What type of fraud is indicated when a legitimate cardholder does not recognize a purchase on their statement?

The situation described, where a legitimate cardholder does not recognize a purchase on their statement, typically refers to Friendly Fraud. This type of fraud occurs when the cardholder makes a purchase and later disputes the charge, often claiming that they never authorized it, even though they did make the transaction. This can happen for various reasons, such as forgetting about the purchase or not recognizing the merchant name on the statement.

Friendly fraud is particularly significant for merchants because it can lead to chargebacks and financial losses, despite the fact that the transaction was legitimate initially. It highlights the importance of clear communication and transaction descriptions on billing statements so customers can easily recognize charges.

On the other hand, other types of fraud such as Identity Theft involve a third party using someone else’s personal information to make unauthorized purchases, which does not fit the scenario of a legitimate cardholder disputing a familiar charge. Business Fraud pertains to fraudulent activities typically conducted within business transactions rather than personal purchases. Chargeback Fraud is a term often used interchangeably with Friendly Fraud, but it specifically refers to consumers abusing the chargeback process, further emphasizing the complexity in categorizing such disputes.

Understanding the context and nuances behind these types of fraud is crucial for developing effective measures to mitigate these risks and protect both consumers