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How do credit cards get cloned?

Credit card cloning, or "skimming" as it is sometimes called, is a new technique whereby someone obtains your credit card details, copies them onto a bogus card and begins using the credit card. While credit card theft itself is not new, the manner in which the information is stolen is.

The first step is to recruit an individual willing to participate in the scheme. Bartenders, wait staff or shop assistants are often prime targets because of the sheer volume of credit cards they handle.

Recruits are given a pocket-size device with a scanning slot, something that resembles a pager and can be worn on a belt. They are instructed to swipe customers' credit cards through the device. Because the process takes only a few seconds it can be done easily and inconspicuously without the customer or another employee noticing.

Swiping the credit card through the device copies the information held on the magnetic strip into memory. That information can subsequently be copied to a counterfeit card, complete with security holograms.

Alternatively, the information can be used to overwrite a stolen credit card which has become too hot to handle.

Do not underestimate the size of this problem. In the U.K. alone an astonishing $200m was spent with cloned credit cards in 2000. That's over $500,000 every single day!

So how do you protect yourself?

One solution lies in smart chip credit cards. Smart chips are microchips embedded in some credit cards that encrypt the information contained in the magnetic strip. The microchip cannot be changed or deleted. If a skimmer tries to scan your card through the device, they will obtain only encrypted information and thus be unable to clone your credit card. If someone steals your smart card and disables the chip, the new swipe terminals will alert staff to ask for an ID or decline the transaction.

For more information on smart cards see What is a smart card?