Fraud involving credit and debit cards rose by a fifth to £504.8m last year, a bank payment body has said.
140 million chip and pin cards are being issued by banks
Much of the rise was due to an increase in crime involving cards lost or stolen in the post, the Association of Payment Clearing Services (Apacs) said.
Banks are replacing 140 million cards with new chip and pin cards, but Apacs said some of these were falling into the hands of fraudsters.
Apacs also said that internet scams cost UK consumers £12m in 2004.
It is the first time that Apacs has put a figure on the amount of money consumers are losing through phishing scams and computer viruses which can capture security details through keystroke logging.
Overall, the biggest types of fraud were 'card not present' fraud and counterfeit cards. Together, the two accounted for more than half the total fraud level.
MAIN AREAS OF CARD FRAUD
Counterfeit cards £129.7m (up 17%)
Card stolen or lost £114.4m (up 2%)
Card not present £150.8m (up 24%)
Card lost or stolen in the post £72.9m (up 62%)
ID fraud £36.9m (up 22%)
Source: Association of Payment Clearing Services (Apacs)
Apacs hope that the rising tide of UK fraud will be stemmed by chip and pin technology.
Chip and pin cards aim to cut fraud by including a smart chip, which can store more information than the usual magnetic strips, and also by having users verify transactions by keying in a pin number rather than signing a receipt.
France pioneered the technology more than 10 years ago - reportedly cutting fraud by almost 50% as a result.
Latest figures show more than 90 million new cards have been sent out, with 50 million more cards due to be sent out later this year.
Stemming the tide
However, the roll-out of chip and pin seems to have been at least partly responsible for the upturn in fraud during 2004.
The cost of crime involving cards lost or stolen in the post increased by 62%, from £45.1m in 2003 to £72.9m in 2004.
RISING CARD FRAUD
2004 card fraud £520.8m
"There are 100,000 cards a day being sent out through chip and pin roll-out and some of these have inevitably found their way into the hands of the fraudsters," Sandra Quinn, Apacs spokeswoman, told BBC News.
But, according to Ms Quinn, card fraud would be much more prevalent if it had not been for the introduction of chip and pin.
"We estimate that if we had not rolled out chip and pin card fraud would rise to £800m this year," she said.
Apacs is advising cardholders to check their account regularly in order to spot bogus transactions.