Credit Card Piggybackin

Credit piggybacking has become an increasingly prevalent issue in recent years, according to the authoritative credit monitoring website FICO, with the practice growing by 50% since 2016. Legitimate credit piggybacking can create advantages for both the primary cardholder and authorized user; a scam can bring disaster to enterprise operating entities along with their consumers. In 2021, global credit card fraud losses totaled $28.58 billion.

TRUSTID found that unauthorized account access ranks as a major contributor to credit card fraud loss. This post aims to provide a comprehensive guide on credit piggybacking fraud. By revealing its modus operandi, the effects that businesses suffer, and—most importantly of all—what businesses can do proactively to stop credit card use for piggybacking fraud. With these methods of prevention firmly in mind and practice, businesses can empower themselves against this kind of fraud and protect their bottom line.

What is Credit Card Piggybacking?

Credit card piggybacking is a practice where individuals improve their credit scores by becoming authorized users on established credit accounts. This arrangement allows them to benefit from the account holder’s positive credit history without being responsible for payments. The practice has gained traction due to its potential to enhance creditworthiness, especially for those with limited credit histories.

It is legal as long as both parties consent. However, fraudulent credit piggybacking involves deceit or unauthorized use, such as when someone adds themselves as an authorized user without the account holder’s knowledge or consent, or when there’s intent to deceive for credit benefits.

How Credit Card Piggybacking Works?

Credit piggybacking relies on the way that credit scores are calculated. Your credit score is based on your payment history, credit utilization, period of credit history, and various other factors. If someone becomes an authorized user on your credit card account, it can affect your credit files in a variety of ways:   

Traditional Piggybacking:

  • The primary account holder adds a friend or family member as an authorized user on their credit card account.
  • The authorized user may receive a secondary credit card linked to the primary account holder’s credit line.
  • The activity and payment history of both the primary and authorized user cards are reported on the credit reports of both individuals.
  • If the primary account holder has a good credit history and low credit utilization, these positive credit behaviours can benefit the authorised user’s credit score.

For-profit Piggybacking:

  • Some companies offer services where individuals can pay to become an authorized user on a stranger’s credit card account with an excellent credit history.
  • In these cases, the individual does not receive a physical credit card or access to the stranger’s account; they are added as an authorized user.
  • The payment history and credit utilization of the stranger’s account are then imported onto the individual’s credit report, potentially boosting their credit score without any actual credit management on their part. 

Difference Between Traditional And For-Profit Piggybacking 

The critical difference between traditional and for-profit piggybacking is that traditional piggybacking involves being added as an authorized user by someone the individual knows. In contrast, for-profit piggybacking involves paying a third-party service to be added as an authorized user on a stranger’s account. 

In both scenarios, the individual’s credit score can benefit from piggybacking on the positive credit behaviours of the primary account holder. However, for-profit piggybacking raises ethical concerns and could be considered fraud.   

Which Businesses Can Be Impacted by Piggybacking Abuse?

Businesses that can be affected by piggybacking abuse include: 

Business TypeImpact
Financial Institutions (Banks, Credit Card Issuers)
– Higher costs of risk management – Damage to reputation 
Retailers and Merchants– Potential losses from fraudulent transactions and chargebacks
Credit Reporting Agencies– Challenges in maintaining accurate credit reports and scores
Internet Service Providers (ISPs)– Potential breach of contract issues if customers share bandwidth with unauthorized users
Businesses with Public Wi-Fi Networks– Unauthorized access to their network and potential legal consequences

Risk of Credit Card Piggybacking  

Credit piggybacking abuse can significantly impact businesses. Here are some of the ways: 

Effects of piggybacking frauds
  • Increased Default Risk: Credit piggybacking artificially boosts credit score, making those gain access to credit they are not qualified for.  
  • Higher Costs of Risk Management: A direct consequence of piggybacking abuse results in high costs for risk management. Businesses need to spend more resources to monitor and prevent such fraudulent activities.
  • Damage to Reputation: Piggybacking abuse erodes trust and brand perception in customers’ eyes.  
  • Regulatory Scrutiny: Involvement in credit piggybacking may result in regulatory scrutiny and potential legal consequences, such as fines and penalties.  
  • Distorted Market Dynamics: Such practices distort market dynamics by artificially increasing access to credit, skewing legitimate competition.  

How to Prevent Businesses From Credit Card Piggybacking Attacks?  

Here are some effective ways to prevent credit card piggybacking attacks:

Credit piggybacking prevention tips
  • Limit Authorized Users: Be extra cautious while adding users to your credit card account. Adding trusted individuals, such as family members and friends, is always better. Also, if you must add somebody else, monitor their activities regularly. For example, if you add any person, make sure to verify them. 

If you plan to add your spouse as an authorized user, make sure to verify their identity and monitor credit card activity regularly to ensure no unauthorized charges or misuse happens.

  • Review Credit Reports: Check your credit reports regularly for unauthorized user additions. If you notice an unfamiliar credit card account or an authorized user, this could be a sign of piggybacking fraud. If you detect such activity, immediately contact the credit card issuer.   
  • Use Credit Monitoring Services: It will help subscribe to a credit monitoring service if you don’t have time. It sends you alerts immediately if any suspicious activities are reported. For example, a fraud detection tool can immediately alert you when someone uses your identity to open a new credit card or adds an unauthorized user to your existing credit card account. 
  • Set Fraud Alerts: Create a fraud alert on your credit reports. This requires creditors to verify your identity before opening new accounts or adding authorized users, making it more difficult for piggybackers to abuse your credit.  
  • Be Cautious with Personal Information: Avoid sharing your Social Security number, date of birth, or account numbers with untrusted sources, as piggybackers could use this information to access your credit accounts.  
  • Monitor Account Statements: Regularly review your credit card statements for any unauthorized charges or activities which could indicate that someone has gained access to your account.
  • Report Suspicious Activities: If you suspect you’ve been a victim of credit card piggybacking or any other form of fraud, report it immediately to your credit card issuer and the appropriate authorities, such as the Federal Trade Commission (FTC) or local law enforcement.

How Sensfrx Can Help 

Sensfrx employs a multi-layered approach to combat credit card piggybacking and similar frauds. Its strong encryption safeguards sensitive data, while device fingerprinting detects patterns of multiple registrations from the same device. The intelligent algorithm monitors user behaviour for anomalies, and dynamic risk scoring evaluates transactions in real-time to identify potential fraud. Sensfrx also provides early alerts for unauthorized access, flags disposable email addresses to spot friendly frauds, and offers customizable fraud policies. Automated tools and real-time unmasking further enhance its ability to prevent financial losses and quickly react to threats.

Conclusion 

The alarming surge in credit piggybacking fraud is a pressing issue that demands immediate attention.Fraudsters are employing complex strategies to exploit credit card accounts, causing significant harm to individuals and financial institutions. With such frauds becoming increasingly prevalent, it is crucial to confront these challenges head-on and implement effective measures to counter such activities. However, it’s important to note that fraud prevention does require time and resources, which could otherwise be utilized for more productive endeavors.

At Sensfrx, we offer a comprehensive solution to prevent a wide range of fraudulent activities. This allows you to focus on business growth without the worry of such scenarios. Contact our team for more information.

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