How Can My Business Prevent Credit Card Fraud?

Prevent credit card fraud by verifying the authenticity of all transactions -- whether retail or online.

Credit card fraud can be a source of merchant frustration and monetary loss. In most cases, when a merchant has accepted a fraudulent transaction, the burden falls on the merchant to not only refund the monies accepted for payment to the consumer but also write off the merchandise loss. Merchants represent the front line of defense against credit card fraud, and fortunately, there are many techniques that can be used to identify possible fraud before it happens.

Ask for Identification

When a customer hands you her credit card to make a purchase, always ask for identification. For the majority of requests, the consumer will likely oblige. Match the name on the identification with the name on the credit card. In some cases, the consumer may object; but as a merchant, you have the right to verify the identity of the person you are conducting business with. If the consumer does not have identification, you can accept the purchase at your own risk, or you can politely ask for another form of payment or decline to conduct business with the consumer.

Check the Signature

When the consumer signs the sales slip, verify that the signature matches what is on the back of the credit card. If the consumer has not signed the back of the card, compare the signature with the one on the identification. You can even compare the card, the sales slip and the identification. If there are any discrepancies in the signatures, you can politely decline the credit card as payment or ask for another form of payment.

Achieve PCI Compliance

Many merchant account providers require their customers to adhere to standards set forth by the Payment Cards Industry (PCI). Becoming PCI-compliant and maintaining compliance can be a costly and time-consuming undertaking, but the standards published are meant to protect consumers and merchants. PCI compliance centers around keeping credit card data safe and having procedures in place to identify fraud before you get hit with the transaction. Obtaining this certification, as well as employing the techniques set forth by PCI, should help reduce fraud.

Ship Only to the Billing Address

Particularly for Internet or mail order businesses, make it a policy to ship only to the customer's billing address that matches what is on file with the issuer of the credit card that was used to pay for the transaction. Many fraudulent card users will illegally obtain a consumer's credit card and billing address and then specify to ship to a different address. If there is a discrepancy in the billing and shipping addresses, contact the consumer and ask to provide some additional verification or identification to complete the transaction.

Watch for Other Signs

Frequently, preventing credit card fraud is simply a matter of using common sense. Look for erratic behavior in the consumer's body language that may indicate nervousness, or if dealing with an Internet transaction, be wary of consumers that specify express shipping and aggressively call you to make sure the item ships out immediately. Also, if you receive an order that is outside of the ordinary, in terms of price, volume and quantity, it may be too good to be true. If you see one or more warning sides, proceed with caution when conducting business with the customer.

References

• PCI Security Standards Council: Why Comply with PCI Security Standards?
• Shopping Cart Reviews: How Merchants Can Avoid Credit Card Fraud
• PCI Compliance: PCI FAQs and Myths
• Taming the Beast: Preventing credit card chargebacks -- fraud screening strategies
• Hypercom: Defeating Credit Card Fraud What Retailers Need to Know (PDF)