How Can My Business Prevent Credit Card Fraud?

The only way to be 100 percent safe from credit card fraud is to refuse all credit card transactions. Credit card fraud is a serious problem that affects all types of business and merchants of all sizes, costing them not only money, but also precious time. Fortunately, there are ways to minimize your business' risk of falling victim to credit card fraud.


Credit card fraud is a type of theft. A person commits credit card fraud by using a credit card to purchase products or services without the cardholder's authorization. This type of crime harms the cardholder and the business that sold the products or services. The cardholder may lose part of the money for the transaction, depending on the terms of his credit card agreement, and the business may lose the transaction money and face chargeback fees, which are fees a credit card company charges merchants for returning transactions.


Often, preventing credit card fraud requires more than one solution. You may find that you need to check IDs and signatures, look for security features, such as holograms, on credit cards, and verify that the address, ZIP code and telephone number you are given matches the cardholder's account information. You may also request verification codes for online transactions as part of your prevention process. Sometimes, preventing credit card fraud requires you to consider your gut feelings about a transaction. If you've received a very large order from a new customer, you may decide to do some extra checking before you ship it out. Likewise, you may decide to be particularly cautious about accepting international orders, calling the card's bank to verify the information you've received from the purchaser.


Though it can be time-consuming, you may consider adding an additional step to the processing of customer orders you receive by phone or Internet. After collecting your customer's name, address and phone number, you may call to confirm the order. In the case of fraud, the rightful cardholder may answer the phone and reveal that he did not place an order with your company.


Often, business owners believe that credit card fraud is limited to those who do not have authorization to use a cardholder's credit card. This is a misconception, as some legitimate cardholders commit friendly fraud. This sort of situation occurs when a customer orders something with her credit card but claims she did not authorize the purchase in order to get a product for free. You may prevent this type of fraud by using the AVS and obtaining delivery confirmation for shipped products.


Spending time on credit card fraud prevention can help you to save time and money. By heading thieves off now, you can avoid spending time talking to authorities and disgruntled cardholders later. Likewise, you can avoid devoting time to finding an individual who has used credit card fraud to obtain your products or services. Perhaps even more important, however, is the money prevention techniques may help you to save. With a good fraud prevention system in place, you can avoid having transactions reversed and losing the product or service as well as the amount you charged for it. You can even save money on the expensive chargeback fees credit card processors charge in cases of fraud.