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Skimming: It's Worse than You Think
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In our digital age, “skimming” has become a growing problem. Skimmers are small devices, installed by criminals on ATM machines, self-serve gas pumps and other devices to steal information from credit, debit or ATM cards.
According to the U.S. Secret Service, thefts from ATM skimmers now total more than $1billion/year. That number is expected to rise. In January 2013, two people were arrested in New Jersey and charged with skimming more than $1 million from ATM machines.
A skimmer is a small plastic device — often a thin plastic sheath — that fits over the slot where you insert your card. The skimmer reads the card’s magnetic strip to steal your information. Sometimes thieves will also put small cameras near an ATM to view the keyboard as the unwary customer inserts his or her PIN into the ATM or other card reader. More sophisticated criminals will install a phony keypad over the real keypad to record the PIN and then transmit this information back to them in a text message.
Skimmers are easily purchased online. Although some states make it a crime to possess a skimmer, there is no law that prevents their sale. In other states, the skimmers themselves are perfectly legal although they have no legal use whatsoever. Skimmers can cost as little as a couple of hundred dollars or as much as a thousand dollars. The equipment to make a counterfeit card can be had for as little as $5,000.
Armed with the information stolen through a skimmer, the criminal can easily create a counterfeit card to use at ATMs, make online purchases or even sell the information to other criminals. Thieves will often time their use of the skimmed cards by making a maximum daily ATM withdrawal as soon as possible and then another withdrawal shortly after midnight of the next day.
Skimming poses many problems for victims:
- Although many banks provide no protection for victims, they will generally freeze the account while they investigate, limiting victims’ account access
- Although the federal Fair Credit Billing Act limits liability on credit cards to no more than $50 for unauthorized use, debit and ATM cards limit your potential loss to $50 only if you notify bank of a fraudulent transfer within two days of the theft.
- If you do not report the theft within two months, your entire bank account is in jeopardy.
- In addition to the direct loss you may incur, the fraudulent charges made using information stolen through a skimmer can quickly have a negative effect on your credit report — which can take months to correct.
Part of the problem is that today’s credit and debit cards generally store critical information unencrypted on the card’s magnetic strip. Once this information is skimmed, it is easy for the thief to make a counterfeit card and insert your information. The United States is one of the few countries that continue to use the old magnetic strip card. Most of the world is using newer EMV smart cards that contain computer chips with encrypted data. As card security increases in the future, present day skimmers will be less of a problem. However, scam artists (the only criminals we refer to as artists) are always adapting to the latest technology.
As always, the best place to find a helping hand is at the end of your own arm. Taking some simple precautions can reduce your chances of becoming a victim:
- Check out the surface of the ATM, particularly the slot where you insert your card. Don’t use it if it appears to be scratched or has evidence of glue or adhesive.
- If the keypad feels odd or if the keys offer unusual resistance to your touch, don’t use it.
- When punching in your PIN, shield the keypad from any prying cameras or eyes that may be present.
- Pull a little on the ATM where you insert your card. If it is loose, it may be tainted by a skimmer.
- When possible, use ATMS within bank buildings — these are more likely to be safe from a skimmer.
- Review your account statement regularly online to quickly learn of any criminal access to your account.
Digital life is liberating in many ways but, like so much else, the price of freedom is vigilance. Follow these tips and you’ll be less likely to fall victim to a cyber-thief.
Steven J. Weisman is a senior lecturer of Law, Tax and Financial Planning at Bentley University.