Explain credit card fraud to me -- like I'm 2 years old.

[Tracer]

I just had someone dump $645 on my credit card.

One of the charges was $40 at Dunkin' Donuts fer crissakes! Aside from that crook having a major need for caffeine and doughnuts, wouldn't he/she have to swipe a card?

I don't get it.

(I called my card and it's fixed).

[Lydia Leftcoast]

1. They copy your credit card number and make a new fake card OR

they order stuff online using your number.

I once had someone order hundreds of dollars worth of junior fashions (which I haven't worn since I was in college) and $150 worth of make-up from Sephora (have I bought $150 worth of make-up in my entire life? I don't think so) on my debit card.

Fortunately, my bank watches out for charges that are outside one's normal pattern of spending, so they called to ask me about it, and the charges were cancelled. They also sent me a new debit card.

Their watchdogs were activated again this spring, when I made a bunch of reservations for Japan and Korea. I was able to explain to them that I really was going there, so they didn't question any more charges.

[NYC Liberal]

2. They can reprogram the magnetic strip of another card.

[Spider Jerusalem]

3. A frequent method of card fraud involves use of a "skimmer" to get the magnetic data

these are usually placed on ATMs, card readers on fuel pumps, and the like: http://abcnews.go.com/US/credit-card-thieves-target-gas-pumps-atms-restaurants/story?id=24624967

Card data obtained in this way can be used to clone the card.

Note added on edit: this is why the USA needs to implement the security measures found by default on credit and debit cards issued outside of North America, so-called "chip and PIN"; aka the EMV smart card; there's a chip on the card that contains data and isn't cloneable by magnetic means, read by the card-reader, and the transaction requires a four-digit PIN:

[BadgerKid]

4. Until it's cost effective or mandated,

Chipped cards aren't happening in the US.

[Spider Jerusalem]

6. I'm sure an average of $3 billion in credit card fraud per year...

over the more than 20 years since chip and PIN technology has been available, is a very much more cost-effective solution.

[Kurska]

5. They get your number, then make a copy of your card.

Places don't ever card anymore. Stores simply couldn't care less, because it is the credit card company that foots the bill if there is fraud.

[Grammy23]

7. We got a call from American Express Friday morning regarding suspicious charges

on our AM EX card. We had eaten at a restaurant 60 miles from home the night before so I thought maybe that was the problem. Turned out that someone had charged small amounts for something from Google and Match.com for $71.95. The customer service rep I spoke to checked and there was also a $1.00 charge from last month that I had overlooked when I looked at the statement online. He took off all three charges, canceled that card and has another one on its way which we'll get by Tuesday.

I have read a little about how they pull off these fraudulent charges. They obtain your number (stolen by someone who has possession of your card, unscrupulous employees who get your number, etc. LOTS of way to steal the number and the code you have to enter to use it online). Then they charge small amounts like $1.00 or maybe up to $3.00 to "test" to see if the card is good and if anyone catches it. IF those charges go through, then they hit you with a bigger charge (Match.com) to see how that goes. And some people have had thieves charge thousands of dollars worth of merchandise.

Luckily for us, AM EX has a system in place to watch the "spending pattern" as someone else mentioned. Once your pattern is disrupted, they flag your account and notify you that something seems amiss. Sometimes it IS a legitimate purchase you made and you can quickly tell them that you DID make the purchase and all is well. But, as in our case, the charges were definitely not made by us. The restaurant charge was also mentioned but I knew that one was made by us so it stayed while the rest were disallowed.

So one moral of this story is ALWAYS look carefully at your monthly statement and be sure to look for small charges as they can be a clue that someone might have stolen your card number and is testing out your account to see if they can hit you for something really BIG and you won't notice. Familiarize yourself with your consumer rights because even if they do hit you with a big charge, you can usually get it straightened out. But it might take some time.....be prepared.

P.S. They do NOT need to have your actual card in their possession to use the number and make charges to the account.