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What Is Carding? A Complete Overview of This Payment Card Fraud

Carding is a form of payment card fraud that involves stealing credit or debit card data like account numbers, expiration dates, and security codes and then using that information illegally to make online purchases or withdraw cash. Essentially, criminals "card" accounts that don‘t belong to them.

According to the FTC, around 9 million Americans fall victim to some form of identity theft or payment card fraud every year. Financial losses total in the billions annually. With carding crimes specifically, victims often have limited recourse in recovering stolen funds, making this a particularly damaging form of fraud.

So how exactly does carding work and how can you reduce your risks? Let‘s take a comprehensive look at what you need to know about carding.

Defining Carding as a Form of Payment Fraud

Carding refers to the systematic theft and fraudulent usage of credit or debit card information to obtain money or purchase goods illegally. The term "carding" comes from criminals "carding" accounts by stealing and using payment card data that does not actually belong to them.

At its core, carding involves these steps:

  • Criminals gain access to consumer payment card data through phishing, data breaches, or by purchasing stolen card information on black market sites on the dark web.
  • Fraudsters validate the card data by making small purchases to verify the cards are active.
  • Valid "carded" accounts are then used to buy gift cards, prepaid credit cards or other items that are easily resold for cash, transferred, or used to buy goods they can resell.
  • The funds obtained through the scam are difficult to trace due to the layer of anonymity added by first buying retail gift cards with the stolen payment cards.

Carding differs from crimes like identity theft because the account information is specifically used to drain funds or steal cash – not open new fraudulent accounts. Unfortunately, cardholders often have little protection against these losses.

The Rising Threat of Carding Attacks

Payment card fraud has been steadily rising as data breaches and sophisticated cyber theft tools become more common.

According to the 2022 Identity Fraud Study by Javelin Strategy:

  • Nearly 1 in 3 consumers were notified of a data breach where their personal information was exposed.
  • Roughly 1 in 5 consumers were the victim of payment card fraud in 2021.
  • Criminals stole nearly $52 billion through various forms of identity fraud just last year.

With the surge in online shopping and electronic payments, carding is on the rise. And due to the global nature of carding crimes, lack of jurisdiction, and use of cryptocurrencies, prosecution is challenging. Consumers and businesses alike need to be vigilant in detecting and preventing carding attacks.

How Criminals "Card" Accounts

Carders rely on a variety of techniques to steal valid credit and debit card data. Some of the most common carding methods include:

Phishing Schemes – Phishing emails, texts, calls, or fake websites impersonate banks, delivery companies, social media sites, and more to trick consumers into entering account information, often due to a sense of urgency conveyed. Links take users to convincing but fraudulent lookalike sites to harvest data.

Malware Infections – Malicious software secretly installed on devices can record keystrokes, steal passwords, take screenshots, and log payment card numbers typed into online retailers.

Physical Skimmers – Skimmers and shimmers placed inside or over top of ATM, gas pump, and POS card readers copy and store data from inserted cards. This allows criminals to clone cards.

Hacking Card Processor Systems – Directly infiltrating the payment systems of large retailers and merchants through hacking provides mass quantities of consumer card data for carders.

Purchasing Bulk Stolen Cards on the Dark Web – Vast troves of payment card information stolen through data breaches is sold on dark web marketplaces frequently used by carders.

Once carders have access to active payment card data, they use it quickly to maximize their profits through carding before the fraud can be detected and the cards get cancelled.

Alarming Impacts on Carding Victims

For the millions of consumers who fall victim to carding attacks annually, the financial toll can be devastating. With carding schemes and online fraud, there is often limited recourse in recovering any stolen funds since the merchant has already delivered the purchased items to the scammer.

If carders drain a bank account connected to a debit card, overdraw fees and account closure can result. Having accounts suddenly emptied leads to missed bill payments, credit damage, and loan defaults in severe cases. Identity recovery efforts for carding victims can take months to resolve.

Consumers are advised to use credit cards when shopping online, since debit cards lack the same level of protection against fraudulent charges. Still, a compromised credit card means carders rack up huge debts in the victim‘s name until the activity is reported and resolved.

The average victim spends over 7 hours resolving each ID theft case and loses nearly $500 out-of-pocket in the process according to Javelin Strategy research. This makes awareness and prevention key in the fight against carding.

8 Tips to Protect Your Payment Cards Against Carders

While completely eliminating the risk of carding is impossible, consumers can take proactive steps to reduce their chances of getting carded:

  • Monitor your statements and accounts routinely – Catching unauthorized charges quickly limits damages. Many banks offer text or email alerts when large purchases are made.
  • Avoid using debit cards online – Debit cards don‘t come with the zero liability protections of credit cards. Using a credit card online provides an extra buffer.
  • Only shop on secured sites – Look for the "https" prefix and padlock icon indicating encryption is protecting your data as it travels between you and the retailer.
  • Never email or text full card details – Legitimate companies will not ask for your full credit card number or security code via email, text, or social media. These are signs of phishing.
  • Use virtual card numbers – Many banks now offer temporary single-use card numbers you can use when shopping online if you‘re unsure of the merchant.
  • Enable two-factor authentication – Adding another step, like an OTP code to your account login helps prevent criminals from accessing accounts even if they have your password.
  • Keep devices clean – Ensure your antivirus software is active and up-to-date to detect malware designed to steal financial data. Avoid downloading anything from unverified sources.
  • Check statements weekly – Frequently checking your transaction activity makes spotting any fraudulent use quick and easy. Immediately report unfamiliar purchases.

This vigilant approach reduces opportunities for carders to utilize your payment card information illegally. But another key line of defense is found in the security measures implemented by merchants and payment processors.

Retailers Implement Layers of Carding Protection

Responsible merchants take precautions to protect your data and prevent their systems from being compromised by carders, such as:

  • Using secure encrypted payment gateways when processing online transactions. Thisscrambles payment data as it‘s transmitted.
  • Requiring additional verification like CVV codes, ZIP code, and/or billing address checks to confirm the customer has the card in hand during purchases.
  • Deploying EMV chip technology and tokenization to replace raw card data with tokenized stand-ins, making account numbers useless if stolen.
  • Monitoring all transactions and network activity for signs of compromise or suspicious patterns indicative of fraud.
  • Employing AI-powered fraud detection platforms that analyze data and transactions to identify criminal behavior in real time.
  • Reporting any suspicious transactions, accounts, or activity to the relevant authorities to allow further fraud investigation.

Many merchants also provide shoppers with virtual credit card numbers that can only be used for a single transaction. This means even if carders get the one-time use details, they cannot reutilize the number.

While no single solution eliminates carding, this layered security approach curtails the impact of carding attacks on consumers and businesses. But more work still needs to be done.

Overcoming Challenges in Fighting Carding Crimes

One hurdle in bringing carders to justice is that threats span international borders. Local law enforcement often lacks the jurisdiction or resources to pursue global cybercriminal groups.

In the U.S. carding falls under federal laws against access device fraud, identity theft, and computer crimes. Still, the rise of cryptocurrencies further obscures tracing illicit funds. When carders are prosecuted, they face serious fines and multi-year prison sentences.

Consumers and merchants must remain vigilant in identifying and reporting any carding activity to authorities. Ongoing security education and following protective measures greatly reduce the carding threat over time.

The Bottom Line on Carding

Carding refers to the systematic theft and illegal usage of consumer credit and debit card information to buy goods resold for cash or fund criminal enterprises. Awareness and preventative steps empower consumers against this fast-growing form of payment card fraud.

Stay alert in monitoring your accounts, choose credit over debit when shopping online, and stick to secured sites. If you ever suspect you‘ve become the victim of carding, immediately contact your bank and local authorities. The sooner fraudulent activity is reported, the less damage criminals can inflict.


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