Fraud Protection

Protection from Credit Card Fraud

Losing any amount of money to credit card fraud is too much! From merchant chargebacks to higher operating costs, fraud affects us all. The most efficient place to prevent fraud is at the point of sale, by making sure your employees follow some simple guidelines for every credit card transaction.

Follow Procedures
  • If you are suspicious for any reason, call for a Code 10 authorization.
  • If you have an electronic POS terminal, always swipe every card, even if the customer says the magnetic stripe is damaged. If there is no response, or the message is garbled, call for an authorization and take an imprint of the card. If the card looks deliberately damaged, call for a Code 10 authorization.
  • If the magnetic stripe is not reading, key in the number manually, and take an imprint with the cardholder’s signature.
  • Always call for authorization at the time of sale. If suspicious, call for a Code 10 authorization.
  • Ensure there’s a paper trail. With signed receipts and credit card slips, there’s a good chance you can prove that the merchandise was delivered to the cardholder.
Check the Card
Fraud Protection
  • Check the signature on the draft against the signature on the back of the card. If the signatures don’t match up, have the customer sign again or ask for a piece of I.D. If you are still not satisfied, call for authorization to confirm the validity of the card.
  • Check the expiration date. Cards are often mistakenly used before their initiation date or after their expiration date.
  • Pay particular attention to the four-digit printed number (BIN) to the left of the embossed account number, above or below. It should match the first digits of the embossed account number. If the printed BIN is not there, the card is most likely counterfeit.
  • Be especially vigilant with gold cards. Because of their higher spending limits, gold cards are favorite targets of fraud artists.
  • Make sure the customer’s address and phone number match up. Be particularly cautious with orders when cardholders live out of the country and/or merchandise is being shipped out of the country.
Learn Fraud Signals
  • Train your staff to recognize suspicious transactions, such as orders that are much higher than usual and multiple orders on the same card in a short period of time.
  • Be wary of customers who buy many items without regard for the price, size or color. They are often using a counterfeit card to load up on merchandise before the card is detected.
  • Watch out for “the check-out bully.” The bully’s objective is to make such a commotion that the cashier becomes intimidated and rushes the purchase through without following proper authorization procedures.
  • Be suspicious of phone order requests for delivery to hotels, office complexes and post office boxes. Items delivered to a non-residential address may be impossible to trace and could be charged back to you if the transaction is questioned.
  • Thieves often purchase big-ticket items shortly before closing in an attempt to rush the sale and avoid authorization procedures.
Good Practices
  • Keep the transaction slip and the merchandise behind the counter until the sale has been completed. This prevents anyone from stealing your copy of the sales draft, or from running out of the store with your merchandise if the authorization is declined.
  • Never accept a letter that claims to give a customer permission to use someone else’s card. Only the authorized signatory can use the card.
  • Don’t accept credit card payments over the phone, by mail, fax or on the Internet unless you have a special merchant agreement.
Business Owner, Beware
  • Seasonal fraud specialists who don’t have their own merchant accounts often approach legitimate merchants. They will typically offer you a kickback in exchange for depositing transactions through your account. It is important that you only process your own transactions.
  • Make sure your staff know the proper procedures for credit card transactions and follow card acceptance procedures.
  • Efficient accounting and reconciliation of your receipts can help pinpoint potential account problems quickly.
  • Encourage your staff to report anyone who tries to coerce them into “skimming off” the account data from the magnetic stripe on a credit card. Some crooks use wallet-sized, cordless devices to retrieve this information and produce counterfeit cards.
When the Card Is Not Present, Caution Should Be!
You and your staff are the most effective weapons against fraud. Statistics show that the risk of fraud increases when the card and customer aren’t present at the point of sale.“Card-not-present” transactions include catalog purchases, telephone or fax orders, and Internet sales. They can also include recurring payments, such as automatic donations and subscriptions.You cannot accept mail, fax, phone or Internet transactions without a specific type of merchant agreement. Without it, you are not only vulnerable to fraud and chargeback losses, but you risk losing your merchant privileges. So, before accepting a card-not-present transaction, make sure that you have the proper agreement. Then, take the necessary steps to prevent chargebacks:
  • Start by getting authorization for every transaction. This reduces the likelihood of processing an expired or invalid card.
  • Never ship items to hotels, office lobbies or post office boxes. Without a permanent address, there’s no way to verify whether the shipment has been received or followed up with the customer.
  • If a customer contacts you to cancel a recurring transaction, stop billing immediately.
  • Protect yourself by making sure your return policy is clearly stated on your order forms, Web site, advertising and catalog materials.
When You Use Credit Cards
Most merchants are also credit card users. Here are some tips you, as a consumer, can take to reduce the chances of becoming a victim:
  • Always cut up old cards.
  • Sign new cards as soon as they arrive. Use permanent ink.
  • Keep a list of your active cards in a safety deposit box, with account numbers and the number to call if the cards become lost or stolen.
  • Only carry the cards you plan to use.
  • Store your Social Security number somewhere other than your wallet.
  • Do not give credit card information to a phone solicitor.
  • Don’t keep sensitive information at work.
Avoiding Shoplifting
Everyone who works in your store should be on the lookout for possible shoplifters. Although shoplifters are seldom violent, it’s a good idea not to attempt to physically restrain them. Call the police or security immediately. Here are some tips to help you identify likely suspects:
  • Be wary of customers returning to the same counter. It could mean they are scouting or loading up on a particular item.
  • Watch for customers “browsing” without any apparent focus.
  • Be on the lookout for people who come into your store with large shopping bags. These are often used by shoplifters to “scoop up” merchandise.
Prevent Fraud at your Virtual Store

Merchants who accept Internet orders are at a higher risk for chargebacks because the transaction is not face-to-face. Here are a few tips for avoiding chargeback situations on Internet ordering according to the rules and regulations set forth by the governing bodies of Visa and MasterCard:

  • Merchants can be setup to request CVV (Card Verification Value), which is the three digits on the back of the card printed on the signature panel. Although this is not a remedy to fraud-related chargebacks, this may prevent some customers from disputing the transactions. Please note that once a transaction has been completed, the merchant should discard the CVV code lest being open to fines.
  • If the merchant is shipping merchandise, ensure the goods are being shipped to the address of the cardholder and not to another address. U.S. merchants should be able to perform AVS (Address Verification Service) to verify the cardholder’s address.
  • Ensure that authorization was obtained during the first attempt; if it was denied or not obtained, do not bill the card but request another form of payment.
  • Internet merchants should also bill the card providing the toll-free number in the description, in the event the cardholder has a dispute. Cardholders are more likely to call the number provided rather than calling the issuer to initiate a dispute.

For those merchants who mainly accept P-cards or conduct business-to-business transactions, Visa and MasterCard have implemented an elevated level of passing data. It is Level III. In order to qualify for a Level III transaction, the merchant must provide six items of criteria for the authorization, all of which are commonly found on an invoice. They are as follows:
          1. Unit of Measure            4. Item Quantity
          2. Item Description           5. Extended Item Amount
          3. Product Code               6. Debit or Credit Indicator

Please note that passing this information to Visa and MasterCard not only ensures that the card, not present transaction, is valid, but also allows for lower transaction costs. This type of data can only be passed via the Internet gateway, namely 3 Delta, or by using a PC software product.


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Terri Nock Meet the Author
Teri Nock is an account executive, business to business sales, at Global Payments, located in Atlanta, Georgia, and on the Web at