You might not know it, but your credit card company is tracking your every move. Advances in how card providers and networks process massive amounts of data from card usage means they often alert consumers to potential fraud before consumers notice anything amiss.
While card providers and networks have long analyzed shoppers’ spending data to look for problems, they now have more automated systems in place as well as more sophisticated methods of sorting through data. And by the end of the year, consumers will start noticing an even newer technology that will almost completely shut down point-of-sale fraud.
Credit card companies look for patterns and search for anomalies. If you typically use your card in the D.C. area, and then suddenly it’s being used in Eastern Europe, they’ll flag that. Or if you usually keep your spending under $1,000 a month, and then there’s suddenly a purchase for $6,000, it will raise flags. The card provider will then call the customer and ask him or her to verify the purchases.
Companies are often first alerted to problems from customers themselves, and the information can then be used to identify other instances of fraud. As consumers recognize fraud on their accounts, they call in, and card providers note that in their system, and then they’ll build a sort of heat map of all the areas where they are seeing consumers report fraud. After the card providers and networks identify hot spots, like a certain merchant that keeps coming up, then they will proactively notify customers.
While much of that data analysis is automated, once computers pick up on a potential problem, a manual review is initiated, which is when customers get notified. Companies are increasingly moving to automated systems for customer notification, too. Instead of a phone call, customers might get a text message, for example, asking them if a transaction was really made by them and to respond “yes” or “no.
One potential problem is when card companies incorrectly flag legitimate purchases. In the worst case scenario, a customer who doesn’t usually travel overseas might be on his first major international trip and have his card shut down because the card provider notices unusual activity and is unable to contact the customer directly. Usually, though, companies verify the fraud first with the customer before shutting down the card. Companies can also allow some types of transactions, like monthly automated bills, to continue for a period of time until payments can be set up on a new card.