Credit freeze © Francisco Cruz / SuperStock

The Basics

Is your waiter a thief?

Crooks with portable bank-card readers are getting away with $60 million a year. Your credit or debit card could be 'skimmed' at a store, a restaurant, even an ATM.

By U.S. News & World Report

Brad Lipman's dinner out with his family turned out to be much more expensive than he expected, at least temporarily.

When he paid for the meal with his debit card, someone in the restaurant -- he still doesn't know who -- swiped it through a portable card reader, which copied the account information. Within a few weeks, thousands of dollars had been stolen from his bank account.

Lipman, who lives in Thousand Oaks, Calif., is one of thousands of people affected by "skimming," criminals stealing credit card information when cards are used at ATMs, restaurants or other retail locations. Skimmers siphon about $60 million a year from bank accounts, according to the Electronic Funds Transfer Association.

"We're seeing more of it," says Todd Davis, the chief executive of the security company LifeLock in Tempe, Ariz. One common technique, he says, is placing a skimming device over the card slot of an ATM. The skimmer looks like a piece of plastic to guide cards into the slot, but it picks up bank information as the card slides through.People can purchase skimming machines, which are also called portable magnetic credit card readers, through online sites such as eBay for around $200. The devices, which are about the size of a small stapler and contain a slot for card swiping, electronically read cards' magnetic strips and store the data. The data are then transferred to a computer and used to make copycat cards, which can be used to make purchases.

The devices are also used for legal purposes, such as registering conference attendees or making sales at small retail stores. An eBay spokeswoman said that the company allows the sale of the devices because they are legal, but that sellers are prohibited from marketing the devices for fraudulent use under the company's policy against encouraging illegal activity.

Kurt Helwig, the president of the Electronic Funds Transfer Association, which promotes electronic commerce, says that though the number of skimming incidents as a percentage of overall ATM use hasn't grown, the increase in ATM use overall means that skimming is happening more often. Although it's still a rare occurrence and there's no need to avoid ATMs, he says, consumers should be wary.

"If you see something that looks funny or doesn't look right, with wires hanging out or a stupid sign (directing consumers to a different card slot), don't use that ATM, and let someone know," Helwig says.

Video on MSN Money

Victim © Comstock/Jupiterimages
Recovering from ID theft
Here are tips for restoring your credit after you've been victimized.
Many banks have added security measures, such as monitoring ATMs with physical inspections as well as electronically during off hours, when skimming is most likely to occur.

Still, falling victim to skimming is not pleasant. Even though his money was refunded, "I felt absolutely as violated as can be," says Lipman, who has since started a company, TablePay Solutions, to help prevent skimming. The company distributes a machine to retailers that allows customers to swipe their own card, never allowing it out of their sight.

This article was reported and written by Kimberly Palmer for U.S. News & World Report.

Updated Feb. 4, 2009

Rate this Article

Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowHigh
U.S. News  on MSN Money