Prepaid debit card use has grown steadily and significantly over the previous decade, and industry predictions predict that growth will continue. Prepaid cards are frequently used in place of cash or cheques because they provide funds in a more convenient manner. Prepaid cards, unlike these earlier payment options, can be used to make e-commerce transactions without first transferring funds to a bank account.
Prepaid card expansion could benefit merchants, particularly those in e-commerce. Unfortunately, these cards have one significant drawback: fraud. What should merchants know about prepaid card fraud?
What Is A Prepaid Card?
A prepaid card is a payment card that you or someone else can top up. You can use this card to pay bills and make purchases in stores, over the phone, or online. It is very easy, more useful and safe than money. The lost or stolen card is blocked and the balance is transferred to a replacement card.
The prepaid card is not tied to a bank account and does not have a credit limit like credit cards. You can spend as much as the amount loaded on the card. The card has the card number, expiration date, and security number on it. You can use these cards in all workplaces that accept Visa and Mastercard cards.
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Types Of Prepaid Card Frauds
A prepaid debit card scam is a low-level problem with a long-term solution. Consumers utilize prepaid cards for a wide range of applications. They trust a card because it isn’t tied to their personal information or bank account. Because prepaid cards are not linked to a bank account, customers who are the victims of fraud have few legal options. As a result, solving the crime becomes much more difficult. Taking steps to combat fraud in this area can help to ensure a favorable prepaid card user experience. Your company’s brand will be safeguarded by effective fraud prevention techniques.
Swapped cards: A thief stealthily opens the packaging of a reloadable prepaid card in a store and replaces it with an identical card they bought and cloned. When a customer buys the cloned card and adds funds to it, the fraudster steps in and uses those funds to make transactions or ATM withdrawals using the cloned card.
Advance fee scams: Someone receives an email promising a large sum of money provided they pay a little charge upfront to address taxes, customs, or some other issue. Traditionally, these scams have been carried out using wire transfers, but nowadays, many scammers persuade the victim to purchase a prepaid card and use it instead, making the transaction more difficult to trace.
The other types of prepaid fraud scams are;
- Skimmed cards
- Card reloading fraud
- Repair scams
- Tax fraud
So, how to avoid card scams? Using fraud prevention software is the greatest approach to keep prepaid card fraud at bay. Purchases made with prepaid cards, as well as purchases made by customers who acquire prepaid cards, may be subject to more scrutiny, assisting in the detection of more fraud attempts.
