10 Things Every Merchant Needs to Know About Credit Card Fraud

Credit card fraud costs merchants millions of dollars each year, and it’s only getting worse. Understand that most banks fraud scrubbing just checks for some real basic stuffs, e.g., things like card balance, if the card has been reported stolen and if the card has sufficient free credit available to fund the purchase. Most banks also check if the security code on the back of the card, and the name and address of the card holder are matched. These are just simple basic stuffs. The internet has made credit card fraud much easier to do. You can now find forums that buy and sell lists of credit card numbers along with the matching security codes as well as the card holders’ names and addresses. You can even find programs that produce fresh new card numbers and they are readily available to use. Online transactions leave the merchant unable to see and verify the credit card in real time.

Online merchant account agreements leave the merchant with 100% of the liability when it comes to charge backs. Any fraudulent transaction resulting in a charge back leaves the merchant paying a 25.00 up to 35.00 fee on top of the lost items or services sold. If a merchant starts getting a high number of charge backs, they will be hit with higher discount rates and transaction fees and could possibly have their merchant account terminated. Once you lose your merchant account, it’s almost impossible to get a new one. If you do however find a bank that will take your business on, you’re faced with higher set ups and transaction fees.

Still want to get a merchant account? If you are going to do any serious business, then yes, you have to have one. You need to consider what protections you can take before you open a merchant account. Here are some ways to limit your exposure to credit card fraud.

1. Always check the address and verify it with the AVS system. The AVS system will cross compare the card holder’s address with the one entered into the online billing form. This system works best for USA card holders and still limits your exposure to fraud.

2. The shipping address and billing address should match. Most merchants do not accept cards that don’t match up. I would never ship an item to an address that did not match the card holder’s address unless I could call them and verify everything.

3. Be careful and look over any order that lists a free email address. Example includes yahoo.com or hotmail.com. These are anonymous addresses that can’t be verified or traced. Most fraudsters use these throw away email addresses.

4. When it is possible, check out the customer’s website. Some customers use email from their personal web account. If the site is under construction or the information on the site does not match the information they gave on the order form, then be careful. You can even check out who owns the website by looking the domain up at http://www.networksolutions.com/cgi-bin/whois/whois

5. Watch out for unusual high dollar amounts from orders. If you are used to a customer ordering 30.00 on the average, and you get a 500.00 order, then you need to take more time and look it over. If they have a unusual high dollar order and also pay extra for quick delivery, then this too should raise a red flag.

6. Don’t be afraid to call a customer when in doubt. It’s better to be safe than sorry.

7. Warn all your visitors of anti-fraud devices and communicate the penalties for committing fraud. Put it on your website in clear view so everyone will see it. This will sometimes scare off thieves.

8. Never agree to process credit cards for someone else. You don’t know their customers and business well enough to realize when something isn’t right and it’s against your merchant account’s terms of service.

9. When using the banks real time fraud scrubbing, make sure it’s reliable and has an up time of at least 98%.

10. If you are still having charge back problems and have taken these steps to prevent them, then it’s time to bring in the professionals. One good anti fraud company is maxmind.com. They can help reduce your charge backs to almost zero, and the service does not cost a lot. There are different ways you can set maxmind up and should read and carefully consider your options. You can use google and find many other companies that can work with you and help you bring down charge backs.


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