Study Ranks Banks' Records With Credit Card Fraud
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Study Rates Companies on Credit Card Fraud Protection

Thursday, July 21, 2011

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A recent study release by Javelin Strategy and Research tries to separate the pretenders from the contenders in the world of credit card fraud protection. The results may surprise you.

According to the study, credit card account fraud costs consumers and lenders roughly $37 billion each year. Credit card debt, often caused by fraud, is a leading cause of Chapter 7 bankruptcy.

While customers are generally content with companies’ handling of fraud after it occurs, they feel more could be done to prevent fraud in the first place.

The study used a 100-point scale to judge 23 companies on their fraud-prevention abilities. The research analyzed each company’s ability to detect, prevent, and remedy incidents of credit card fraud.

The resolution of card fraud issues represented the highest score across the board, with the average company getting 18 of 20 points in this category.

This figure suggests that companies are vigilant when it comes to resolving past incidents of fraud. Other statistics, however, reveal that companies are not doing enough to prevent fraud in the first place.

The companies that were studies only achieved an average of 24 out of 45 points in "fraud protection," while the average company only got 17 out of 35 points when it came to "fraud prevention."

As for the ranking of individual companies, the top five companies with respect to credit card fraud prevention were:

  1. Bank of America
  2. Discover
  3. U.S. Bank
  4. USAA
  5. Capital One

Bank of American led the pack with a healthy figure of 87 points. The two largest credit card companies, American Express and JP Morgan Chase, finished in sixth and seventh place, respectively.

So, what can be done to remedy credit card companies’ performance? Phil Blank, a manager with Javelin Strategy and Research, offers some solutions.

Blank claims that most acts of fraud happen when the credit card isn’t physically present, such as during an online transaction.

In order to address these cyber-thefts, Blank suggests that credit card issuers send text message alerts to customers that would require them to approve or deny individual online purchases.

While this method may make online transactions a bit less efficient, it would be a relatively inexpensive solution for card issuers, and potentially save billions of dollars in fraudulent transactions each year.

In addition to this improvement, Blank also recommends that companies stop asking customers for their Social Security numbers as a form of identification. These numbers are too easily used by scam artists.

Of course, consumers also play an important role in fraud prevention. When making online purchases, make sure that you are on a secured site.

In addition, keep an eye on your card when you are using it in public. Beware of suspicious behavior by cashiers, such as swiping your card under a counter or taking it away from the register area.


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