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Beat Credit Bandits

How to protect your business against credit card fraud

Stories about credit card fraud are almost as abundant as credit cards themselves. Frequently, however, these stories focus on the costs to the customer whose card is stolen, even though banks, merchants, and credit card issuers are typically on the hook for paying for fraudulent charges over $50.1

To minimize their vulnerability to credit card fraud, businesses can best protect themselves by employing concrete, preventative measures. While there's no foolproof way to thwart credit thieves — and this article does not provide an exhaustive list of steps — the following tips will help any business shore up its defenses.

Always check for a signature, always ask for ID

This is an obvious, but often neglected, step for businesses that sell from an actual, brick–and–mortar store. It's amazing how rarely cashiers actually check the signature on the credit card and ask to see a driver's license. You can't emphasize this practice enough to your employees.

Verifying the legitimacy of a credit card, however, is even more imperative for online stores. Since online vendors can't actually see a customer's credit card, they should take the other steps outlined in this article.

Ship only to the billing address

Or at least be weary of fulfilling orders that have a separate shipping address, says Audri Lanford, Co–Editor of Internet Scambusters and CEO of WZ.com. If you do want to leave open the possibility of shipping to a different address, then you should ask for faxed copies (both sides) of the customer's credit card. If you're very skeptical about an order's authenticity, you should also ask for a faxed copy (both sides) of the customer's driver's license.

Ask for the CVV number

Instead of stealing an actual card, crooks will often steal credit numbers from receipts or discarded mail.

But there's a way to head off these instances of fraud, says Clark Kothlow, CFO of Ticketcity. When processing phone orders, Ticketcity employees ask for the CVV number, a three or four digit number that appears on the back of credit cards. And the only way someone can provide the number is to actually have the card.

Far-flung orders and free email addresses

Rob Frankel, a best–selling author and founder of I–Legions.com, advises against accepting orders from overseas, unless the customer first faxes copies of both sides of the credit card. Audri Lanford adds that international orders should only be mailed to the billing address.

Lanford also notes that, since establishing an email address only requires Internet access, the incidence of illegal orders over the Web is higher from free email accounts (such as hotmail.com, juno.com, excite.com, etc.). When receiving an order from a free account, then, ask for a non–free email address (such as a work address), the name and phone number of the card–issuing bank, the exact name on the card, and an exact billing address.

Choose an established merchant account processor

Many of the authorization methods described above will become automatic if you set up an account with a reputable merchant account processor. A merchant account processor will provide you with a terminal and, if your business is on the Internet, an online, electronic processing system.

Cardservice International provides one of the best available processing services. With address verification, password protection, secure software from Clear Commerce, complete, real–time Internet access to your merchant statements, and, for online accounts, Secure Socket Layer encryption, Cardservice's LinkPoint Secure Gateway system has never been breached (unlike other popular processing systems). Since Cardservice acts as the processing bank, you'll also be able to centralize your credit card processing and potentially receive payments into your account sooner.

What to do when something goes wrong

Inform your merchant account processor and your bank immediately. You should also contact the cardholder immediately. Cardholders often don't know when their cards have been stolen.


Issues described in this article are complex and continually changing. We recommend you consult a professional advisor about your specific situation.


1Yahoo Financial Center.

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