Credit Card Fraud – How to Protect Your Business and Customers Against Loss

Credit card fraud is a tough challenge faced by credit card companies and businesses accepting credit card payments. The challenge is more daunting for e-commerce businesses and mail order businesses where the card information is provided by someone who may or may not be the legitimate customer. Brick-and-mortar store businesses, on the other hand, use credit card swipers and the customer is present during the transaction. Though this does not eliminate the risk of fraud, it reduces it

Credit and debit card fraud is the No. 1 fear of Americans caught in the global financial crisis. (Source: Unisys Security Index: United States, March 2009). According to the Javelin Strategy & Research, “Identity Fraud Survey Report,” February 2010, the number of U.S. identity fraud victims rose 12% in 2009 and the annual fraud amount equaled $48 billion.

At times, the bank that issues the card provides some coverage for a merchant’s loss if the business has followed all of the bank’s card acceptance and processing rules strictly. Even then, the business is not clear of losses as it will see chargebacks. Credit card processing services employ fraud security measures but you must also do your own bit to reduce the risk of fraud. Here are some tips:

Review orders for complete information

Do not accept orders if all required fields in the form are not filled by the customer. An address verification check via the credit card processing service’s AVS (Address Verification System) service is effective as most fraudulent transactions fail this test.

Verify billing and shipping addresses

Be wary of orders with different shipping and billing addresses. Of course, if a regular customer does this as a norm, it should be fine. Otherwise, recheck with the customer. It doesn’t hurt and saves you from potential losses.

Verify addresses using websites

You can check the addresses and contact numbers of customers using online phone directories such as,, and similar websites.

Be wary of free email ids

Most credit and debit card fraudsters use free email accounts – Yahoo, Gmail, Hotmail, etc. That doesn’t necessarily make the order suspect but you should be on guard.

Document every detail of the transaction

Store the IP address of customers when they are browsing your website or placing orders. Record the date and time of the visit, and phone conversation details if any. Add the caller ID and any other information to the order details. If you do get caught in a card fraud case, this documentation will be very helpful.

Be wary of first-time customers placing high amount orders

If a new customer places a big order the first time around itself, it’s suspicious. If they also ask for overnight delivery services, you should call the customer and make sure he placed the order.

Ask for the CVV number in the order form

Your order form should ask customers to enter the Card Verification Value (CVV) number that is printed on the back of the card. Your billing software should store this value and pass it to the credit card processor for verification. This lowers the risk of fraud as scammers typically only have the credit card number to go with.

Caution and adherence to proper process does not eliminate credit card fraud but is definitely effective in mitigating it. If you follow the aforementioned guidelines, you should be able to protect your business and your customers to some extent.

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