Contactless card users warned of fraud risk

It's important to keep an eye on all transactions in your account

Updated: 

Fears that some contactless cardholders are being left at risk of fraudulent payments being made from their account - even after they have cancelled cards which have been lost or stolen - have been raised by a consumer help website.

MoneySavingExpert.com is warning people whose contactless cards have been lost or stolen that they may need to comb through months or years of statements to check for fraudulent transactions which may not have been flagged.

The website said one user from Cheshire discovered his Halifax cards, which had been cancelled when they were stolen last November, had been used to make fraudulent contactless purchases eight months later. Five contactless purchases totalling nearly £30 were made in Stoke-on-Trent.

MoneySavingExpert.com said the "chaotic system" means that while some accounts are prevented from being raided by this type of fraud, in other cases it is left to customers to spot dodgy payments.

Steve Nowottny, news and features editor at MoneySavingExpert.com, said: "Most cardholders will be frankly astonished to learn that they're still at risk of contactless fraud months after cancelling lost or stolen cards - and the implications are worrying and wide-ranging.

"There's a very real risk that fraud is going undetected because people have cancelled their cards wrongly assuming that means they can no longer be used.

"And the fact that when a cancelled card is used some banks will still automatically debit your account and not check whether you made the purchase is shocking."

Halifax has refunded its customer for the thefts and given him £100 for distress and inconvenience.

Halifax said in a statement: "In the unlikely event that contactless transactions have been made on a cancelled lost or stolen card, we will always refund the customer in order to ensure they are not out of pocket."

Contactless card use has grown rapidly in recent years as a handy alternative to cash. A year ago, the contactless card limit for a single transaction was raised by £10, to £30. In March, contactless card spending in the UK topped £1.5 billion in the space of a month for the first time.

MoneySavingExpert.com said the problem generally lies in contactless card payments being processed in one of two ways - "online" or "offline".

When payments are processed online, the card and payment machine immediately communicate with the customer's bank. If a lost or stolen card has been cancelled, this will be flagged immediately and a payment not allowed.

Offline payments are stored in batches by retailers and processed online to the bank at a later point, sometimes a few days later with smaller stores. This can allow a thief buying goods on a stolen card to go undetected.

But fraudsters can be tripped up if the contactless card has been used the maximum number of times before a Pin is required. The limit before a Pin is required varies between card issuers and account types.

Firms may also set a "floor limit" at which payments are forced to go online - meaning anything above a certain amount is checked out immediately with the issuing bank. Some cards may always have to go online.

The UK Cards Association said fraud on contactless cards represents only 0.5% of overall card fraud.

Total contactless fraud in 2015 equated to to 3.6p in every £100 spent using contactless technology. By contrast, overall card fraud as a proportion of card spending was 8.3p for every £100 spent.

A spokesman for the UK Cards Association said: "Fraud on contactless cards is rare and considerably lower than overall card fraud. Consumers are fully protected against any fraud losses and will not be left out of pocket.

"As always it is important to check bank or card statements regularly for any unusual transactions, especially if a card has been lost or stolen. When a customer reports a lost or stolen card they will be advised to report any transactions they do not recognise to their bank."