Unauthorized Transactions

Unauthorized transactions are purchases or transfers of funds from an individual's account without their permission or knowledge. This scenario constitutes fraudulent and illegal activity or a financial scam involving the use of payment instruments and misuse of financial systems. The main purpose of such transactions is to obtain money, goods, or services.

Although different nations have their firewalls, security frameworks, and other privacy protocols, unauthorized transactions are common in most countries. Every individual, business, or entity must take proper precautions to avoid such transactions, and in case they encounter an authorized transaction, they should report it immediately to the concerned authorities. These are also called fraudulent transactions.

Unauthorized transactions are illegal transactions executed without the knowledge or consent of the account holder. It can be orchestrated in many ways, from a lost or stolen card being used by someone illicitly to buy goods and services or someone practicing identity theft or hacking into someone's bank account or personal financial information to executing an illegal transfer of funds to another account. The sole objective of an unauthorized transaction is to obtain money, goods, or services and harm someone financially. 

An authorized transaction occurs when someone with an illicit mindset steals payment information and account credentials or commits identity theft to initiate transactions to harm or simply steal from an individual, business, or financial institution. A mistaken transaction is different in that a transaction was made in haste or unintentionally using the wrong information. It cannot be confused with an unauthorized transaction because, ultimately, the account holder authorized it. 

The main types of unauthorized transactions are: 

• Credit card fraud - When someone's credit card information is used without their consent to make purchases. In such scenarios, the card can be stolen, lost, or due to skimming. Unauthorized transactions on credit cards are one of the common forms of fraud in the US. 
• Identity theft - This involves the use of someone's personal information, social security number, and account details to conduct a fraudulent transaction. 
• Online payment fraud occurs when someone's digital wallet is hacked, or a payment platform is attacked to exploit its weakness and initiate unauthorized transactions. 
• Check and wire frauds - Counterfeiting checks or using electronic communications, including wire transfers, mobile devices, and other mediums. 
• Phishing - This type of activity involves deceiving people through fraudulent messages, phone calls, emails, or websites into sharing their personal information and passwords, which can lead to financial fraud. 

Other types of fraud include Zelle fraud, account takeovers, e-commerce, and auction fraud.

Listed below are the steps to follow to report such transactions: 

• The very first thing an individual or business should do is to report them to the bank or credit card company. 
• If required, try submitting a written report for the unauthorized transaction and keep a copy of the report. 
• Credit card unauthorized transactions should be blocked immediately. If necessary, the bank account should also be temporarily blocked. 
• Speak to the bank customer service and elaborately explain the unauthorized transaction, purchase, or any form of encountered suspicious activity. 
• Reporting an unauthorized transaction may require submitting important documents; always be prepared for that. 
• Constantly monitor the account once the unauthorized transaction is reported. 
• It is also important to report such an incident or authorized transaction within a certain time frame; otherwise, the victim will be held responsible for the transaction. For example, deposit accounts typically have 30 days to report such unauthorized transactions. 
• When an authorized transaction is reported, the federal authorities, along with the bank or financial institution, should investigate it. They have the authority to look at all angles and consider all relevant factors before arriving at the fault.

Below are two examples. The first is hypothetical, whereas the second example is from real-world news:

Example #1

Howard visits a supermarket to buy groceries. At the time of payment, he decides to pay with his credit card. A mugger, sneakily watching from behind, catches sight of Howard’s PIN. As Howard heads to the parking lot, the mugger pickpockets him, taking all the cash in the wallet along with the credit card. 

When Howard arrives home, he realizes his wallet is missing. While searching, he receives a notification on his phone that a payment of $189 was just made at a shop with his credit card. The mugger, knowing Howard’s PIN, has used the card illegally, completing an unauthorized transaction without Howard's permission or awareness. 

Howard immediately contacts the credit card company, his bank, and other customer support services to report the theft and requests them to block his card. He carefully reviews recent transactions and files a written complaint with the authorities. Shortly after, the mugger is caught, and the money is recovered.

Example #2

For the second example, there is the 2024 credit card fraud report and statistics. In the US, credit and debit card transactions have increased exponentially in recent years, and their security has become extremely critical as the US is working towards becoming a cashless economy. Statistics show that around 60% of US credit card holders have experienced fraud and were victims of unauthorized transactions. 

In contrast, only 7% of fraudulent charges were associated with stolen or lost credit cards, while the rest involved accessing personal data and account credentials remotely. Today, four out of five US citizens possess at least one credit card, and the report shows that three of five cardholders have encountered unauthorized transactions. The general number of unauthorized transactions on debit cards or other purchases is around $100, which technically accumulates to $5 billion in criminal purchases annually.

Steps and tips to avoid unauthorized transactions are: 

• The general precaution is to keep your financial information private and confidential. 
• Do not let people know your passwords and PINs, and change them from time to time. 
• Do not let your friends, family, or relatives use your account or credit card without your permission or presence. 
• Keep checking the transaction history from time to time to check on transactions that you have made lately. 
• With Internet banking, avoid using random computers or public WIFI networks. 
• Individuals should also monitor their credit reports to ensure they have no unauthorized credit in their name. 
• Always carry your credit card and other crucial documents with you or leave them at home when not needed. 
• Do not click on random internet links and visit suspicious sites. 
• Do not give away or share account information on the Internet. 
• When shopping online, buy only from trusted sites and reputed vendors.