How Does Credit Card Fraud Protection Work?
Techquickie
·Techquickie
·2018-05-06
·
997 words · ~4 min read
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thanks for watching techwiki click the subscribe button then enable
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notifications with the bell icon so you won't miss any future videos
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so aren't credit cards great the rewards programs are fantastic you can buy
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things now and pay for them later and the reasonable interest rates mean that
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i'm just kidding about that last one but obviously there's a huge difference
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between you using your own credit card irresponsibly and someone else deciding
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to commit credit card fraud and run up a bunch of charges on your account and
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these days is often much easier for criminals to forget about stealing hard
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currency like the highwaymen of yesteryear and instead focus on ripping
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off credit card numbers so they can charge as much as they want
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well up to the victim's credit limit anyway but that leads us into another
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big advantage that credit cards have over cash if your card number gets
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stolen your credit card company has technological measures in place to
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detect and put a stop to fraud but how in the world do they do this well
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perhaps unsurprisingly major payment processors mine huge amounts of data
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from their card holders and they know a great deal about their spending habits
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and while that might sound a little creepy in this age where it feels like every smartphone and computer is trying
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to learn about us it's also a key way that
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companies like visa and mastercard detect fraud you see odds are that you
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mostly swipe and tap your card in and around the areas where you live work or
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frequently visit now as you do this your credit card company builds a picture not
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only of where you spend your money but how much and how frequently so over time
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they get an idea of whether you're a high roller with money to burn or if you
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follow grandma's advice and only use plastic in emergencies so if a
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transaction goes through for far more money than you usually spend
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or from some far away locale this will automatically trigger the car company's
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payment processing system to flag that transaction and mark it as potentially
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fraudulent as the odds are that it wasn't you making the purchase however
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if you've ever done something unusual like drive down to t01 in one weekend
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for some dental work you might have had your credit card work just fine well it
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turns out that your credit card carriers computers look for patterns that
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wouldn't be obvious to us mere mortal humans now oftentimes thieves will use
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stolen credit card numbers to buy something small at first to test the
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card before moving on to grand theft so a stick of gum followed by a brand new
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kitchen is going to raise some eyebrows in american express and some more
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advanced methods can track the ip addresses of where transactions
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originated from so if they see a charge tied to an ip address that's been used
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in the past for fraud you might get a fraud alert on your phone or pc so that
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you can contact your card issuer and tell them whether you've been scammed
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and many banks employ similar technologies to protect money that you
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already have in your bank account in fact if someone drinks a ton of money
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out of your account fraudulently the bank generally has to give you that
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money back as long as you report it quickly enough and since banks don't
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want to have to foot the bill for theft they definitely have an interest in
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keeping your cash as safe as possible
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but remember that these systems aren't perfect in fact it's their errors that
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allow them to continue to improve so keep an eye on your statements and
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sometimes they can even work too well if you've gone on vacation to some exotic
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place and started using your card without telling the company first it may
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have ended up accidentally flagging your card when you tried to use it to buy a
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mai tai or some bar in the caribbean so it's generally considered a good idea to
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give them a ring before heading out on a big trip now of course with huge credit
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card companies and banks using machine learning and artificial neural networks
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to more effectively identify fraud patterns and develop new algorithms for
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catching it there's a lot of secret sauce that goes into protecting
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consumers that's kept away from the general public to keep it out of the
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hands of would-be fraudsters after all i don't think kevin mcallister left the
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plans for his booby traps in plain sight for the wet bandits to find
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