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What is Credit Card Spinning or Card Testing Fraud?
Credit card spinning fraud, also known as "card testing" or "carding," is a sophisticated and malicious technique used by criminals to validate stolen credit card numbers for subsequent illicit activities. This fraudulent method typically involves acquiring a large number of stolen credit card details, often from data breaches or dark web marketplaces. Bad actors use automated tools and scripts to quickly test these cards by making numerous small, low-value transactions across various merchant websites. The primary objective is to identify which cards are active and have available credit, all while avoiding detection by traditional security measures.
To evade detection, these small transactions are designed to fly under the radar, typically staying below thresholds that might trigger immediate fraud alerts from banks or payment processors. The automated nature of these tools allows criminals to test a high volume of cards in a short period, systematically checking each one for validity. Once a card is confirmed as active, it is either used for larger fraudulent purchases or sold on the black market at a premium, given its verified status. This entire process poses significant risks to businesses, leading to increased chargebacks, higher processing fees, and potential reputational damage due to the association with fraud.
Can Credit Card Spinning Fraud Wreck Your Business?
Yes, credit card spinning fraud can significantly harm your business in various ways. Here are the primary impacts:
Financial Losses Due to Credit Card Testing Fraud
Credit card spinning or testing fraud can lead to substantial financial losses for your business. When criminals test stolen credit card numbers by making small transactions, the cumulative effect can result in significant unauthorized charges. Even though these transactions are low-value, the sheer volume can add up quickly. Additionally, once a card is validated, it can be used for larger fraudulent purchases, leading to more considerable losses. Businesses also face chargebacks when legitimate cardholders dispute these unauthorized transactions, resulting in further financial penalties and lost revenue.
Increased Chargebacks Due to Credit Card Spinning Fraud
Chargebacks are a major consequence of credit card spinning fraud. When unauthorized transactions are detected, cardholders often initiate chargebacks to reclaim their money. Each chargeback incurs fees and penalties from payment processors, which can accumulate and become a substantial financial burden. Excessive chargebacks can also lead to higher processing fees and even the termination of merchant accounts by payment processors, severely disrupting business operations
Higher Processing Fees Because of Credit Card Testing Fraud
Credit card spinning fraud increases the number of small transactions processed by your business. Payment processors typically charge fees for each transaction, so an influx of small fraudulent transactions can lead to higher overall processing costs. This increased volume of transactions can strain your payment processing infrastructure and result in additional administrative costs to manage and resolve fraud-related issues.
Reputational Damage & Credit Card Spinning Fraud
Reputation is something that business spend years building and maintaining, and frequent fraud incidents can damage your brand’s reputation. Customers who experience fraud through your business might lose trust and decide not to return. Negative reviews and word-of-mouth about security issues can deter potential customers, affecting your market position and long-term business prospects. A tarnished reputation can take years to rebuild and can significantly impact customer loyalty and acquisition
How Credit Card Testing Fraud Works
1. Obtaining Stolen or Leaked Card Numbers
Sources: Thieves obtain stolen credit card numbers from various sources, including data breaches, dark web marketplaces, and phishing attacks. These numbers may lack complete details such as expiration dates and CVV codes.
Data Sets: The stolen data sets typically contain large numbers of credit card details, which the criminals then test for validity.
2. Fraudsters Carry Out Automated Testing
Card Testing Tools: Fraudsters use automated scripts and bots to perform numerous small transactions across different merchant websites. These transactions are designed to be low-value (e.g., under $1) to avoid raising immediate red flags.
Testing Method: The goal is to test as many card numbers as possible in a short period, checking for which ones are active and can successfully authorize transactions.
3. Then They Attempt to Verify Valid Cards
Successful Transactions: When a small transaction is approved, it indicates that the card is valid. Thieves will then use or sell these verified card details for larger purchases.
Further Exploitation: Validated cards can be used for high-value fraudulent purchases or sold on the black market at a premium price.
4. And Work Hard to Avoid Merchant Detection
Low-Value Transactions: Small, seemingly harmless transactions help fraudsters avoid detection by banks and payment processors.
Diverse Merchants: Using a wide range of merchants to spread out transactions further reduces the risk of detection.
How to Prevent Credit Card Spinning Fraud?
1. Enhanced Fraud Detection Systems
Real-Time Monitoring: Implement advanced fraud detection systems that monitor transactions in real-time and use machine learning to identify suspicious patterns.
Fluid Pay WatchDog: Utilize systems like Fluid Pay WatchDog, which leverage collaborative intelligence and data from a network of merchants to detect emerging fraud trends.
2. Set Transaction Limits and Velocity Checks
Transaction Thresholds: Set limits on the number and frequency of transactions from a single card or IP address within a specified timeframe.
Velocity Rules: Implement rules that flag or block transactions occurring in rapid succession.
3. Multi-Factor Authentication (MFA)
Verification Steps: Require additional verification steps, such as sending a one-time password (OTP) to the cardholder’s mobile device or email, for transactions flagged as suspicious.
Layered Security: Employ multi-layered security measures to add additional hurdles for fraudsters.
4. Community Intelligence Sharing
Collaborative Defense: Participate in fraud intelligence networks where businesses share data on fraudulent activities. This helps in recognizing and preventing new fraud tactics quickly. Durango Merchant Services and our partners have the technology to help you access these community intelligence sharing tools.
5. IP Address Monitoring to Fight Card Testing Fraud
Geolocation Checks: Monitor the geographic location of IP addresses used for transactions. Significant deviations from the cardholder’s usual locations can indicate fraud.
Blacklisting: Maintain a blacklist of known fraudulent IP addresses and block transactions originating from these sources.
Contact Durango Merchant Services to Make Sure Your Gateway is Ready to Combat Credit Card Spinning Fraud
To protect your business from the devastating effects of credit card spinning fraud, we can’t overemphasize how important it is to implement robust fraud prevention measures. Durango Merchant Services offers comprehensive solutions designed to fight credit card spinning fraud effectively. By leveraging advanced fraud detection systems, multi-factor authentication, and collaborative intelligence networks, Durango Merchant Services can significantly reduce the risk of fraudulent transactions. Contact Durango Merchant Services today to secure your payment processing system and safeguard your business from financial and reputational damage. Visit Durango Merchant Services to learn more and take proactive steps to protect your business.
