Credit card fraud prevention for merchants: General Guidelines

Whenever a card gets swiped, it goes through an authorization process. If the card is approved, the merchant gets paid. This happens even when a card has been stolen. If a card is not present (a CNP sale), the liability becomes that of the merchant. This means every credit card purchase that is made online is a risk to the merchant, not the cardholder. That is partly why credit card fraud is becoming more prevalent in our global marketplace than ever before.

It’s hard to make someone take responsibility for the loss. In 2007, 52.6 billion dollars worth of loss was reported. That was in the United States alone. It’s hard to prosecute criminals for a lot of these crimes, because they’re commonly done internationally. Domestically, the Secret Service punishes crimes that exceed $150,000. The criminals know this and stay within their limit. The FTC doesn’t even investigate anything under $2,000 and local law enforcement isn’t willing to fly anywhere anytime soon.

According to Forbes magazine, the majority of theft is still done in person. There are handheld scanners that can record and store classified information when you’re in public. More resourceful criminals dive into a dumpster and fish out credit card receipts that have all the information they need.

It’s hard to address this problem, because it’s a fine line. Merchants don’t want to scare away customers with too many precautionary measures. If a customer reports an unauthorized transaction within 24 hours, they are protected from incurring a fee. Worst-case scenario for the cardholder is a $50 penalty and a new card.

Credit card companies usually have someone to hold accountable, so they aren’t too worried about the situation. They issue a chargeback, which accounts for the lost transactions and often includes an additional penalty. The payment is then returned to the customer and the penalty goes to the card issuer. These penalties increase after each offense. If the offenses reach a certain limit, they can result in the end of a business. Merchant account providers, the companies that allow merchants to do business online in the first place, know to deny business to blacklisted merchants.

This is an epidemic that is commonly underplayed, or dismissed as insolvable. The problem we face is not how to solve it, but how to manage it. A BIN system is a valid way to verify credit card information, but no one system is enough. Over the course of this article, a number of preventative measures will be explored. The important thing is to be mindful. There are plenty of techniques and new technology to deter fraud, but common sense is most important deterrent of all.

General Guidelines for fraud prevention

Credit card fraud prevention tips (researching the customer):



Precautionary Methods (from Merchant Side):