9 Crucial Tips to Protect Your Small Business From Credit Card Fraud

Processing credit cards for your small business is pretty much a given these days. Unfortunately, cyber-criminals are well aware of the increase usage of credit card payments. Nielsen expects that by 2020, credit card fraud will result in over $31 billion in losses.

In short, credit card fraud is a very real threat to both your bank account and reputation. Thankfully, you can avoid credit card fraud from damaging your small business by following these nine tips.

1. Use an Address Verification System.

An Address Verification System (AVS) is a tool used by banks and credit card associations. The AVS are able to compare the numerical part of a customer’s address to the information on file. The issuing bank can then verify when a merchant makes an authorization request.

For example, if the cardholder’s name and address is Mr. John Smith, 123 Main Street, Realtown, USA 09876, the system will verify 123 and 09876. Once this info is sent, the merchant will receive one of six codes: full match, partial match address, partial match zip code, no match, international, and unavailable. Receiving a full match for AVS assures you that there is less risk processing this payment.

However, don’t solely rely on AVS. There could be instances, like when a customer moved and hasn’t updated their address yet. Also, AVS is only available from banks and not payment software or gateways.

Related: Online Debit, Credit Fraud Will Soon Get Much Worse. Here’s Why.

2. Upgrade to chip readers.

Counterfeit cards are one of the most common types of fraud in brick-and-mortar stores in the U.S. There’s a good explanation: we’re behind on implementing EMV.

If you haven’t already, it’s past time to upgrade to chip readers. An EMV is more theft-resistant than swiping the magnetic stripes of credit cards. Additionally, merchants who are using chip readers aren’t liable if credit card fraud does occur.

Related: 38 Crucial Tips to Prevent Card Fraud (Infographic)

3. Keep an eye out for unusual customer behavior.

If you accept credit cards in-person pay particular attention to the cardholder for warning signs including:

  • Pulling their credit card out from their pocket, instead of a wallet or purse.
  • Purchasing a large number of expensive items.
  • Purchasing an unusual variety of items, such as clothing in multiple sizes.
  • Rushing to complete a checkout at a closing time.
  • Telling you not to insert or swipe their card because it doesn’t work.
  • Handing you their phone when they claim that they’re talking to their bank.

A customer who does any of these actions isn’t automatically guilty of credit card fraud but these are some some of the tricks fraudsters use. Trust your gut when a customer seems suspicious.

Related: Mobile Fraud a Blind Spot for Ecommerce Merchants

4. Process online payments safely and securely.

What if you process payments online or over-the-phone when you don’t handle the credit card? You can process online payments safely and securely.

Reviewing the following before processing a payment:

  • Orders that have several of the same items – especially when it wouldn’t make sense to purchase multiples. I mean how many iPhone 7 chargers does a customer really need?
  • Orders consisting of “big-ticket” items, such as TVs.
  • Multiple same day purchases.
  • Multiple purchases coming from the same IP address.
  • “Rush” or “overnight” orders.
  • Orders that have failed AVS (Address Verification Service) or CID (the three-digit value on the back of the card).
  • International orders from countries that you usually don’t have customers in.
  • Orders that are shipped to a single address, but made on multiple cards or using multiple billing addresses.
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