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Credit Card Fraud In India Research Team | Posted On Friday, February 08,2019, 04:16 PM

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Credit Card Fraud In India



What is credit card?

Credit card is a financial instrument issued by lenders and banks, which can be utilized by borrowers to purchase goods both online and offline. A credit card can be considered as a form of debt. Credit card works on the principle of borrow now, pay later.

Credit cards are not for the ones who struggle with money management, rather, it’s for those who are financially well off. Misuse of credit cards have long term implications, which are going to affect your credibility, resulting in lenders not willing to lend you money.

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Credit Card Fraud In India

Types of credit card:

Balance Transfer Credit Cards

A balance transfer credit card facilitates transfer from a high-interest credit card to a low-interest credit card and helps pay debt easily. A balance transfer credit card comes in handy to pay off outstanding amount on current credit card and relieve you from the burden of debt. There are various other benefits of using a balance transfer card:

  • Savings on interest: You are transferring outstanding amount from a high interest credit card to a lower one, which results in saving a lot on interest.
  • Quick processing: Processing of these credit cards is faster and won’t take much time.

Rewards Credit Cards:

A reward credit card is a type of credit card that gives rewards on the purchases made through credit card. They are popular because of their reward system. Reward credit cardholders earn reward points on the purchases made both offline and online. Reward points can also be in the form of welcome gifts, renewal bonus and so on. Whenever you make a purchase, reward points are added which can be redeemed later to get discounts or cash back on future purchases.

Charged Credit Cards:

These cards are offered to borrowers who have great financial habits and records. American Express is the primary issuer of charged cards. There is no credit limit on the charged credit cards. All late payments are subject to a fee, charge restrictions, or cancellation of the card.

Auto/Fuel Credit Cards-

These credit cards offer great benefits on fuel related purchases. An auto credit card also helps save a good amount of money with cashbacks offers and fuel surcharge waivers. Benefits of these cards are doubled with extra rewards and offers on travel and shopping.

Business Credit Cards-

These cards are issued for business establishments, and are meant specifically for business purposes. These cards help a business owner efficiently manage both personal and business finance. Business Credit Cards also provide good rewards and benefits to users. 

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Cashback Credit Cards-

As the name suggests, these cards offer cashback on credit card purchases. A cashback can be earned by paying bills, booking movie tickets, retail purchases, grocery bills, dining bills and many more. They have many other benefits like fuel surcharge waivers, shopping privileges, rewards program and so on.

Classic Credit Cards-

A classic credit card comes with loads of benefits like cash advance, interest free credit period, rewards, supplementary cards, revolving credit and various other benefits. Most classic cards don’t have annual fee and joining fee is quite low.

 Co-branded Credit Cards-

These credit cards are associated with a financial institution, a travel agency, or a retail merchant. All privileges and benefits are merged into a single co branded card. A credit card lender ties up with a merchant to expand customer base. A co-branded card has several benefits like vacation, rebates, discounts on clothing, offers on food, discount on movie tickets, cheap airfares and so on.

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Contactless Credit Cards-

These cards do not require Personal Identification Number, PIN. They work on Wi-Fi mechanism. Just like any other credit card, these too have benefits like discounts, cash rewards, reward points, welcome gifts, airport lounge access and so on.

 Credit Cards for Women-

These cards are exclusively made for modern age women, who want to reap benefits while saving on their purchases. These cards offer benefits on shopping and cashbacks. Apart from this, a cardholder gets benefits like fuel surcharge waiver, insurance and so on.

 Entertainment Cards-

These cards are designed specifically to give offers on entertainment to cardholders. Offers like discounts on ticket bookings for movies, events, shows, concerts, and offers like buy 1 and get 1 free on movie tickets are available. Cardholders also earn reward points on these transactions, which can be redeemed for several other benefits.  

Gold credit cards-

Gold cards are designed by targeting individuals of high income having a good credit score. Important features of a Gold credit card are-

Cash withdrawal limit is high

–> High credit limit

–> Cashback offers

–> Rewards program

–> Travel Insurance

Platinum credit cards-

These cards offer benefits like dining, shopping and entertainment. The annual joining fee for the card is a little higher when compared to other credit cards.

Premium/Signature credit cards-

Signature or premium credit cards offer exclusive benefits and rewards to customers. They offer privileges like flexible spending limits, premium airport lounge access, concierge services, complimentary insurance, reward programs, global assistant services and so on. Few of these cards have an annual fee waiver, provided cardholders spend a certain amount.

Prepaid credit cards-

These cards require cardholders to load money to the card up front and then use it. Although these cards do not offer a line of credit on purchases, customers still enjoy various privileges and benefits offered by these cards.

Silver credit cards-

Salaried professionals can procure these credit cards provided they have a good credit score. Silver credit cards have low membership fee and offer benefits like zero interest rate for the initial 6 to 9 months, on balance transfer.

Titanium credit cards-

These cards are similar to Gold credit cards, but with additional benefits and rewards. Key feature of such cards is the titanium rewards program that is offered to the customers. Additionally, this reward program includes redemption of gifts, air miles, cashback offers and so on. Other benefits that this card offers are annual fee reversal, insurance, welcome gifts, surcharge waivers, revolving credit add-on facility and much more.

Travel credit cards-

These cards offer a wide range of benefits on cards domestically and internationally. Lenders tie-up with airline companies and travel agencies to provide exclusive offers to customers. Customers also earn reward points, which can later be redeemed into Air miles. These reward points can also be used to extract benefits like upgrading seats, discounts on flight tickets and so on.

Importance of credit card

Credit cards were not appreciated in India initially as people considered it’s not good to avail debt of any form. But the mentality of people has changed considerably over the last two decades. Most employed youths in urban India have credit cards these days.

Credit cards can be constructively used in building credit score which later helps avail loans like home loan. Credit cards come in handy when you are low on cash during the end of the month. Using credit cards to improve or decimate credit score is in your hands. Using it wisely has many benefits while misusing it has long term implications which hamper financial goals.

The mechanism of a credit card transaction:

For a transaction on credit card to be completed, it has to be authorized by cardholder, merchant, acquirer, Visa / MasterCard / RuPay, issuer, card network and merchant. It is summarized below:


Cardholders begin a credit card transaction by presenting their credit card to the merchant as a method for payment.


The merchants use their credit card machine or software or gateway to transmit the credit card’s information and the details of the transaction to their acquiring bank, or the bank’s processor.


The acquiring bank (or its processor) will capture the transaction information and routes it through appropriate card network to the cardholder’s issuing bank for approval.

Visa / MasterCard / RuPay Network

MasterCard transaction information is routed between the issuing banks and acquiring bank via MasterCard’s Banknet network. Visa transactions are routed via Visa’s VisaNet network.


The credit card lender/issuer receives the transaction information from the acquiring bank (or its processor) through Banknet or VisaNet and responds either by approving or declining the transaction after checking to ensure, among other things, that the transaction information is valid, the cardholder has sufficient balance to make the purchase and that the account is in good standing.

Visa / MasterCard /RuPay Network:

The card issuers send a response code back via an appropriate network to the acquiring bank (or its processor).


The response code sent by the Visa / MasterCard / RuPay reaches the merchant terminal or software or gateway and is stored in a batch file awaiting settlement.

Credit card fraud

Credit card fraud is a wide ranging term that is used to represent theft and fraud committed involving a credit card, as a fraudulent source of money in a transaction.

What is credit cloning?

Credit card cloning or skimming is a technique in which a fraudster gets your credit card details, copies them onto a duplicate card and starts using the credit card. While credit card theft itself is not new, the manner in which the information is stolen is still not clear to many.

The types of frauds

  • Stolen credit card: Fraudsters can steal your credit card and swipe it to purchase expensive goods. It is wise to avail credit card insurance and save yourself from the consequences of a stolen credit card.
  •  Compromised credit card: Information like credit card number, CVV and PIN of your credit card will be compromised and this information can be used by fraudsters to purchase goods online.
  • Identity theft: Identity theft is further divided into:

i) Application fraud: Application fraud takes place when a fraudster uses stolen or fake documents of an individual to open an account in his/her name. Fraudsters may steal documents like utility bills and account statements to build up useful personal information. 

ii) Account takeover:An account takeover happens when fraudsters pose as genuine customer and gain control of an account and then makes unauthorized transactions.

  • Skimming: Skimming is the crime of getting private information of someone else's credit card used in an otherwise normal transaction. The fraudster can procure a victim's card number using basic methods like photocopying receipts or more advanced methods like using a small electronic device (skimmer) to swipe and store multiple victims' card numbers.
  • BIN attacks: Credit cards are manufactured and produced in Bank Identification Number BIN ranges. In this method of production, a credit card issuer does not use random generation of the card number; it is possible for a fraudster to access one valid card number and generate further valid card numbers.
  • Phishing: Fraudsters use a variety of schemes to lure victims into giving credit card information through tricks like websites pretending to be of a bank or payment system. Telephone phishing can also be made, in which a call center is set up to function as to be associated with a bank.

How to counter frauds? /How do I protect myself?

  • Don't let your card out of sight: Fraudsters can steal card’s data, which would then be secretly swiped and skimmed. Hence make sure you don’t let your card out of sight.
  • Register your mobile number with the credit card lender and subscribe for alerts on your card’s transactions: It is always good to subscribe for SMS and email alerts for card transactions. Inform your lender immediately when you notice an unauthorized transaction.
  • Inspect ATMs before transacting and do not insert the card if you find suspicious devices connected to the machine: Easiest way to find if a machine is working or not is by entering a wrong PIN. If the machine is working fine, then the machine would reject your transaction on entering the wrong PIN. Check if there is any suspicious device connected around the ATM.
  • Memorize your CVV: CVV is a three-digit number printed on the back of credit cards. It’s good to memorize CVV and scratch it from the card, thereby avoiding data theft.

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