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How Can I Prevent Credit Card Fraud?

Q: I hear credit card fraud is increasing. What can I do to accommodate my customers, yet prevent fraud?

You are so right. Credit card fraud is on the upswing - in both traditional and online businesses. While there is no doubt that doing business on the Web can be lucrative, it also invites Internet fraud. As a merchant, you need to stay up to date with the latest developments in credit card technology and information, which your credit card processor should willingly share with you.

State-of-the-art online payment gateways, such as the LinkPoint Secure Payment Gateway, enable merchants to process transactions securely over the Internet, which you need to access today's extensive global e-commerce marketplace. Secure online payment gateways and sophisticated encryption technology make credit card fraud increasingly difficult.

Stop Fraud Before It Starts
Before shipping merchandise to a customer, verify the cardholder's information by using the fraud-prevention services and features available. Address Verification Service (AVS) helps verify street numbers before the merchandise is shipped and direct contact with your cardholder or your cardholder's bank can also minimize chargebacks (a disputed credit card transaction).

Your cardholder's bank customer service number is printed on the back of the credit card, and the bank should be able to verify a billing address and the cardholder's name. If the two do not match, resolve this with your customer before shipping the merchandise. If you don't have AVS, contact your credit card processor to add this service to your arsenal of fraud -prevention weapons.

Every Credit Card Has Security Features

These characteristics are a credit card's most important security features:

The credit card's hologram changes color in the light.

The hologram's image is visible in a larger scale under fluorescent light.

The signature line resists erasure and protects the cardholder's signature.

The magnetic stripe transmits specially coded information that is recognized by only your bank, making stripe duplication virtually impossible.

The embossed credit card number on the front and back of the card must match.

The card number on the terminal ticket should match the number on the credit card.

CVC2 (MasterCard) and CVV2 (Visa) are new verification methods designed to minimize Internet and mail order/telephone order fraud. These methods allow greater security when merchants process transactions where the customer's credit card is not present. This is how it works:

The customer finds a three-digit number on the back of the credit card located on the signature panel.

The last three digits of that number - along with the credit card number - is transmitted to the card-issuing bank.

If all the information matches at the cardholder's bank, the bank responds with an approval code.

The CVC2 and CVV2 systems minimize the likelihood that a cardholder's bank will process fraudulent mail order/telephone order transaction chargebacks.

Always Ask for Identification
You may ask for identification any time you are presented with a credit card. Many cardholders write "ask for ID" on their credit cards to prevent unauthorized use. Customers should always have identification when presenting a credit card to a merchant and you should review it consistently when you accept their credit cards. Here are some tips that can help you when you request customer identification:

If the back of the customer's credit card is unsigned, say to the customer, "I see your card is not signed. Could I check your identification to verify your signature?"

Call the customer by the name on the card. If the cardholder does not respond, definitely ask for identification.

A credit card is not valid unless it is signed, and this is clearly stated on the back of the card. Point this out to customers who have unsigned cards and no identification, and encourage them to sign their cards

Summary: Fraud-Stopping Tips
Stopping fraud begins with you. Each merchant is the first line of defense against potential losses.

These are some of the security measures available that can help you prevent fraudulent credit card purchases and save your business money:

Always use the Address Verification Service (AVS); input all of your customer's numerical address and ZIP code information.

Check the security features on the customer's credit card.

Compare the signed credit card to the signed sales receipt.

Call the toll-free customer service number on the back of the card to verify a cardholder's information.

Ask for identification. If the customer is a first-time mail order, telephone order or Internet order customer, ask him or her to fax you a driver's license and a credit card photocopy before you ship the merchandise.

ABOUT THIS GUIDE
About the Author
A Word About Our Membership Community
Frank Merchant knows how to get the best price
The Internet Marketplace
   
UNDERSTANDING IT ALL
What are the advantages (and disadvantages) of accepting credit cards for your business?
6 Benefits of Accepting Credit Cards
Disadvantages of Accepting Credit and Debit Cards
Who are the players? How does the money get in your bank account?
Credit Card Transactions Step By Step
Should I go visit my banker for my merchant account?
How can I tell if I will get good customer service?
Be on the Lookout for Deceptive Sales Practices
How to Avoid Your Money Being Held By Your Non-Cash Transaction Processing Company
Banking Terms You Need To Know
Benefits of Debit as a Payment Option
What You Need To Know About Leasing a Credit Card Terminal
Fraud Protection 101
Cardholder Security: Avoid Monthly Fees, Fines, and Penalties What Is PCI Compliance (PCI DSS)?
   
THE PROCESSES
Four Key Components to Conduct eCommerce Successfully: What They Are, and How They Work
Web Site
Your Merchant Account
Secure Payment Gateway / Payment Transaction Software
Shopping Cart and Catalog
Should I use a third party processor like PayPal?
   
ANALYZING IT ALL
Quick Summary of Costs
Detailed Summary of Setup Fees, Recurring Fees, and Risk Estimate
Total Risk Estimate (TRE)
Total Risk Estimate Worksheet (Low-Medium-High)
   
THE DETAILS
Are you being stung with "Non-Qual" fees for keyed orders?
Have You Ever Felt Betrayed By Your Credit Card Processing Company?
Your Customers' Credit Card Numbers at Risk
Visa: Heartland, RBS WorldPay no longer PCI compliant
PayPal
Marketing 101: Gift and Loyalty Smart Card Technology Ensures Customer Loyalty
Check Warranty and Check Acceptance Policies
How Can I Prevent Credit Card Fraud?
Identity Theft
Merchant Account Comparison Worksheet
Glossary
 
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