Top 5 Ways Thieves Use Your Stolen Credit Card

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It can be a shock. You go online to check your credit card statement, and you're presented with a series of hefty transactions you know you didn't make. Thousands of dollars, gone in the blink of an eye.

Luckily, credit cards have fraud protections not offered by debit cards. As long as you report the errors quickly, you're covered for these fraudulent charges. But it does make you wonder … how do the thieves do it, and how might they have used your stolen card? Here are the five most common uses for a card that has been "liberated."

1. A blowout shopping spree

Once the thieves have a working copy of your credit card information, they are off to the races. Timing is paramount for thieves, because they know the second you realize what's up, you'll call and cancel the card. Plus, credit cards these days will stop working on their own if the bank's algorithms detect suspicious activity, such as purchases of many high-cost items in one go, or purchases made out of state.

So, credit card in hand, thieves hit up several different stores in a mall, or anywhere else that has a variety of stores close by each other. They pick out items that they can sell easily with a good return, such as electronics, designer clothing, and jewelry. They are lightning-fast — they can rack up thousands of dollars in purchases in under 30 minutes. By the time the card is shut down, they have already made off with quite a haul. Sadly, the stores and the credit card companies rarely catch them.

2. ATM withdrawals

Most people assume that a stolen credit card won't be used for ATM withdrawals because those require a PIN. However, depending on how the thief got your card, that may be wrong. If the thief stole your entire wallet or purse, they can often get clues from the contents, including your birth date (still a common PIN used by many people) and house number.

Your best defense here is to choose strong passwords and PINs. If your PIN is still somehow compromised, report the card stolen as soon as possible. Luckily, you won't be on the hook for the money withdrawn, as long as you can prove it was a result of theft.

3. Sold to other criminals as part of a bulk lot

When your card details are breached, it's not always the thief's intention to use the information on goods or cash withdrawals. More sophisticated thieves will collect a large number of cards and then sell those details to cybercriminals as part of a "job lot."

Interestingly, these cybercriminals price the cards in different ways, depending on how much information is provided. If it is simply the card number and expiration date, it will not bring much money. These cards are sold for a few bucks, because the chances of successfully making off with a chunk of money is slim. If the security number on the back is added, the price goes up. If the PIN is known, the asking price is higher. The highest price goes to sellers who can provide additional data, including purchasing behaviors and security question details.

Of course, once cybercriminals have the info, they either use it quickly, or resell it again. The black market for card numbers is vast.

4. Gift cards

A simple form of money laundering is for criminals to use the stolen credit card to buy up a large number of high-denomination gift cards. If you think about it, it's the simplest way to turn a liability into cold, hard cash.

The thief will hit a local grocery store and pick up handfuls of different gift cards. If the store clerk questions the large purchase, the thief simply says it's a great way to buy goods and services from merchants that won't take credit cards.

By the time the stolen card is reported and canceled, the thief has made off with thousands of dollars in gift cards. Now, the criminal has all the time in the world to spend them, or sell them to someone else, because these cards are 100 percent legit and won't be shut down. Even if the thief only gets half the face value of the gift cards, it's all profit for them.

5. Online shopping

Thieves have many options when it comes to buying merchandise online with a stolen card. Only the dumbest thief will actually use a stolen credit card to have a big-screen TV delivered to his or her own home. Instead, the criminal can have the products delivered to an address they know to be vacant. They can use a mail drop scheme, which is basically a remailing service that makes the final destination of the product impossible to trace. They can also set up an intricate "triangulation" scheme on auction sites like eBay.

All in all, if you think your stolen credit card will not be used online, you're in for a rude awakening. Thieves are always thinking ahead.