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How Can Small Business Avoid Credit Card Fraud?

Nov. 22, 2013
Business Credit Cards, Credit Cards, Small Business
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Consumers have it good. If their credit card is stolen, they will be responsible for no more than $50 in fraudulent charges. If their number is stolen (but not the physical card), they won’t have to pay a dime. Business owners are not so lucky. Credit card companies are not legally required to assist in tracking down fraudsters. Businesses can have a tough time recovering merchandise purchased through illegitimate means. And when you operate a small business, you simply can’t afford the risk. Fortunately, there are a number of precautions you can take to protect yourself. Here are four effective techniques for preventing credit card fraud.

Ask for identification  

Sometimes the most simple practices are also the most effective. When a customer presents a credit card, ask to see a photo ID. Verify the names match and the picture looks right. If the customer can’t provide proper identification, don’t perform the transaction. You could be letting valuable goods walk right out your door. And come on–in this day and age, who doesn’t carry a photo ID in their wallet? Remember, a good scam artist will have tricks to counter your precautions. They may lie about forgetting their ID at home or in the car. Don’t fall for it. And when they do hand you identification, make sure they’re not trying to obscure the name or photo, hoping you won’t really check. Checking IDs is your first defense.

Look for security features

In addition to inspecting the customer’s identification, take a careful look at the card as well. Look for the common features that confirm it as legitimate. The account number on the front of the card should be identical to the number on the back. The back of the card should also have a hologram, signature panel and magnetic strip. It’s rare you’ll come across a counterfeit credit card, but this another simple precaution you should get in the habit of taking.

Get all of the information

Over-the-phone and online transactions present additional complications. Fraudsters may think it will be easier or less risky to conduct their criminal activity from a distance. Don’t prove them right. When processing an order from a customer remotely, get all of their information. This includes the full name of the cardholder, the 16-digit card number, the expiration date, a phone number and the cardholder’s billing address. Be wary of customers who can’t provide these simple details. With this information, you can make use of the Address Verification Service (AVS), which confirms the billing address with card issuers. You simply enter the address and receive a quick response confirming whether it matches the bank’s information. You can then decide how you want to proceed. Often, directly contacting the cardholder or the bank to resolve the issue will be the best course of action.

Look for red flags when filling online orders

The internet makes people feel anonymous, and there is power in anonymity. You should know which red flags to watch for. Anything unusual should be further scrutinized. Anytime you see a shipping address that is different from the billing address, sound the alarm. While it will usually be a perfectly legitimate transaction, such circumstances should always be treated with a healthy amount of suspicion. Websites like can help you check for false billing addresses. Be careful of international orders from countries where fraud runs rampant, and always proceed with caution when filling large rush-delivery orders. Fraudsters want to get their goods before the card is deactivated, and they don’t mind paying for expedited shipping since someone else is picking up the tab. When confronted with a suspicious order, use any and all verification methods at your disposal.