Credit card fraud is a costly problem, with businesses losing billions of dollars every year to bogus transactions both online and in-person. Not only does credit card fraud lead to lost merchandise but also to lost time — and major headaches — spent straightening everything out.
Although banks and credit card issuers are constantly working to fight fraud, often adding features and security protections to cards to protect both customers and businesses, merchants still have a responsibility and the power to stop fraud before it happens. Criminals are becoming more sophisticated all the time, but there are still a few telltale signs that should trigger a closer look at certain transactions.
Fraud Detection Services
One of the most important things to do to protect against fraud is to work with a credit card processing company that offers advanced fraud detection. Some companies use big data to evaluate transactions against known fraudulent accounts; when a card is associated with fraud, information about that card is then added to a database against with future transaction can be evaluated.
Credit card processors also offer advanced detection tools that help protect again fraud in card-not-present transactions (i.e., online purchases). Using tools built into cards themselves, such as Address Verification Service, Card Validation Codes and Card Verification Values, your processor can flag suspicious transactions right away before you have a loss.
Identifying Signs of Fraud
Fraud investigators have identified several red flags that are often associated with credit card fraud. Obviously, not every transaction that meets one of these criteria is a fraudulent one, but if you spot any of these warning signs, it’s worth doing some more diligence before processing the transaction. Chances are, your customers will be appreciative of your efforts — especially if you catch a problem.
Among some of the telltale signs of fraud to watch for include:
- Making larger than average purchases, especially when the items ordered include multiples of the same product in a wide range of colors, sizes and/or styles. Criminals will often use stolen credit cards to purchase items for resale and ordering 10 identical shirts in all sizes is often suspicious.
- Shipping multiple orders to the same address using different credit cards (especially if they have similar numbers), or multiple orders going to different addresses using the same card. One common tactic for thieves is to list items for sale on online sales sites like eBay and then use a stolen credit card to order the items directly from another site and ship them to the buyer, pocketing the payment from the buyer.
- Entering the card information incorrectly. When names and addresses are typed in all capital letters or contain spelling errors, the expiration date is entered incorrectly, or the CVV number is repeatedly entered incorrectly, that could be a sign of fraud.
- Making multiple smaller purchases on a card after it’s been declined.
Again, these are just some of the signs to watch out for — and don’t all automatically equate fraud. Still, many bogus transactions follow these patterns, so it’s best to be alert.
Training Your Employees
If you own a brick-and-mortar business, training your employees to spot signs of fraud and respond is important as criminals still attempt to steal in person. Remind your employees that they should never confront or accuse a customer of fraud; most credit card companies have a dedicated fraud line that merchants can call and ask for specific code, which triggers the issuer to walk the caller through the steps to confirm the transaction.
Of course, you must train your employees on how to be alert to signs of fraud first. Some of the things to watch for include:
- Damaged or suspicious-looking cards. Most cards have some wear on them after a while, but if the numbers or name is misaligned, the card appears to have been tampered with in some way, or doesn’t have a magnetic strip on the back, that’s cause for concern.
- Signature issues. Cashiers should always compare the signature on the back of the card to the signature on the card or ask for ID if the card isn’t signed. If the customer looks at the signature on the card while signing or does things to attempt to distract you from checking the signature, be suspicious.
- Strange purchases. Purchases that are significantly larger than average, have many big-ticket items (especially electronics) or seem to be made indiscriminately without regard to size, style or cost should be scrutinized more closely.
As long as there are credit cards, there are going to be thieves attempting to commit credit card fraud. By being alert and taking steps to confirm suspicious transactions, you can stop them in their tracks and keep your business from losing money.
