They walked away with both the jewelry and their money, and the store took a big hit. A few days later, they filed and were granted a chargeback on the purchase. But there’s another layer to this scheme, if the fraudster owns the credit card or has access to the full account credentials, they can call the issuing bank, report the transaction that they just made as fraudulent, and get the funds returned to them.Ĭhargeback Gurus handled a case where a cardholder made a high-value purchase at a jewelry store, complained that the chip reader wasn’t working, and was allowed to swipe their card. In this way, a criminal can make a purchase on a stolen or cloned credit card without the EMV chip stopping them. If the clerk says yes, the fraudster can swipe the card and completely bypass the EMV verification. Then, they will tell the sales clerk that they’re having problems with the EMV chip on their card and ask if they can complete the transaction by swiping the magnetic strip. When they make a purchase at a retail establishment, they insert the card in the chip reader, which will report an error because the chip cannot be read. In this new scam, the perpetrator takes a credit card and installs a fake EMV chip in it. This is the loophole that fraudsters are now trying to exploit. Unfortunately, not all merchants are willing or able to upgrade their terminals, and most newer terminals are set up to allow for transactions to be processed off of the magnetic strip to accommodate older cards without chips, or cards with malfunctioning chips. By requiring customers to use EMV chip-verified transactions at the point of sale, merchants can screen out many of the more commonplace forms of credit card fraud. It's much more difficult to steal credit card information from EMV chips, and fraudsters can’t create cloned cards with valid or functional EMV chips. The presence of the EMV chip verifies the authenticity of the card and can allow for customers to use encrypted PINs to authorize transactions. Devices called “skimmers” can read the magnetic strips on cards, copy the information they contain, and clone them onto a new card. Worst of all, fraudsters wouldn’t even need to steal your actual credit card. Signatures and IDs can be forged, and a cardholder’s ZIP code is often easy to guess. Of course, these safeguards were easy to defeat if you had a stolen card. The customer’s identity could then be verified with a signature, an ID, or a ZIP code. Originally, point-of-sale terminals read credit card information off of the magnetic strip customers would swipe through them. Now, retail merchants are finding themselves increasingly victimized by a new scam that uses deception to circumvent EMV chip security features. It’s an undeniable fact, however, that fraud is constantly evolving alongside the technologies developed to stop it. This tiny piece of hardware has gone a long way toward reducing fraud from cloned cards and other longstanding methods that exploit the vulnerabilities of older technology like magnetic strips.
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