Credit card fraud prevention system and method using secure electronic credit card

A method for authorizing a credit card transaction, comprising the steps of:

• user activating the electronic credit card by entering the correct password prior to transaction;
• user entering the transaction data to the electronic credit card, either through a communication device such as a modified credit card reader compatible with the electronic credit card, or through the keypad of the electronic credit card;
• the electronic credit card recording the said transaction in its memory, counting the total number of transactions made in that day, choosing an enciphering algorithm with that information, enciphering the transaction data and returning a secret code that includes the sequential number of the said transaction;
• the credit card reader transmitting the enciphered code, the credit card account number and plain transaction data to the authorizing computer;
• the authorizing computer receiving the enciphered code and the user's account number, plain (un-coded) transaction data from the electronic credit card, either through the electronic credit card reader or through other means;
• the authorizing computer accessing the database and retrieving the information needed to run the deciphering program from the user's account;
• the authorizing computer deciphering the enciphered code using its deciphering program and comparing the result with the plain transaction data;
• the authorizing computer denying the transaction if a match is not found;
• the authorizing computer authorizing the transaction if a match is found and no other transaction is not made in that day with the same sequential number;
• the authorizing computer recording the sequential number of the authorized transaction in the user's account in that day.