Gen Z Is Openly Admitting They Are Committing Credit Card Fraud

By: Lauren | Published: Dec 22, 2023

The next generation of 20-somethings is called Gen Z. They’re known for their individuality, their desire to find a balance between life and work, and now, credit card fraud.

But it’s not the type of credit card fraud you might think. Gen Zers don’t steal other people’s card information, but they do fraudulently dispute claims on purchases they have personally made.

What is Friendly Fraud?

According to an anti-fraud company called Sift, Gen Zers commit what is known in the business as first-party fraud or “friendly fraud.”

Man holding a blank credit card and pointing to it

Source: Freepik

Essentially, friendly fraud is when a person orders something legitimately, receives it, and then complains in some way about the product in order to get their money back while keeping and often enjoying the item.

Friendly Fraud is Especially Common with “Card Not Present” Disputes

Sift also found that the next generation commonly commits fraud through what are called “card not present” disputes.

Sift company logo on a black background with blue dots and white letters


In this case, Sift explained, “These consumers likely knew their credit card company would cover the cost if they filed a dispute, making the business liable for the card-not-present dispute losses.”

Is Friendly Fraud Actually Theft?

And the truth is that while this may seem like a victimless crime, it’s really not; it’s theft. These young people are buying products, then getting their money back, and keeping the items.

Woman holding a phone and a credit card with a concerned look on her face

Source: Freepik

The retailers who are providing the refunds are losing both profit and product, and Sift says that, overall, refunding will cost $100 billion to online merchants by the end of the year.

The Cost of Chargebacks Is Growing Every Year

Refunds, or chargebacks as they are called in the retail business, are when retailers must refund the money to a person’s card because of a complaint or dispute.

Three young people sitting on a ledge holding their phones

Source: Freepik

The cost of chargebacks increased by 16% in 2023 compared to the year before. According to Sift’s data, the reason why the increase is so significant is because of the now-common “fraud economy” within the Gen Z generation.

Previous Generations Committed Far Less Fraud

While 42% of the Gen Z age group admitted to committing first-party fraud, only 22% of Millennials said they did the same.

Older man on the phone holding a credit card

Source: Freepik

Then, only 10% of Generation X said they ever asked for a chargeback on something they received and were satisfied with, and only 5% of Baby Boomers have ever done so.


What Are Gen Zers Stealing?

Sift reports that the vast majority of the goods stolen are clothing and accessories, though 19% are digital products, 14% are groceries, 13% are electronics, and 12% are food deliveries.

Bed covered in clothes and a laptop open to an online shopping site

Source: Freepik

And while age certainly seems to be one factor for why this fraudulent activity is increasing, it’s also due to the surge in online shopping.


Increase in Online Purchases Has Directly Led to a Rise in Fraud

Over the past few years, especially during and since the global COVID-19 pandemic, there has been an intense increase in online shopping. And because this kind of fraud is specific to at-home deliveries, it makes sense that the numbers are increasing simultaneously.

Man holding boxes next to a woman with a clipboard

Source: Freepik

However, the main reason why they were able to get refunds on this wide variety of products is because many merchants prioritize “consumer protections.”


The Customer Is Always Right

Especially in the United States, the idea that the customer is always right has become a mantra for the service industry.

Customer service representatives working on computers with headsets

Source: Freepik

They call it “consumer protections,” and it essentially means that retailers are giving refunds left and right in order to keep their customers happy, but to their own financial detriment.


Many Merchants Are Losing In More Ways Than One

Although some companies, such as Amazon and Uber, may be able to withstand the extremely expensive refunds every year, smaller businesses could be in big trouble.

Woman putting up a “Sorry, We’re Closed” sign on her business

Source: Freepik

In fact, Sift noted in its report that “Failing to prevent fraudulent transactions costs a business more than just profits. Businesses often face fallout from consumers who were victims of fraud on their site, losing both their business and lifetime value.”


Merchants Need to Make a Change in Their Policies to Stay Afloat

Sift reported that “people [are] taking advantage of the dispute process and their consumer protections” and that, essentially, if smaller businesses want to remain profitable, they may have to change their policies.

Hands under an illustration of white coins

Source: Freepik

Sift also explained, “This should serve as a wake-up call for businesses to implement a proactive fraud strategy and end-to-end dispute management process in order to preserve profitability.”


Gen Zers May Not Know the Damage They’re Causing

It’s important to note that these Gen Zers who admitted to committing first-party fraud may be completely unaware of how their actions negatively affect many businesses.

Faceless person dressed in black with black gloves using a computer

Source: Freepik

Without human interaction with the business, it’s easy to feign or truly be innocent to the fact that asking for a refund when you don’t want or need one is absolutely a harmful crime.