Credit card hijacking

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Credit Card Hijacking is the term used when a person’s credit card information is used for undesired

charges for goods or services where the credit card owner has trouble reaserting control. This can occur

in a few major forms.


Credit Card Hijacking by Identity Theft

The first form of credit card hijacking is basically identity theft, which is the deliberate assumption

of another person's identity. Identity theft is usually the result of serious breaches of privacy and

often involves the victim compromising a great deal of financial and personal information allowing the

thief to open up new credit card accounts in the name of the victim.
Credit Card Hijacking by Cancellation Barrier

The second form of credit card hijacking, which most people have fallen victim to[citation needed], is

the continued charging of a person’s credit card for a subscription to goods or services no longer

desired by the credit card owner. This type of credit card hijacking was pioneered by major ISPs, credit

monitoring services and online dating services, is perfectly legal, and is still common today in a wide

range of subscription based goods and services. Credit card hijacking of this type came about as online

subscription based marketers realized that traditional subscription systems, such as the annual

subscriptions that paper magazines use, were an impediment to enrolling customers. A typical dial-up

ISP, at US$24.95 per month, is US$299.40 annually. By breaking the subscription period into small units

like months or quarters, and allowing direct monthly charging of the subscriber’s credit card, the

psychological and economic barriers potential subscribers see are greatly reduced.

The issue which makes one subscription system a hijacking of the credit card is not the mode of entry

into the subscription nor the billing interval, but the marketing organization creating barriers for the

user to easily cancel the subscription. Organizations which use credit card hijacking as part of their

marketing strategy make online registration for the subscription easy, enforce default automatic renewal

policies, and create barriers to halting the subscription. (This is in contrast to traditional

subscription based system such as paper magazines where the subscriber has to periodically proactively

reauthorize the subscription, hence the default is to not renew.) The most common subscription exit

barrier is to not provide any online subscription cancellation mechanism at all, but to instead require

the user to cancel by telephone or by "on-line chats". Such organizations often add the additional

barrier of making any subscription cancellation information difficult for the user to even find, thus

creating an additional delay in the subscription cancellation. This is very common amongst ISP’s, who

know the psychological barrier to making the call, which the subscriber anticipates will be unpleasant,

is very high. It also allows the marketing organization to talk the subscriber into changing their minds

and not cancelling the subscription. Another common subscription cancellation barrier is to have a

relatively long subscription period, a no refund policy, and to require the user upon cancellation to

forfeit all money covering the present subscription period. This is very common amongst online dating

services.

This second form of credit card hijacking was created by marketers who recognized that subscription

based services generally have relatively low periodic billings which will generally go unnoticed on any

given credit card statement. So what happens is that long after the user loses interest in the

subscription, they forget to cancel the subscription and because the periodic billing is so low, they

don’t tend to notice it on their credit card statement.

[edit] Credit Card Hijacking by Negative Option Billing

Negative option billing is the practice of sending goods automatically and billing the recipient unless

the recipient is proactive in declining the goods before they are sent. Negative option billing reverses

the usual direcion of sales transactions. It assumes that unless you say 'no', you've agreed to have

bought the goods. This is the common practice used in book clubs, record clubs, and magazine

subscriptions with automatic renewal. Some practitioners of negative option billing prefer to call it

"advance consent marketing."