5 Ways Merchants Can Avoid Credit Card Fraud

While the customer may have their money or information stolen, it’s the merchant that truly loses.

Credit card fraud is virtually a nightmare for merchants because not only is it a hassle, but you as the merchant are the one that is held liable instead of the buyer. Therefore, it becomes the responsibility of the merchant to prevent fraudulent changes to their business as much as possible. While your merchant services provider will offer support to your problem, it’s ultimately up to sellers to take responsibility for fraud and deal with the issue.

There are two main types of fraud that merchants deal with, neither of which are particularly good for merchants:

  • Fraud – When a “buyer” uses a fake or stolen card to buy goods. This type of fraud provides no means for the seller to recoup their losses
  • Friendly Fraud (AKA Chargeback) – When a buyer asks the credit card company to remove a charge from their bill. It happens when the buyer feels that they didn’t receive the product or service they were promised. It costs up to $100 to dispute a chargeback, but merchants typically lose.

To keep fraudulent charges in your store to a minimum, vigilance and looking for odd patterns in buyer behavior is key to ensuring you protect yourself as well as other customers. Since credit card fraud is quite prevalent in today’s market (not to mention the penalties merchants incur should they allow such a charge to happen). Here are five things you can implement to cut down on instances of credit card fraud:

  • Address Verification System – Include the cardholder’s billing address and zip code in the authorization request; this option is more useful when doing Internet transactions
  • Require Credit Card Verification Value – Require buyers to enter the 3-digit number typically found on the back of the card; this method allows the merchant to verify that the person making the purchase has the physical card
  • Examine Online Transactions – Credit card fraud is more prevalent in e-commerce transactions, so it’s always helpful to look for inconsistencies between billing and shipping addresses; also look for odd behaviors like making a large order with priority shipment
  • Secure Your Website – If your website is compliant with PCI DSS standards, it secures customers’ information along with keeping the website secure
  • Reach Out to Chargeback Customers – If your customer service team is responsive to customer complaints, a lot of the misunderstandings can be cleared up and possibly reverse the chargeback
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Sally Wells
Contributing Editor

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