When Good Credit Cards Are No Good

Scammers use a particular "sweetspot" with credit cards and I wanted to write a post about it today, so that more people understand and are not exploited by this.

Scammers love their stolen credit card numbers. They rarely have the card itself but just the numbers. They are stolen in a variety of ways but typically hackers break into systems and get large volumes of credit card numbers and then sell them, or more often than you'd like, scammers are tricking people into providing the number themselves by going to bogus "phishing" websites where they think they are logging into a real and secure website but it is not.

When scammers pretend to buy something (when they have no intention of actually paying), they used to go the route of sending a counterfeit check or money order. Some still do this. But more and more scammers are using the stolen credit card number route because they save even more money not having to pay to mail a check to their potential victim.

Here's how it works: the scammer will ask if an item is still available for sale and if so, they would like to purchase it (sometimes the story is they are moving, sometimes the story is they are at sea and buying for someone else, etc.). They need to explain why the amount is going to be for more than the price of the item - typically the story includes something about a shipper who is handling their items and will pick up your item as well - so they overpay with a credit card number and ask you to forward the difference on to pay the shipper as well. The difference is often a lot - $1000 to $5000.

Here's where people are getting trapped - the credit card will actually clear. That is because scammers love stolen credit card numbers NOT yet reported as such. So they do as much damage as they can with it before it gets reported. So for you, you'll think its a good card, because it cleared, and then proceed to forward YOUR money on to their shipper (who is non-existent). How do they pull off this part? There will be some reason why the shipper can only receive the payment via wire transfer (typically Western Union) and who is really at the other end of that transaction? The scammer... who is untraceable once he's picked up your good money.

And still you think everything is ok. So you ship out the product. And then - days or sometimes even a week or so later, the credit card company comes back and says the money was fraudulent and we are doing a chargeback in behalf of the real owner of that card. So suddenly you are out your money and your product, with no payment.

That is how it works.

Even if a credit card clears - it doesn't mean its good!

How can you avoid this scam? A couple of ways.

1. always ask for the billing address, even if their lame-ass story includes that they are moving or "at sea".

2. NEVER NEVER NEVER take an overpayment or use wire transfer services in your business dealings. The scammer's scam can not exist without this step, so if you avoid overpayments and refuse to use wire transfers, you should be good.

Here is a real-life story, a cautionary tale, an email I received this morning that prompted me to write this post. Too many good people are falling for this scam - because these stolen credit cards are clearing at first. Be on the lookout for the overpayment and the request of the wire transfer.

Hi,

Found this blog a little to late i'm afraid!

Julie Smith & her daughter Valerie approached us in June with an email. Could they buy goods, would we pay shippers direct etc etc. I did speak to the organisation that manages our credit card payments but as the cards appeared legitimate they saw no cause for concern.

The payments, 4 in total, where all authorized via Worldpay and after waiting to ensure the credit card money hit our bank account we did transfer the money i'm afraid, but only after checking with CTT/Worldpay once again that the cards were legitimate.

Sure I don't need to tell you that some 6 weeks later we get a call to say a chargeback has been applied and yes the cards are stolen/cloned.

Reported them to Fraud Action in the UK, who told me they see an awful lot of this, for all the good it will do us, we are firmly out of pocket for the shipping money we transferred.

As it took so long for the Credit Card transaction company to notify us does anyone know if we have any way of holding them to account?

In short - if it looks to good to be true then it is to good to be true and no one needs to say what an arse I am for falling for it as I have called myself that and a lot worse!