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As prepaid card usage increases, fraud prevention measures gain importance

Feb 11, 2013 Sean Albert

Contrary to popular belief, Americans are still actively using credit cards - those cards are just taking on different forms.

A recent CRL report found that consumer credit increased more than $680 billion from between 2000 and 2012, according to the North Dallas Gazette. At the same time, alternative credit usage has surged in recent years, particularly in the wake of the Credit Card Accountability Responsibility and Disclosure Act of 2009. In 2009, Americans made 6 billion prepaid card transactions, spending $140 billion. 

According to the source, shoppers are turning toward alternative credit methods because of their convenience and added security. Some companies are even using prepaid cards in place of traditional paychecks. 

However, as these cards gain popularity, they are also becoming more susceptible to fraud. Because consumers typically qualify for liability protection in most incidents with regard to both reloadable and non-reloadable prepaid cards, companies that offer these strategies may want to ramp up their fraud prevention measures. 

A recent CardHub study found that card fraud is on the rise in the United States. The report also revealed that zero liability conditions typically occur in instances when the "issuer does not know the identity of the cardholder," which applies to the majority of prepaid cards.