Merchant Account Credit Card

Minimize Credit Card Fraud

How To Prevent Credit Card Fraud

Credit card fraud could be the downfall of your business if you don't take steps to minimize it. It is almost certain that you will fall victim to this scam at some point. And it is you, not the customer, who pays for it - not only by having to pay a chargeback fee of $25 to $50, but by having your merchant account cancelled if your chargeback rate exceeds 1 to 3%.

Internet credit card fraud is made easy by the fact that the customer is not right there in front of you, with his credit card in hand. Even in a physical business, however, a stolen or counterfeit credit card could pass the card swipe process. So what can you do in the way of credit card fraud protection?

• Address Verification System ( AVS ). This service compares the address given to you by the customer with the address on file with the credit card company. Many credit card payment services offer AVS as part of their package; others charge a small fee.
  
  
• Manually check the order. Look at the information submitted by the customer to see if anything is suspicious. Particularly check to see if the billing and shipping addresses are the same. If not, phone the customer for an explanation.
  
  
• Ask for proof of identity. In a physical store, you should not only check to see if the customer's signature matches the one on the back of the card. Also ask for photo ID.

  A lot of online credit card fraud could be prevented by asking the customer to fax you a copy of his credit card and a photo ID.




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• Check the address. Email addresses can easily be obtained for free, and without giving any personal information. So a customer with a phony credit card can hide behind his phony email address, and be virtually untraceable. So you can either not accept such addresses, or you can phone such customers to take the order in person.

  P.O. boxes can also be rented anonymously, so you could insist on a physical address.

• Post a warning. Place a prominent warning on your website, saying that you employ heavy safeguards against fraud, and will pursue and prosecute all offenders.
  
  
• Use an online credit card fraud protection service. There are several online businesses that claim to reduce your chargebacks to a very low level. They run a lot of checks, and reject the card of there are too many warning signs of fraud. There is of course a fee for such a service, but in some cases, this is refundable if you are not satisfied with the results after a certain amount of time.

So be sure that you decide on a credit card fraud protection plan before you begin accepting cards. You should pay as much attention to this as you do to the other processing fees for credit card services.

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Eden

Posted 589 days ago

That's nothing new, Corinna. My sister's first husband used to get her to send his used underwear back to the store, complaining it was of inferior quality. Even after he'd worn it for over a year! And the store always refunded his money!

Corinna

Posted 601 days ago

I know it's an old saying, but why is the customer always right? Why does the merchant have to bear all the cost of a chargeback? It seems kind of one sided to me.

Sonia

Posted 620 days ago

I don't understand why the chargeback fee is so high. I realize that it makes more work for everybody involved, but does it really cost your merchant bank more than $25?

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