Safeguarding Your Business Against Credit Card Fraud

business man using credit card on his mobile device


In today’s digital age, credit card fraud poses an ongoing threat that businesses must be prepared to combat. While eliminating the risk entirely may be impossible, there are proactive steps you can take to protect your business and reduce the likelihood of falling victim to fraudulent transactions.

Preventing the Root Cause of Fraud

Credit card payments are an integral part of conducting business, whether it’s in-person, over the phone, or through mail. One effective way to mitigate the risk of credit card fraud is by offering customers alternative payment options. By reducing the reliance on credit card transactions, you can significantly decrease the chances of your customers becoming victims of fraud. 

Here are some measures you can implement to limit your exposure to fraud:

  • Thoroughly validate the customer's full name, address, and contact details. It's crucial to have a verification system in place for customers requesting changes to their card information on file.
  • Exercise caution if the delivery address for an order differs from the address on the cardholder's file, especially if the credit card address and shipping destination are in different countries.
  • Require a signature to minimize the risk of carrier collusion and never deliver goods to unattended premises. 
  • Never request credit card information to be sent via email, as it is an insecure channel that can be easily intercepted and exploited for criminal purposes. 
  • Utilize a click-to-pay invoicing solution for mail or telephone orders. This provides a secure, paperless way for your customers to pay invoices.
  • The safest option is to use a reputable merchant services provider to capture and process payments. 
  • Stay vigilant and look out for any unusual spending patterns or behavior that could indicate potential fraud.

Protecting Your Business 

It is a widely known that credit card fraud is less prevalent when the cardholder is physically present during the transaction. However, in the digital realm, it becomes easier for bad actors to exploit vulnerabilities in the block chain.  Therefore, it is essential for merchants to implement robust measures to identify purchasers and ensure the legitimacy of each transaction.

In the unfortunate event that credit card fraud occurs, merchants often discover it when they receive a chargeback. This highlights the importance of taking proactive steps to detect and prevent fraudulent transactions.

Authorization Approval

Authorization approval does not guarantee payment for the merchant. This approval simply indicates that, at the time of the transaction, the card was not reported stolen or lost, and the credit limit had not been exceeded.

If someone else is illegally using a credit card number, the cardholder has the right to dispute the 'approved' charges, and the transaction could be charged back to your business.

Refund Fraud

Refund fraud is a common type of fraud involving credits issued through your EFT/POS terminal. Perpetrators, often employees, process refunds to their own debit and/or credit cards. To avoid detection, they might create a large sale on a fraudulent card and then process a refund to their own card.

To guard against this, we recommend closely monitoring all refunds to ensure they correspond to legitimate sales and are refunded back to the card used in the original purchase.

Shipping Scam

Another increasingly prevalent scheme involves a malicious third party using a stolen credit card to pay for goods. Scammers contact businesses, requesting goods to be shipped overseas, and divide the price and freight charges among several credit cards.

These scammers insist that the business use a specific shipping company and provide an illegitimate email address. Acting in good faith, the business contacts the 'shipping company,' which demands upfront payment of the freight charges via cash wire transfer.

Later on, the business realizes that the shipping company's email address is a front for these bad actors. The credit card details turn out to be fraudulent, leaving the business out of pocket for the shipping costs.

Ticket Scams

Another notable method employed by bad actors to exploit business owners involves the sale of tickets to tourism activities, travel passes, etc., through private sellers on social media apps or resale sites.
The seller purchases tickets from the legitimate ticket company using illegally obtained credit card details, then poses as an independent reseller offering discounted prices. Unsuspecting consumers purchase these tickets at a discounted rate via bank transfer. The ticket company then receives a reversal/chargeback for the fraudulent transaction shortly after.
Remember, you have the right to decline suspicious orders. Fraud directly impacts your business, as you bear the liability for any loss if the legitimate cardholder disputes the transaction.

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