Avoiding prepaid card fraud: signaling indicators and mitigation steps

24 November 2017

Prepaid cards are increasingly gaining momentum in some countries, where emerging fintech startups, providing payment services, offer prepaid debit cards for their users as a better spending control alternative to credit cards. While, scamsters are generally focused on traditional bank accounts, as these have the full balance of money owned by a victim, prepaid card frauds in the United States alone amounted to $500 million in 2015. Below are major prepaid card fraud schemes and recommendations from experts on how to avoid being burned.

Identity theft

This is a common method used by con artists to defraud card holders out of their hard earned money, as access to someone’s personal information allows criminals to either clone the card or perform an online transaction by entering all details requested by merchants at the checkout.

– One of the most wide-spread tools to steal user’s sensitive information or duplicate his/her card is skimming device. When a cardholder swipes his/her card at the terminal the data is read and copied to a fraudster’s card. After the original card is activated, a criminal may complete the withdrawal or payment transaction on the clone card.

– Other ways to steal cardholder’s information include card trapping and shoulder surfing. In case of card trapping, the card is retained by the ATM and after some time, when the information and the funds are stolen, it is released. Shoulder surfing means that someone may pry into the process of entering the PIN at the ATM. It may look like a stranger wants to help a cardholder if the card is stuck or something is wrong with the ATM operation.

Identity theft

Resisting the fraud:  In order to avoid identity theft, experts recommend users to be wary when they use ATMs, looking at their appearance. ATMs should not look damaged, altered, dirty or unattended. Cardholders are also strongly advised to mistrust the machines that instruct them to enter their PIN codes several times in order to complete the transaction.

Unsolicited phone calls

This type of scam is the most efficient for fraudsters and complicates the process of tracking the stolen funds. Scamsters would call a potential victim appearing as some governmental or law enforcement officer. They would use some personal data to put on a mask of a person knowing the victim and his/her relatives. Such personal details may include bank account information, address, names of relatives and so on. After that the victims are reported that their relatives face some troubles and need the funds to be paid for them in order to get released out of prison or avoid imposed fines.

Besides, con artists may pretend to be working at the internal revenue service, requesting the unsuspecting cardholder to pay the outstanding duties and taxes, otherwise they will suffer the consequences of the criminal charges.

After the cardholder provides the details required to access the funds and complete the transaction, the swindlers transfer the money from the victim’s prepaid card to another card, making further tracing virtually impossible.

Resisting the fraud: Customers should be clear about the fact that authorities will not call over the phone for requesting to clear off their debts on taxes or pay for releasing their family members out of prison using a prepaid card. Governmental agencies usually send emails and never ask to make payments using a prepaid card.

Online shopping fraud

As an increasing number of customers across the globe are turning to online shopping, fraudsters make use of it as an opportunity to misappropriate the funds during online payments. During the shopping process, scam artists use the pharming technique, where a shopper is redirected from the original retailer’s website to a fake checkout page that looks very similar to the genuine one. As a shopper completes the transaction, the funds and card details get stolen.

Resisting the fraud: Shoppers are strongly advised to use only proven and well-known online shopping platforms with the SSL-certificate protection, which is viewable in the address bar of the browser: the website address should have the “Secure” icon. Besides, online stores should have payment verification tools like Verified by Visa or MasterCard SecureCode, which ensure the privacy of an online payment and inaccessibility of personal data to any parties.

Online shopping fraud


Types of malware used to make money on inadvertence of users are abundant and hackers continue sophisticating their lockpicks to access card details and other personal information of the victims. Most common malware applications used by scamsters include keyloggers and ransomware.

Keylogger is a malicious program installed on a PC, which traces all operations performed from the keyboard, recording them in order to steal the card numbers, PINs and passwords to access the prepaid card account and money.

Ransomware is a type of malware that locks the computer of a victim and puts the shake on them to force them to pay for unlocking their desktops or laptops.

Resisting the fraud: Recommendations and advices for fighting the malware are classic: cardholders should make sure they are using reliable anti-virus or anti-malware applications, ensuring round the clock protection both online and offline.

Phishing and vishing

These tricks resemble that with the phone calls, as con artists send an email (in case of phishing) or a text message on a mobile phone (in case of vishing) instructing the victims to send some funds for helping their close friends or family members.

Resisting the fraud: In this case experts often offer users to confirm the information by calling their friends or family members to ascertain that they indeed have some troubles and ask for some financial aid.

Blockchain techs
Mastercard may launch a payment system for fast cryptocurrency transactions
Banking techs
Korea digitizes mortgage and loan documents on a blockchain platform
Writing a White Paper for an ICO: expert recommendations
Show more posts...