Chapter 19. Credit Card Security

What's the most insecure thing about your life?

If you're like most people, it's your credit cardor to be more accurate, your credit cards because most people have multiple cards. Credit cards are stolen with astonishing regularity and account for substantial amounts of financial losses every year.

There is no single source of information about credit card theft, but the Federal Trade Commission reports that credit card and identity theft cost consumers more than $52 billion in 2004 alone.

Most people worry about their credit cards being taken when their wallet or purse is stolen or when they give out credit card information over the phone. But that does not account for most credit card theft. The vast majority of credit card theft is committed by hackers who break into financial sites and steal credit cards in bulk. In the most infamous of all credit card thefts, the payment processor CardSystems Solution had 40 million of its credit cards exposed to possible theft when a hacker broke into its system.

It's not only hackers who steal credit card information, though. People working at financial firms do it as well. Insiders stole tens of thousands of credit card numbers from Teledata Communications, Inc., which provides information to banks from the three commercial credit history bureaus.

Your credit card is vulnerable to hackers and insiders because many companies provide services to credit card companies, banks, and merchants. In fact, the companies that provide these services are, more often than not, the ones that are hacked into. The credit card companies and banks themselves tend to be more secure.

The Internet has become central to credit card theft and the sale of credit cards. Hackers use the Internet to connect to financial firms and hack into them, and scam artists have turned to the Internet to steal credit card information. So-called phishing schemes, in which emails lure you into providing your credit card information to hoaxers, are one of the primary ways in which credit cards are stolen.

Most of the time, those who steal credit cards don't use them for themselves. Rather, they sell them to gangs, often the Russian Mafia or gangs based in Southeast Asia. These gangs then sell the credit cards over the Internet, often for $50$100 each.