There’s been a lot of publicity about so-called “card not present” fraud in recent years, as the number of online transactions has increased. What about fraud that occurs when a card is actually presented for a transaction, or what’s known as “card present” fraud? While that’s a lesser concern than the former type, it seems it still could occur.

For instance, Harry writes that he has been the victim of “card present” fraud. He says First National Bank of Omaha, his card issuer, notified him about a series of $1 charges, and he also found a few bigger charges, with these transactions all occurring in his homebase of Dallas. The bank says Harry’s card was present for all the bigger transactions, two at gas stations and another at a computer store. Harry says he was working in his office on the day the transactions all occurred.

According to Harry, “The card was in my possession at the time, but I have not used the card for a while. Stupid me, I should have just told them I don’t have the card or it was stolen. Being the honest me, I told them I have the card. They did an investigation, and two weeks later a letter came telling me my request was denied. The chip was used so I am responsible, period!” While the bank did remove the $1 charges, it holds Harry liable for the bigger ones. Harry wonders how his card could have been present for the transactions.

Card present transaction fraud in the U.S

According to a 2019 study by the Federal Reserve Bank of Kansas City, the United States had a higher rate of fraud for “card present” transactions in 2016 compared to Australia, France and the U.K. Fraud rate in the U.S. for such transactions (just shy of one-tenth of a percent) was more than double that of the other countries.

The study surmises that the U.S. rate is higher because the country only started adopting chip card technology in 2015. And while other countries also require the use of a personal identification number with chip card use, the U.S. has not adopted this additional step.

It seems the U.S. lags other developed countries in general when it comes to fraud mitigation techniques, both for “card present” and “card not present” transactions. Moreover, card issuers in the U.S. tend to see their losses from fraud overshadowed by the revenues they get from swipe fees, which makes them less vigilant about fraud.

How does card present fraud happen?

While chip-enabled cards provide an additional layer of safety compared to magnetic cards, the technology is not immune from being compromised. Chip cards change your information in a dynamic manner for each transaction so that it is difficult for fraudsters to capture your card details. However, fraudsters also are constantly developing new techniques to tap into credit cards.

It is possible for criminals to make counterfeit copies of real cards and then use them at retail outlets. If an error message prevents them from successfully completing the deal, they could ask the retailer to manually key in the card information into the terminal to complete the transaction. According to Mastercard, if a transaction is completed manually, that is not adequate proof to establish card presence in case of a transaction disputed as fraud.

Savvy retailers know to ask for additional identification from customers in these cases and to be watchful for fraud. That’s because retailers will be held responsible for fraud associated with such transactions.

Swiping a credit card makes it more amenable to fraud. Gas stations, especially, have been notorious for credit card skimming scams that capture card details (which can be used to commit fraud) on their card swipe transactions. Gas stations and convenience stores had until April 2021 to make their card systems chip-enabled.

There is an incentive for retailers to prefer chip-based transactions since they are not liable for fraud in case they use chip technology and follow the proper procedures.

What to do if your card dispute is denied?

Once you become aware of a fraudulent transaction on your credit card account, you should contact your card issuer immediately to report it. Your issuer will then conduct an investigation and decide whether or not to refund you for the fraudulent activity.  In any event, you should get a replacement card as soon as you notify the issuer, to prevent any future fraud.

If the issuer denies your case, you should get an explanation for why it does not acknowledge the fraud. It may be that the bank considers that you did not take adequate measures to prevent the fraud. You may want to file a complaint with the bank’s regulator if you believe you were wrongly denied.

You could also file a complaint with the Consumer Financial Protection Bureau. If the amount involved is large enough, you may also want to pursue a case with the Federal Bureau of Investigation.

The bottom line

One way “card present” fraud activity can happen if a fraudster makes a counterfeit copy of your card. Even though chip technology offers more robust protection for card transactions than magnetic swipes, it is not infallible. Fraudsters are always looking for ways to tap into your card.

If you believe you are the victim of credit card fraud, you should notify your card issuer immediately. It will look into the matter and decide whether to reimburse you for the fraud or deny your claim.

If you believe you’ve been wrongfully denied, you could pursue a complaint with the bank’s regulator or other authorities. Harry, those $1 transactions you mention are usually a red flag. Fraudsters typically test the waters with such small transactions before venturing to bigger ones. Hope you can successfully follow up with the appropriate authorities.

Contact me at with your credit card-related questions.