What are the penalties of credit card fraud?

Credit card fraud evolves with the arrival of new technology, now achieving great success online as well as in stores. Due to its relative ease of commission and non-violent nature, its occurrence has increased dramatically now that the economy has us all trying to hang on to every dollar.

According to the U.S. Department of Commerce, credit card fraud costs cardholders and card originators nearly $500 million each year. Penalties for credit card fraud can be as light as paying a fine, so even people not usually inclined to commit crime rationalize that stealing from the credit card company or merchant is a petty, victimless crime.

Punishment for Credit Card Fraud

Using California, as an example, credit card fraud is considered a “white collar” crime, which under Penal Code 470 PC can be judged as either a misdemeanor or a felony. Depending on the dollar amount of the theft and the number of victims, a misdemeanor conviction can result in a maximum one-year sentence in county jail.

The opportunity that the Internet has opened for merchants has also made credit card fraud an exponentially more profitable source of revenue for criminals. With clone web sites luring unsuspecting consumers to enter their credit card data, criminals can abandon one site and start a new one as soon as people become alert to the problem. The higher profits obtained by doing a large volume of business across state lines calls for more serious penalties when these criminals are caught.

In addition to a stiff fine, felony convictions for this level of fraud merit a maximum of two to three years in federal prison. Unfortunately, the recidivism rate for these criminals is about 60% after being released from prison. These offenders often experience a revolving door cycle of incarcerations and repeat offenses.

California’s “Three Strikes Law” addresses the issue of repeat felony credit card fraud convictions by imposing a mandatory 25-years-to-life sentence in a State Prison for a third offense. Offenders who are convicted of a “second strike,” must receive double the prison sentence of first-time offenders. When the crimes are of a non-violent nature such as credit card fraud, the criminal may only serve 80 to 50% of his sentence before being released.

Convictions for credit card fraud will also require that you pay a $10,000 fine for a felony conviction, $1,000 for a misdemeanor, pay restitution to your victims, and work in a labor camp or perform community service. As the profitability of these crimes escalates and the risk of capture diminishes, more criminals are being lured into credit card fraud. As a result, convictions are resulting in more severe sentences.

The Nation’s Largest Case of Credit Card Fraud

Last year, the Department of Justice indicted eleven people who hacked into computers and stole an estimated 40 million credit and debit card numbers from nine major retailers which included Office Max and Barnes & Noble. Assessed as the largest and most complex case of credit card fraud in the nation, the dollar amount of the crime will not be easy to calculate.

A technique known as “war driving,” involves driving around with a wireless laptop and trolling for open networks. When a retailer network is discovered, hackers drop in a “sniffer” program to remotely capture credit card information. Since it took the retailers some time to discover the theft, it is believed that cardholders were fraudulently charged over $40 million before the cards could be cancelled.

Because of the complexity and size of this crime, which will include charges of computer fraud, identity theft and conspiracy, the indictment of these criminals will probably carry prison sentences if the accused are found guilty.

How to Thwart Credit Card Crooks

Immediately and carefully examining the monthly transaction summary that comes with your credit card bill can help prevent this type of crime. Immediately report any unauthorized charges. Your card will probably need to be cancelled replaced.

One man’s trash is another man’s treasure. If you receive unsolicited, pre-approved credit card applications in the mail, a thief rummaging through your trash can recover a discarded application and fraudulently fill it out unless it has been properly shredded. To avoid receiving these easily intercepted applications as well as telemarketing and emails, consult the Federal Trade Commission and learn how to opt out of much of the junk mail jamming your mailbox.

Household paper shredders are an inexpensive and convenient way to dispose of documents that should not fall into the wrong hands. They will even shred expired and unused credit cards.

Do business with online vendors with well-established trust. Maintain only a limited number of quality credit cards to make the job of keeping track of them easier. Keeping a well-managed stable of top-level credit cards will help improve your credit rating and minimize the risk of identity theft and credit card fraud. To assist you in deciding which credit cards are worth carrying, locate and compare different rewards programs and interest rates by exploring the “Chaser Tool” above.