Avoiding Credit Card FraudJanuary 7, 2013 | By: Sean Murray
Many small businesses that weren’t able to utilize traditional credit card processing services are delighted to find that there are now applications where they can accept credit card payments using a smart phone. However, before you jump on the bandwagon, it only makes sense to do your due diligence as to how to avoid credit card fraud. Just because you can process that card via your cell phone doesn’t necessarily mean you should. You don’t want to get caught holding the bag (and paying for) products after finding out you’ve been “had.”
As a matter-of-fact, not matter what services or devices you use to accept credit cards, as a small business owner you need to institute policies and practices to avoid credit card fraud. Here are some of the basics:
When accepting cards in-person at the point of service.
It is amazing at how just asking one simple question, “Can I see some valid ID?” can make all the difference. Always ask for a valid form of picture identification (such as a driver’s license) before accepting a credit card. If the customer isn’t able to provide ID, then DO NOT process their payment. This means asking for the card and identification BEFORE it is swiped. When you have both the card and identification in hand, check the back of the credit card for the customer’s signature and match that signature with the one on their valid ID. Again, if they haven’t signed their card, or the signatures don’t match, don’t process their payment.
Many small business owners may have an issue instituting the above policies with repeat customers if they have not used the policy previously. Now, this is going to be a decision each individual owner needs to make. You may indeed have long-term customers that deserve your trust, but they may not. At the very least, should you decide to accept their payment without a valid ID and/or their signature is missing on the back of their credit card, let that customer know that this is a “one time pass” and they must be able to provide both next time they make a purchase. You might be hesitant to do so, but letting the customer know that you are pursuing this policy to protect your customers. For example, costs associated with theft (including credit card fraud) must be covered by increases in pricing.
When accepting credit card payments over the phone or online.
The best way to avoid credit card fraud when taking payments over the phone or online is to get all the information you can to identify that the person making the order is, indeed, the owner of that credit card. This means reading off the name exactly as printed on the card. It means not only the full credit card number, but also the 3 digit verification number on the back of the card.
Often a purchaser will want the order shipped to another address. This is why you need to ask for both the billing address and shipping address. It is also why having an address verification feature is critical.
Many credit card processing companies monitor purchasing patterns at your place of business. For example, should there be a sudden increase in the number of credit transactions that can serve as a red flag and you will receive an alert. However, taking steps to avoid theft and fraud (not simply credit card fraud, but also shoplifting, employee fraud, etc.) should always be addressed proactively by small business owners themselves.
– Merchant Processing Resource
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.