The New Urban Blight – Card Cracking Schemes Net Millions in Losses

The New Urban Blight – Card Cracking Schemes Net Millions in Losses

The New Urban Blight – Card Cracking Schemes Net Millions in Losses


We often refer to unpleasant visuals within a city as urban blight. These tend to be problems as common as litter or abandoned houses.

Rarely do we think of fraud schemes as a form of urban blight, but I am beginning to think that we should. Have you heard about the fraud scam referred to as card cracking? The classic scenario of card cracking pays homage to a variety of financial scams like account takeovers, deposit kiting and old fashioned greed.

The victims are typically young, low income and credit worthy to the extent that they are able to meet the minimum requirements to open a checking account with a debit card and/or mobile banking access. It is not uncommon for individuals enmeshed in a card cracking scheme to be first-time offenders. Pretty much every scenario involves the deposit of a worthless check and the subsequent withdrawal of available funds from the same worthless deposit.

Many credit union members who fall victim to card cracking schemes are also willing, albeit naïve, participants. Remember folks – greed is the common thread in just about every scam, so don’t feel too much empathy for these young adults. They do know right from wrong, and they are often coached in advance to play the victim when confronted about their participation in scams like card cracking.

How Card Cracking Works

Card cracking relies on a recruiter whose job is to lure accomplices into agreeing to either deposit checks on their behalf or surrender their account information and credentials to enable the fraudster to gain access to the accomplice’s bank account. How exactly do you draw someone in to the extent that they offer up their credit worthiness and personal bank account to a stranger? Easy money of course!

The card cracking recruiter story is almost always a riff on, “I have this great new job but I can’t open my own checking account. Would you be willing to deposit (and cash) my check if I paid you $100”?

If you are young, low on funds and perhaps just a little economical with the truth on occasion, your answer will probably be a resounding “YES” – and you will never consider for a second that serious ramifications will ensue for simply giving a poor guy a break and making a fast Benjamin for yourself. Cue the regrets and punishment folks. There are plenty of reasons to say no to card cracking once you learn how serious it is to defraud a financial institution.

Depositing a worthless check and drawing funds against the fraudulent deposit without restitution is a crime that can also affect your ability to maintain a checking account and your credit worthiness. How are these schemes proliferating so quickly? Technology plays a very important role here.

Recruiting Through Social Media

Card cracking has been around forever, it seems, but lately the internet and social media have provided abundant new channels for criminals to ply their handicraft. A card cracking scheme from 2009 that was mainly perpetrated in urban and suburban locations like shopping malls has traversed into the relatively anonymous and enticing internet venues of Snapchat, Instagram, Facebook and Craigslist. It is no longer necessary for the lynchpin of the operation to venture out into society to lure young people and other targets into his web of deceit because all of the hard work is done quickly over the web using lofty claims of profit all wrapped up in a package that promises an honest and “legal” way to make a few extra bucks.

Who couldn’t use a few extra bucks, right?

Well, apparently a lot of people are in the market for some weekend cash. When a fraudster offers a potential accomplice the opportunity to earn $100, the accomplice (some say victim) literally forgets about the common sense their parents taught them by pouncing willingly into the breach. This same naïve accomplice very quickly becomes persona non grata with his or her financial institution when the bad debts begin to add up.

Controlling Card Cracking Loses

  • Be wary of first time account holders presenting third-party checks for deposit immediately after opening a new checking account.
  • Follow deposit regulations – do not make exceptions.
  • Consider reducing the amount of “cash back” funds for new account deposits.
  • Card cracking targets military, college students and other low income people who will find fast cash appealing. Gender does not appear to a variable for recruiters or their intended accomplices.
  • There are many great check verification tools in the marketplace today that assist in identifying fraudulent checks.
  • Call and verify funds if you suspect that card cracking may be a factor.
  • Talk to vulnerable members when they open a new checking account that card cracking is a major concern and threat. Remind every credit union member:
    • Do not divulge your login, PIN, banking credentials or provide your physical payment card to third parties.
    • There is never a legitimate reason to mail your debit card to someone in order to take advantage of a special offer or exciting job opportunity.
    • Caution the member that restitution comes out of their pocket for any worthless deposits that are not quickly paid back to your credit union.
    • Ask suspected card cracking victim/accomplices if they are depositing a check from someone they met online through a casual conversation or job offer.
    • Ask your member if they have been asked to rebate or “send money” back to their benefactor after a questionable deposit is made.

Socialized fraud scams affect every layer of society. Greed is not limited to age, social class or people with an inability to understand right from wrong. Because of this, credit unions have to remain vigilant and aware of fraud scams like card cracking – to protect our bottom lines and the security of our credit union members. Remember: If it sounds too good to be true, then it probably is.

Join John Buzzard on Thursday, March 16 at 11:00 Pacific/2:00 Eastern for the next FraudBuzz Webinar, “Stay Ahead of the Fraud Game.” To learn more and to register, click here.