The Perils of Credit Card Fraud at Restaurants


With the widespread acceptance of using credit cards for everyday purchases, credit card fraud has become a ubiquitous and ever increasing problem. In the last 2 weeks I have personally had two different credit card numbers stolen and used to buy everything from electronics in Hong Kong to flowers in Manila. While the average person can easily tolerate credit card fraud once and a while, two incidents in a short period of time is alarming. This has caused me to radically rethink the way I use credit cards in an effort to prevent this kind of fraud from occurring again.


I have a longtime girlfriend--you know what that means right? I end up going out to restaurants at least once a week sometimes more. My lovely girlfriend is a self-confessed foodie who likes to take advantage of all of the new and exciting dining options Los Angeles has to offer. These are usually hipster/trendy establishments with "hot" new celebrity chefs with exotic menu selections (grasshoppers, uni, eel,oxtail, etc) and small portions available at egregiously inflated prices. I always pay with my credit card because I earn 2x cash back (so in essence I trade my privacy for 2% cash back).

Well I went to two restaurants last week (Fig and Olive in Beverly Hills) and a Mexican restaurant on PCH, which will remain nameless because it is unknown to the foodies and thus never busy or loud with excellent customer service (have been there over 10 times). I of course paid for the two meals with credit card #1 and thought nothing of it. Within 72 hours I get a fraud alert from my credit card company wondering if I was buying high-end electronics in Hong Kong. Of course not! No problem though, credit card company blocked account and reissued card with new number. Four days later I get another fraud alert from my credit card#2 company saying some supercilious individual was try to purchase large amounts of floral arrangements in Manila, Philippines along with electronics in Singapore. I started to get a little concerned here--has my identity been stolen? has someone broken into my home safe and copied every credit card i own? what's going on here? So I called the second credit card company and talked for over an hour with one of their fraud specialists who gave me some very good tips about using credit cards and how to reduce the risk of fraud.


So the question remains: how and when did these credit card thieves steal my card numbers?

The fraud department told me was that restaurants are one of the prime targets for credit card fraud. The majority of patrons pay with their cards due to the convenience and large amounts involved. You give your card to the waiter and they take the card to be processed (outside your view usually). During this time you have no idea what they are doing with your card. Credit card fraudsters will often work with waiters at expensive restaurants and pay them to swipe customers cards using an electronic reading device which stores the card numbers (all without restaurant management knowing) . Then these pieces of garbage will copy your information onto blank credit cards and sell them on the black market.

Credit card companies are well aware of this problem and simple analytical software can pinpoint where the fraud was talking place. If 20 customers experience fraudulent activity on their cards and they all had one restaurant or other charge location in common in the last week, then it is pretty simple to track down the criminal. However, credit card thieves know this dynamic, so they will copy and store your information and wait a few weeks or months before using your credit card number. This makes it a little more difficult to track down exactly where the crime occurred.

As for my 1st case of credit card fraud, the fraud specialist said that most likely it was at a restaurant location since this is where I use my credit cards the most (not pointing the finger at Fig and Olive or the Mexican restaurant). This incident was still under investigation.

The second case was more difficult and I could not get an answer from the fraud department. I had not used the card in over a month prior to the fraudulent activity occurring.

While the credit card companies were very good with helping me to identify and resolve these fraudulent transactions, I realized that I was in fact very lucky. These fraudsters made the mistake of using my credit cards outside of the country. This made it very easy for the credit card companies to flag the transactions and decline them. The real problem would be if fraudsters used the card in my immediate and surrounding locality for routine goods such as food, gas, clothing, etc. I doubt the credit card companies would have been as quick to respond to the those charges. Furthermore, the process of canceling the credit card and having to wait for a new one to be sent left me without any credit cards, which was a major hassle since you can't purchase anything online these days without a credit card. Anyway that is my story.

Here are some tips I got from the fraud department on how to avoid your credit card from being compromised:

1. If possible, always manually swipe your own card---this prevents a 3rd party from having the opportunity of stealing your card number.

2. If a 3rd party must swipe your card, always observe them---fraudsters would have to be highly ambitious or stupid to try to steal your card in your presence.

3. Monitor Credit Card Account Daily---it only takes a few second to log on and check posted or pending transactions to your account. The faster you inform the credit card companies the easier it is to resolve the problem. I actually caught a major error for a legitimate transaction. Instead of charging me 127.89, I was charged $1,274.89. Called and got in quickly refunded. It is funny how merchants never make a mistake in my favor!

4. Be Very Careful at Restaurants and Gas Stations---These are some of the highest frequency locations for credit card fraud. I will not be using my credit card at restaurants anymore, except when I can swipe the card myself. Once bitten twice shy and all that.