Don't fall victim to a card scam!

Card scammers managed to steal £440 million in the past year. Here's how to ensure you're never a victim of card fraud.

Financial scams are a big fear for all of us with fraudsters continually coming up with even more sophisticated ways to con us out of our cash. But, thankfully, new fraud figures from The UK Cards Association are showing signs of improvement at last.

According to the association, fraud on credit cards and debit cards fell by more than a quarter (28%) in 2009 bringing the total loss down from £609.9 million to £440.3 million. Meanwhile, counterfeit card fraud - including skimming and cloning cards - fell by more than a half from £169.8 million to £80.9 million.

And the good news doesn’t stop there. Card ID theft is down 20%, and fraud on lost or stolen cards has fallen 11%. Meanwhile, cash machine fraud has also dropped by one fifth (20%).

When security goes wrong

Clearly, the latest figures are encouraging, but you shouldn’t get too complacent. After all, credit card security isn’t always as robust as you might hope.

Take huge retailer, Argos for example. It was recently reported that the company had accidently sent customers unencrypted emails containing their credit card numbers and security codes. Worse still, a web link was also included which revealed customers’ full names, addresses and credit card details. An investigation into the faulty emails revealed they were sent out last September, but the problem wasn’t fully resolved until last month.

Oh dear! That makes life very easy for the fraudsters.

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Scams to watch out for

It’s true there’s nothing you can really do to prevent companies from making mistakes like this. But there are plenty of ways you can protect your own plastic. You should start off by reading The top five worst card scams. If you know what to look for, it should be a whole lot easier to avoid falling victim.

Don’t forget some credit card scams are ridiculously simple to execute. For example, a common swindle involves someone contacting you who claims to be calling from a legitimate company such as Visa or Mastercard.

They will often already have your name, address and some of your credit card details which makes you believe it’s a genuine phone call. They might say they are phoning to alert you to fraudulent transactions which have shown up on your account, convincing you that something untoward really has taken place.

The whole charade ends up with the fraudster asking you for the security code on the back of your card for verification purposes. But once you hand it over you’ve given them the one missing piece of information they need. In other words, you have just inadvertently given the green light for the fraudster to go on a massive spending spree on your plastic.

The not-so-good news

Despite all the data indicating that many types of fraud are falling, it appears online banking remains particularly vulnerable. The UK Cards Association revealed online banking fraud rose 14% to £59.7 million last year. This increase is said to be caused by a greater number of sophisticated attacks on vulnerable PCs using malware.

• Watch our video on The scams that make you shiver

What is malware?

Malware - short for malicious software - refers to any harmful software which is capable of infiltrating your computer system without your knowledge and without legitimately obtaining your consent. The general term covers various nasties such as computer viruses, worms, spyware and Trojan horses.

Spyware, for example, is used to secretly monitor your computer use. It can be used to change the configuration of your PC or to cause your system to slow down or crash. But, even more worryingly, spyware can be used to enable fraudsters to collect pieces of your personal information and your security data bit by bit.

There are numerous ways of extracting this kind of information, but Trojan horses are commonly used which are capable of performing all sorts of harmful activities. For example, a Trojan could be used to install other malware, view your screen or download, upload, delete and modify files. But worse still, it can actually be used to log your keystrokes to obtain your usernames, passwords and other sensitive data making you exceptionally vulnerable to financial fraud.

Often malicious software can be unleashed into your PC when you unwittingly open what appears to be a perfectly innocent email attachment. So be warned - these emails can contain harmful code with a wide range of capabilities which will only cause damage to your PC and your finances.

Protect yourself from malware and phishing

Thankfully, there are several simple steps you can take to limit the risks of a malware attack. Check out The worst banking scam in Britain to find out more. Pay particular attention to the final section on ten ways to protect yourself from phishing and malware scams.

Despite our vigilance fraudsters can - and do - get the better of us sometimes. To nip the damage in the bud, you should regularly check your credit report. This will alert you to possible fraudulent activity at the earliest opportunity, and provide you with an early warning if you’ve become a victim of identity theft. You can get a free Experian credit report now. You should also continually check your bank account for any suspicious transactions you don’t recognise.

If you need more help protecting yourself against financial scams, you can ask the lovemoney.com community for advice using our excellent Q&A forum.

More: The top five latest online scams | The three biggest online threats