Feb. 26, 2010 -- Chainsaws, Rogaine and X-Box consoles: these are a few of thieves' favorite things. So don't be too surprised if you get a phone call from your credit card company asking if you've suddenly gone bald.
Credit card fraud is on the rise, and organized crime rings have figured out many ways to steal your credit card and take it on a shopping spree at national chains such as Best Buy and Target. Most of the time, they're not shopping for themselves. Instead, they're looking for hot brands and popular electronics that will easily resell on the Internet or at street stands.
"The dumbest of criminals will buy a cell phone for themselves," says Joe LaRocca, senior advisor for asset protection at the National Retail Federation. "Most of them want merchandise that can be sold for a profit."
Criminals charged $15 billion to stolen credit card accounts in 2008, up from $12 billion the year before, according to California-based financial security consultants Javelin Strategy & Research.
Other items on the list of credit card thieves' favorite picks, according to the NRF:
Enfamil baby formula
Victoria's Secret lingerie
Add to that list big-ticket electronics such as televisions, stereos; pricey jewelry and watches; and gift cards which can be loaded up and resold without leaving a paper trail.
Thieves also have some favorite shopping outlets. Sources were reluctant to give names on the record, worried that they might be extending an invitation for more thieves to target those stores.
However, they agree that large national chains, known for their wide selection of goods and the anonymity they offer shoppers, are particularly popular.
Many large chains don't check ID to verify the cardholder's identity, and checking signatures rarely leads to a catch, since signatures can be easily forged.
As a result, criminals favor big-box stores such as Wal-Mart and Target, as well as department stores that sell designer goods, such as Macy's.
Eric Hausman, a spokesman for Target Corporation disputes that criminals "favor" Target, but admitted that theft poses a significant problem.
"Organized retail crime is one of the biggest issues for us," he says, pointing out that Target is the country's second–largest retailer and therefore attracts heavy traffic from all kinds of shoppers.
Like most large retailers, Target relies on an electronic comparison of signatures -- which is done automatically on electronic signature pads -- to verify a shopper's identity.
"Generally speaking we do not check ID's," says Hausman, arguing that electronic signature verification is much more effective. "We're also concerned about the safety of our team members, and we don't want them to be handling a certain situation" that might put them in danger.
Other retailers did not return calls seeking comment.
In addition, Amazon.com is particularly vulnerable to fraud because it can't even verify signatures. Online merchants have more than double the rate of fraud of brick-and-mortar stores, according to Javelin Strategy & Research.
"The anonymity associated with remote purchases essentially means the merchant takes that payment on good faith," says David Fish, a senior credit card analyst at Mercator Advisory Group.
"Apple stores have a real problem, because everyone loves Apple right now," says one source, who did not want to be named. "If everyone loves it, then thieves love it too."
Interestingly, credit card fraudsters also love tickets -- for flights, concerts or sports games -- because they can be shipped by e-mail from an anonymous e-mail account.
Criminals have many ways to get their hands on stolen credit cards.
A small minority still snatch purses and run off to the nearest store to make a large purchase before the card is cancelled.
Most criminals, however, prefer to steal the account information associated with a card, and then use it to either to emboss a new card and load the information into the magnetic strip; or simply make an online purchase where the actual card doesn't have to be presented.
The information on the magnetic strip can be stolen in many different ways. Crooked waiters or sales clerks sometimes have their own swiping machines that they'll run your card through while you're making a legitimate purchase. Hackers break into banks' databases.
The crooks who stole the cards aren't necessarily the same ones who make the purchases. Organized crime rings have spread around the world with the mission of buying and selling credit card account data.
Eye Drops and Formula
"The card is stolen in the U.S., details are transmitted to somewhere in Asia and 20 copies are produced and used in the name of Mr. So-and-So from Massachusetts," says Joshua Bamfield, director of the U.K.-based Centre for Retail Research and publisher of the annual Global Retail Theft Barometer.
Retailers are fighting back with increasingly sophisticated technology. FICO, the same company that keeps track of consumers' credit scores, sells one of the most widely used fraud detection programs. By analyzing individuals' shopping patterns, the software can often detect if the card is being used in an unusual manner. That's why you will sometimes receive a phone call from your credit card company if you try to use the card while on vacation abroad or if you suddenly acquire a taste for sapphires.
To circumvent these programs, fraudsters will often shop at popular chain or grocery stores.
"Criminals trying to buy things that are more typical for consumers," says Mike Urban, senior director of fraud solutions at FICO. "Grocery store purchases go under the radar."
Surprisingly, many grocery basics, such as baby formula and eye drops sell like hot cakes on the black market.
Gift cards can also be stolen very effectively, because they don't leave behind a trail. By transferring funds from a stolen credit card onto a gift card, criminals buy themselves time to shop at their leisure.
"Gift cards extend the life of a credit card," says NRF's LaRocca. "When you buy a $1,000 American Express gift card, the purchases you make on it are not linked to you. Before someone makes the connection you now have weeks to use it."
Tips for Consumers
Know your rights. Under federal law, you're not liable for more than $50 of fraudulent charges on your credit card as long as you report the problem promptly.
Watch for imposters who ask you to "verify" your account number. Your real credit card issuer already has your account number.
Be careful about e-mails that offer credit services. Many unsolicited e-mails are fraudulent.
Don't leave your card lying around your home or office where others can see it, and never lend it to anyone.
Check your credit card bills as soon as they arrive. Follow the instructions on your bill for disputing charges and make copies of any letters sent to your credit card issuer.
Keep your account number and issuer's phone number handy in case your card is stolen. Keep them separately from your purse or wallet in case they're stolen too.
Tips courtesy: National Consumers League