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Card fraud begins either with the theft of the physical card or with the compromise of data associated with the account, including the card account number or other information that would routinely and necessarily be available to a merchant during a legitimate transaction.

The compromise can occur by many common routes and can usually be conducted without tipping off the card holder, the merchant or the issuer, at least until the account is ultimately used for fraud.

A simple example is that of a store clerk copying sales receipts for later use.

In 1999, out of 12 billion transactions made annually, approximately 10 million—or one out of every 1200 transactions—turned out to be fraudulent.

Also, 0.04% (4 out of every 10,000) of all monthly active accounts were fraudulent.

Even with tremendous volume and value increase in credit card transactions since then, these proportions have stayed the same or have decreased due to sophisticated fraud detection and prevention systems.Today's fraud detection systems are designed to prevent one twelfth of one percent of all transactions processed which still translates into billions of dollars in losses.Credit card fraud is also an adjunct to identity theft.According to the United States Federal Trade Commission, while identity theft had been holding steady for the last few years, it saw a 21 percent increase in 2008.However, credit card fraud, that crime which most people associate with ID theft, decreased as a percentage of all ID theft complaints for the sixth year in a row.Although incidence of credit card fraud is limited to about 0.1% of all card transactions, this has resulted in huge financial losses as the fraudulent transactions have been large value transactions.


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