Preventing Credit Card Fraud

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Whether you operate a storefront or e-commerce business, preventing credit card fraud should be one of your top priorities. As a merchant account service provider, Instabill has years of experience and advice to help you protect your customers as well as your profits. As you know, a fraudulent purchase can turn into a chargeback, which will hurt your bottom line and perhaps jeopardize your credit card processing abilities. Below are some helpful tips to help you prevent chargebacks and fraudulent transactions.

Preventing Credit Card Fraud In-Store

There is really only one way to prevent credit card fraud in your store and that is by diligently checking the signature on your customer's credit card. However, there are many misconceptions with this practice. Cashiers often ask to see an ID without truly understanding why. Here is the proper way for you and your employees to check a cardholder's signature.

  1. 1. Check the back of the credit card for a signature.
  2. 2. Compare the signature on the credit card to the signature on the sales receipt.
  3. 3. If the signature does not match, then ask to see a valid ID.
  4. 4. Compare the signature on the ID to the signature on the sales receipt.
  5. 5. If signatures do not match, then the cashier has the right to decline the purchase.

Similarly, if the cardholder has See ID written on the back of their credit card, then ask to see the ID to compare the signature on the valid ID to the signature on the sales receipt. If a customer does not provide a valid ID, the cashier also has the right to decline the purchase. It may seem like bad business to refuse a sale publicly, but it is also bad business to enable credit card fraud.

Preventing Credit Card Fraud Online

With online credit card processing, there are many ways a fraudster can try to swindle you. Below are some red flag signs that will help you spot online credit card fraud.

  1. 1. Purchasing Large Ticket Items: If you offer large ticket items that are not common sellers, then this should raise concern that the customer may be fraudulent. Scammers often purchase expensive items online with stolen credit cards since they are not spending their own money.

    Fraud Prevention Advice: Call or email the cardholder to confirm the purchase. If you cannot reach the cardholder after a few attempts, then decline the transaction.

  2. 2. Purchasing Multiple of the Same Item: Sure, a legitimate cardholder may purchase two or three of the same item, but a fraudulent cardholder may purchase 10 or 20 of the same item to resell on someone else's dime.

    Fraud Prevention Advice: Again, call or email the cardholder to confirm the purchase. If you cannot reach the cardholder after a few attempts, then decline the transaction.

  3. 3. Making Multiple Transactions in the Same Day: This may not sound suspicious, but that is what the fraudster wants you to think. Pay attention to the details of each transaction. Does the purchase go to different shipping addresses? Does the customer use a different credit card with each transaction? Is the cardholder using different names with the same shipping address?

    Fraud Prevention Advice: We cannot say it enough: Call or email the cardholder to confirm the purchase. If you cannot reach the cardholder after a few attempts, then decline the transaction.

  4. 4. Require the Card Verification Number: Although you cannot store the card verification number — the three digit code located on the back of each credit card — you can still ask your customer to provide it during the payment process.

    Fraud Prevention Advice: If the customer cannot provide the correct card verification number, you can decline the transaction. No verification number or an invalid number may signify that the customer does not have the card in-hand, which may also mean that the card number could be fraudulent or stolen.

  5. 5. Shipping Address Differs from the Billing Address: Through the evolution of online shopping, people also ship online purchases to friends and family as gifts. However, this could be an indication of fraud.

    Fraud Prevention Advice: Use services such as AVS (Address Verification System) to help determine how much the two addresses match. AVS will not decline the transaction for you, but it will return information to you that will help you make a better decision.

  6. 6. Suspicious Shipping Instructions: Some fraudsters will indicate specific shipping instructions, such as to leave the package at the door or ask the neighbor to accept the shipment. However, this could be a trick for the fraudster to prevent the true cardholder from receiving the package.

    Fraud Prevention Advice: Never allow your shipping service provider to leave the package at the door. Only ship the goods to the indicated shipping address.

  7. 7. I Never Received My Order: Some customers may claim they never received their order when, in fact, they have. This is known as friendly fraud. The customer will call you asking for their money back and walk away with a free order.

    Fraud Prevention Advice: Use a shipping service that requires a signature upon receipt of goods. Although this will cost money, consider all it will save you in the long run. You will be able to verify who signed for the package and when.

Using our advice alone may not help you in preventing credit card fraud, which is why you should also consider using a trusted fraud prevention service provider. Some fraud prevention tools will monitor your transactions and connect you with a database of fraudulent credit card numbers and the names of scammers. However, if you do not have the extra funds for a fraud prevention service, using common sense is always an excellent place to start.

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