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Eight steps Small Business Owner’s can use to Reduce Credit Card Fraud

Over the past few years, there has been a massive amount of publicity about the dangers of credit card fraud on the Internet. When Hollywood makes movies like "The Net" it's not surprising that consumers are nervous about giving out their credit card numbers online.

Yet, as many knowledgeable Internet shoppers now know, the reality is that it's actually much safer to enter your credit card number on a secure on-line order form than it is to give your credit card to a waiter at a restaurant. After all, what's to stop the waiter from writing down your credit card number and placing orders on the phone with it later? Research shows that the rate of fraudulent purchases made by cell phones is much higher than credit card fraud on the Internet.

Always take precautions when giving out any confidential information (including your credit card number) over the Internet, over the phone... or anywhere else for that matter. Always use common sense -- it is the best rule of thumb.

However, this post is not about the dangers of credit card fraud for consumers. Rather, it's about a much more prevalent -- and much less publicized -- aspect of credit card fraud for businesses who accept credit cards over the Internet.

There has been a tremendous increase in the number of merchants who have been scammed by crooks who place fraudulent orders using stolen credit card information. Unfortunately, merchants are not provided the same protection as consumers when it comes to credit card fraud. In fact, merchants are completely at risk.

Here's a common example: Someone steals a credit card account number, and then uses the stolen number to purchase a $500 product from a company. The crook knows the cardholder's correct address (by Googling it), provides the company with that information, but requested that the product be shipped to a different address, which is not uncommon. When this occurs the product will be shipped to the “ship to” address and the invoice will go to the "bill to" address. Most scammers will use one of the free email services to open an email account in the stolen cardholder's name which makes the transaction appear more legitimate. Although the merchant will get authorization and approval from their merchant account vendor, the company will bear all the loss.

Did you know that crooks can now create fictitious credit card numbers based on the algorithms used to produce authentic numbers? These fictitious credit card numbers pass through verification and will be given approval codes. Further, there are newsgroups which post stolen credit card data (so if your card number is stolen, it most likely will be posted on the Internet for the world to see in less then one hour).

Eight Steps to Reduce Credit Card Fraud for Small Business Owners

1) Begin taking a few extra steps to validate each order. Don't accept orders unless complete information is provided, including full address and phone number. Do Address Verification for all credit card orders.

2) Be on your guard for all orders using a different "bill to" and "ship to" address. Require customer who uses a different "ship to" address to send a fax with their signature and credit card number authorizing the transaction.

3) Be especially careful with orders that come from free email services (hotmail.com, juno.com, yahoo.com, gmail.com, etc.), because there is a much higher rate of fraud from such accounts. In fact many businesses won't even accept orders that come through these free email accounts. Why? because it's so easy for a scammer to open a free, anonymous email account in another person's name and then send the merchant an order using the fake email account and a fraudulent credit card number (just as in the example above).

Since there are so many free email services, how do you know if the order you receive is from one of these free email services? You can also check every Email address by typing "www" in front of the domain name of the email address into your browser. Or you can check a list of 700+ of these free email services at http://www.prospector.cz/Free-email-accounts. What precautions should you take with orders from free email accounts? It is recommended you send an email requesting additional information before you process the order. More specifically, ask for: a non-free mail address, the name and phone number of the bank that issued the credit card, the exact name on credit card, and the exact billing address. Often, you won't get a reply. If you do, you can easily verify the information (which you should take the time to do).

4) Be especially wary of orders that are larger than your typical order amount, and orders with next day delivery. Crooks don't care what it costs, since they aren't planning on paying for it anyway.

5) Pay extra attention to international orders. Do everything you can to validate the order before you ship your product to a different country. It is not recommended to ship international orders that have different "bill to" and "ship to" addresses.

6) If you're suspicious, pick up the phone and call the customer to confirm the order. It will save you a lot of time and money in the long run.

7) Consider using software or services to fight credit card fraud online. Here are a couple that you can look into; http://www.cybersource.com/ and http://www.clearcommerce.com/.

8) If you, as a merchant, do have the misfortune of being scammed by a credit card thief, you should contact your merchant processor immediately and inform them of the situation. Next, ask for the name and number of the cardholder's bank. Then, contact the cardholder and inform them that their card number had been stolen. (They may not be aware that their account number has been stolen.) You should also contact your bank and the authorities.

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About Online Credit Card Fraud Prevention


  • Welcome to the #1 website dedicated to helping you protect yourself from online credit card fraud -- consumer and small business! You will also find resources on how to avoid the most popular scams, viruses and urban legends involving credit cards on the internet today.

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