Carding is a type of credit card fraud in which a carder (or credit card thief) uses a stolen card to purchase branded gift cards, high-value items, or charge a prepaid card. It is also known as credit card stuffing. Unlike traditional credit card theft, carding does not always necessitate stealing the physical card—only the digital information. In many cases, attackers only require stolen credit card information obtained via data breaches or sold on the dark web.
Unfortunately, the United States is a major target for carding because it does not use chip and PIN technology like other countries do to protect debit and credit cardholders. Card fraud increased by more than 10% worldwide between 2020 and 2021, costing US merchants and cardholders $12 billion alone. It is estimated that global merchants will lose more than $362 billion between 2023 and 2028.
In this article, you will learn how carding fraud attacks work, the most common carding attack techniques used today, and how to combat them.
Let’s get started.
How carding attacks work
To understand how carding works, consider how attackers perform a typical carding operation. A carding attack is a major e-commerce security threat that typically occurs online via a merchant’s payment processor. A cybercriminal will gain access to the merchant’s online credit card processor and obtain a list of all recent debit and credit card transactions. Some carders also use data breaches at major retailers or payment processors to obtain large amounts of stolen card data. Others simply purchase stolen data from a carding shop, where thousands of compromised cards are traded each day.
That is not to say that this is the only way they can obtain stolen credit card information (we will discuss other methods in the following section). To summarize, regardless of how they retrieve the credit card data, they use a bot—software designed to perform automated tasks over the internet—to determine whether the credit card details are valid, often through brute force attacks on large amounts of stolen card data.
Once a card has been proven to be valid, it is used for even more illegal purposes. For example, it can be used to purchase store-branded gift cards or prepaid cards, which can then be resold or used to withdraw cash. These unscrupulous individuals may even choose to sell these prepaid gift cards or use them to make fraudulent purchases that are more difficult to trace. This carding guide will also explain how criminals obtain and use stolen credit or debit card information for profit.
Some carders go so far as to sell all verified card information to criminal rings via carding forums and other criminal markets. Credit card data on the dark web increased by 135% in 2022. Aside from credit card information, these forums frequently advertise a variety of other valuable digital assets for sale, many of which can be used for identity theft. Fraudsters may also trade compromised accounts from various services, including PayPal, Uber, and Netflix. Furthermore, they frequently deal in stolen loyalty card points, which can be redeemed for goods or services, expanding the scope of illegal activity in these darknet markets.
Unfortunately, the original cardholder is often unaware of the fraudulent charges until all of the stolen funds have been used or transferred to another account. At this point, it is usually too late to recover the funds.
However, carding is detrimental to more than just the cardholder. It is also harmful to the merchant. When there is a disputed purchase, the merchant may be forced to issue chargebacks. This means they must reverse the online purchases or transactions and return the funds to the credit or debit card holder’s account.
Carding reversal charges may also be imposed on the merchant as part of their service agreements, adding to their financial burden. They may also lose money on legitimate online purchases if payment processors decide to halt transactions until the problem is resolved. Recovering the products carders purchase is also difficult. Then there’s the reputational damage, which is even more difficult to repair.
What are the best carding attack techniques?
There are several carding methods for stealing and validating credit card information online. We briefly discussed how hackers can gain access to payment card data in order to carry out carding attacks. In this section, we’ll look in depth at other techniques:
Credit Card Skimming
Credit card skimming happens when a criminal replaces an ATM machine, gas pump, or POS system with a similar-looking piece of equipment. This equipment then stores the magnetic strip code, card number, expiration date, and PIN.
The criminals will then use Bluetooth to transfer card information to their own devices, rarely coming into contact with the original machine. These attacks frequently occur at the point of sale, when unsuspecting customers swipe or insert their cards without noticing the skimmer.
Card skimming attacks affected 120,000 cards and 3,000 different financial institutions in just the first half of 2023. This represented a staggering 77% increase in skimming incidents over the previous year.
Social Engineering
Social engineering is the practice of manipulating someone into disclosing confidential information, such as credit card numbers, for criminal purposes. The stolen information can also be used to gain access to the victim’s computer system and steal other sensitive data, such as social security numbers, which could lead to identity theft.
Phishing, vishing, smishing, and pharming are all examples of social engineering attacks.
A phishing scam occurs when cyber criminals send emails to unsuspecting people claiming to be from reputable companies. These emails try to persuade the victim to reveal sensitive information such as bank account numbers, credit card information, usernames, or passwords.
Vishing and smishing are similar to phishing. Only vishing uses phone calls to gain access to someone’s sensitive information. In contrast, smishing involves the use of SMS. A malicious link is usually included in the SMS. When an unsuspecting victim clicks on the link, they are taken to a website where they may be prompted to download malicious software. We’ll discuss malware later.
The final method, pharming, involves redirecting website traffic to another fake site, prompting the victim to reveal sensitive information.
Social engineering is responsible for a staggering 98% of cyber-attacks. According to the FBI’s Internet Crimes Unit, the total number of cybersecurity victims in 2021 was 323972, including phishing, vishing, smishing, and pharming.
Attackers may also use shoulder surfing, which is the visual observation of someone entering their PIN or card details in public, to steal sensitive information without using digital tools.
Malware
Malware is intrusive or malicious software designed by hackers to damage computer systems or gain unauthorized access to sensitive data such as credit card numbers and login credentials. These breaches frequently result in unauthorized charges being made with stolen card information before victims are even aware of it. Examples of malware include Trojan viruses, worms, ransomware, spyware, viruses, and adware. Malware is not only used for carding, but also for identity theft and account takeover schemes.
The majority of malware spreads as trojan viruses, such as.doc and.exe files, and can be distributed through social engineering. Malware attacks are increasing year after year. In 2022, there were 5.5 billion malware attacks, a 2% increase over the previous year.
As you can see, cybercriminals may use a combination of the tactics described above to obtain credit card information for a carding attack. That is why, for the best protection, cardholders should spend time learning about these strategies and implementing cybersecurity best practices to prevent or counter them. For example, they should avoid clicking on suspicious links. They should also take the time to verify the authenticity and credit protection services of the messages sent to them. Another option is to use credit protection services, which can alert them to fraudulent activity on their card.
eCommerce businesses, such as yours, should also do their part. They should identify all points of vulnerability on their website that hackers could exploit to obtain sensitive information, such as customer credit card information. They may use AI chatbots for hacking purposes to detect these. Once identified, they can make the necessary changes or implement appropriate cybersecurity solutions to ensure that their customers do not fall victim to carding attacks. Weak security can unintentionally aid cybercriminals in conducting carding operations against both large platforms and small online stores. When malware is used to collect payment information, it can quickly spread fraud and cause financial losses across multiple platforms.
What are the measures implemented by businesses to combat card fraud?
As criminals improve their schemes, businesses must implement stronger security measures to protect sensitive customer data and reduce fraud risks. That being said, let’s take a look at some other measures that businesses use to combat carding fraud and that you can also implement.
- Address Verification Servic (AVS).
The AVS system compares the billing address entered at checkout to the one in the card issuer’s records. The outcome can be one of three:
Full match.
Zip code and address match.
No match.
If the information does not match, the transaction is considered criminal and will be declined immediately. Sometimes the AVS system leaves it up to the merchant to decide whether or not to decline a partial match.
Unfortunately, AVS only operates in the United States, Canada, Australia, New Zealand, and the United Kingdom.
- CVV (Card Verification Value) checks
CVV is a three or four-digit code found on the back of a credit or debit card, near the signature strip.
You can request this unique code at checkout to ensure that the shopper who wants to make a purchase has physical possession of the card. This will make it impossible for cardholders to use credit card numbers obtained from criminal marketplaces or the Dark Web for fraudulent purposes.
- Geolocation Tracking
Geolocation tracking uses GPS technology to identify the user’s location or IP address and compare it to the one that is typically used and was originally registered by the cardholder. Some advanced geolocation tracking systems can detect suspicious patterns based on device type, transaction history, and even time of day.
Geotrackers can also detect users who are accessing a website via proxy IPs. Proxy IP addresses allow users to appear to be accessing a site from one location while in fact being in another
While it’s possible that the actual cardholder is simply traveling, a geolocation mismatch should not be overlooked. You should conduct additional tests, such as asking questions that only the legitimate cardholder would know, to ensure that the card details are in the right hands.
4) CAPTCHA
CAPTCHA is an online security test designed to deter bots by attempting to verify that the website user is human. CAPTCHA stands for Completely Automated Public Turing Test to Tell Computers and Humans Apart. It follows a challenge-response framework.
A CAPTCHA, for example, may display several similar images and ask the user to select those that include a bicycle, fire hydrant, motorcycle, or other objects. The following is an example of a CAPTCHA test.
While humans can do it easily, bots find it extremely difficult, if not impossible. It is an effective method of preventing AI bots from decrypting passwords and protecting your e-commerce store. CAPTCHA helps to prevent criminals from using bots to conduct automated financial fraud, such as testing stolen credit card numbers.
To add CAPTCHA to your website, simply register it with Google’s reCAPTCHA website.
Aside from these measures, businesses can choose to invest in cybersecurity training for their IT and security teams. Obtaining a cybersecurity certification will allow you to respond more effectively to carding fraud incidents.
- Multi-factorial authentication (MFA).
Multifactor authentication improves security by requiring users to verify their identity using multiple methods, most commonly a password and a temporary code sent via SMS, email, or an authenticator app. This makes it much more difficult for carders to access customer accounts, even if their login credentials are compromised.
In conclusion, web carding fraud is a growing problem that must be addressed. This type of fraud occurs when a carder (or credit card thief) obtains a user’s credit card information or purchases stolen credit card information on the dark web, confirms the details with bots, and then uses the card illegally.
As an eCommerce business, you must safeguard against these threats. Implement one or more of the following measures: AVS, CVV, geolocation tracking, and CAPTCHA. You might also look into AVS, which is only available in a few countries.
With the right security measures, you will not only protect your online store. You’ll also protect your customer data and, ultimately, establish trust and credibility, both of which are essential for business growth. Carders frequently use stolen data to purchase gift cards, so online retailers must have early detection and fraud prevention tools in place.
