card-not-present fraud now accounted for more than half of total losses, it should be seen in the context of the huge increase in the number of people shopping online or by telephone.

It said this type of fraud had risen by 122% between 2001 and 2006, but during the same period online transactions had soared by 358% to £30.2 billion.

There was also a 46% rise in counterfeit card fraud, where card details are cloned, although it is thought the majority of this occurred abroad, while losses arising out of identity theft increased by 7% year on year.

Chip and Pin

But there were signs that the introduction of chip and Pin was having an impact on fraud losses, with fraudulent use of credit and debit cards on the high street dropPing by two-thirds during the past three years from £218.8 million in 2004 to £73 million last year.

Losses arising out of lost and stolen cards and cards which are intercepted in the mail also reached their lowest level for 10 years at £56.2 million and £10.2 million respectively.

Online banking fraud fell by 33% during the year to £22.6 million, despite a near doubling in the number of so-called phishing incidents, in which fraudsters use bogus emails to try to get people to disclose their account details and passwords.

But cheque fraud losses rose by 10% in 2007 to £33.5 million, following reductions during the previous two years.

Tips on avoiding fraud

Which? money expert Martyn Saville said:'If you're abroad, never let your card out of your sight in shops and restaurants and look out for suspicious "skimming" equipment attached to cash machines. Don't leave your cards in your hotel room either - take them with you or leave them in the hotel safe. When you go abroad, take your card issuer's phone number with you in case you need it in an emergency.'

Which? has published tips to help you avoid card fraud. There are more details in our report, but in general our advice is:

  • don't let anyone else use your credit card.
  • always take your receipt
  • keep your receipts, and tear them up, or preferably shred them, before disposing of them
  • only shop from well-known websites that display a secure padlock logo, and have both a landline phone number and a real address (not a P.O. Box)
  • don't give out your Pin numbers. Avoid obvious Pins such as your birth year
  • keep your credit cards and cheque book safe
  • keep a note of contact details to use if your card is lost or stolen. Carry them separately from your cards.