Five Flavors of Faux Fraud

Raccoon pointing to sneaky checkout option.

Things aren’t always as they initially appear — like unauthorized transactions.

Upon closer inspection, sometimes they aren’t unauthorized after all.

Since we’re laser focused on (a) teaching kids the financial ropes, and (b) thwarting fraudsters on our platform, we investigate all unauthorized transaction reports very carefully. With your help, extra due diligence can yield a valuable lesson for a child or an important clue to cracking a new fraudster scheme. Or, sometimes, both.

With over a decade of researching fraudulent transactions under our belt, we’ve compiled a list of classic faux fraud flavors — transactions that look like fraud, but aren’t. Here are five of the most common patterns we see and some tips for identifying them:

  1. The Sibling Sniper: one sibling “borrows” another sibling’s card. If you have multiple kids using cards and see an unexpected charge on one card, scan the transaction histories of the other cards for similar purchases or attempts. It might be a case of “friendly fire” with one sibling raiding the funds of the other.
  2. The Wayward Wallet: a child’s card wanders into the digital wallet or online account owned by somebody else. See if anyone in the family uses the service or merchant identified by the unexpected transaction. If so, check the account histories to see if the charges line up.

    We’ve run into several cases where the child’s card has been added as a payment method to the parent’s account (like Amazon) for a one-off purchase, but inadvertently winds up becoming the default payment method for future purchases.

    We’ve also seen cases where kids add their cards to their friends’ apps — like Chipotle and Chick-fil-A. That can be a lot trickier to track down. Look for the first instance of the charge and click or tap on the Settled lozenge to see the precise time of the transaction. That might jog your child’s memory about coordinating a purchase with a friend.

  3. The Memory Lapse: a child “forgets” they made a purchase. Kids are particularly “forgetful” when the purchase is, how shall we say, embarrassing or off limits 😬. Look to see if your child has the corresponding app on their phone. Or, locate the corresponding web site and try the Forgot Password link with your child’s email address to see if something lands in their inbox. For an in-store purchase, finding the precise time of the transaction (see above) may improve your child’s recall.

    Remember, kids’ frontal lobes are still developing, and teens are wired to test boundaries. Such episodes are normal. Just inform them you’ll be turning on activity alerts so you’ll both receive text messages whenever purchases occur. That tends to head any future shenanigans off at the pass.

  4. The Subscription Sucker Punch: an initial purchase or free trial offer coaxes a kid into agreeing to fine print at checkout that results in further charges down the line.

    Amazon Prime is the classic culprit. Want next day delivery? Sure! Check the box. 30 days later — boom! The first “unauthorized” Amazon Prime subscription charge hits. Similarly, a dizzying array of subscription services sucker countless kids into surrendering their card numbers knowing they’ll forget to cancel before the first charge hits.

    Look for an initial related charge in the transaction history a month earlier. This isn’t always obvious: some shady subscription sites even bill for the subscription under multiple different names.

  5. The Bundled Billing Bomb: delayed billing for a bundle of small purchases shows up as an unrecognized bulk charge later. iTunes is the most common example. Apple won’t bill until the charges surpass a certain threshold. Then, they’ll bill for the lump sum at a later date. Since the billed amount and the billing timing is disconnected from the individual downloads, the eventual charge often feels fraudulent. Sign into your child’s account for the service in question. Inspect the purchase history. The billing detail should show how the amounts have been bundled into a lump sum.

Whether a mystery charge winds up being fake fraud or real fraud, the very first step in every investigation is to lock the card. That will prevent additional charges from going through while you check things out. If you have trouble tracing the source of the charges, contact us and we'll jump on the case.

Don’t delay. A cold case is always harder to crack.

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