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Minimize the Risk of Credit Card Fraud
Posted on 30 October 2003 08:32 AM

If you are a consumer, the chances of your credit card number being intercepted as it travels over the Internet is very small. It is actually at a higher risk when you use it in a brick-n-mortar store, as the merchant not only has all of your credit card details, but also a copy of your signature.

If you are an online merchant, the chances of getting orders with stolen credit card numbers are greater, as the person who is using the stolen credit card cannot be seen and may even be located in another country. Unfortunately, merchants are not provided the same protection as consumers when it comes to credit card fraud. In fact, merchants are completely at risk and bear all of the losses. Even when reporting the fraud, the banks, merchant providers, and police are not always able to help -- mainly because they are too busy or feel that the dollar amount involved is not significant enough to warrant further action.

Did you know that thieves can now create fictitious credit card numbers based on the algorithms used to produce authentic numbers?! These fictitious credit card numbers pass through verification and will be given approval codes. Further, there are newsgroups that post stolen credit card data (so if your card number is stolen, it may be posted to the world in a matter of minutes).

The following are some steps you can, and should, take to minimize your risk of credit card fraud:

  • Begin taking a few extra steps to validate each order. Don't accept orders unless complete information is provided (including full address and phone number). You may even want to require Address Verification for all credit card orders.

  • Do not accept orders from untraceable email addresses. Free email addresses, such as Hotmail, are often used with fraudulent orders.

  • Multiple orders of the same product. Why would someone want to buy three video cameras?

  • Large orders. The average order on the Internet is about $50.00. It is usually lower for first time orders, as customers often place a small test order to check out the quality of the goods. So beware if you have a first time order for multiple items, costing hundreds or thousands of dollars.

  • Pay extra attention to international orders. Do everything you can to validate the order before you ship your product to a different country.

  • Shipping address differs from the credit card billing address. Not uncommon, but is something to watch for.

  • Express shipping. Thieves want to receive the items quickly and then move on to another location.

  • If you are suspicious for any reason, call the customer to confirm the order. It will save you a lot of time, and money, in the long run.

Other Resources

An excellent book on how to protect yourself against online scams and cyberspace invaders called Risky Business: Protect Your Business from Being Stalked, Conned or Blackmailed on the Web by Dan Janal provides good ideas for merchants to minimize the risk of credit card fraud. You may obtain this book now by clicking here.

Discover Financial Services also provides tips that should help merchants greatly reduce the chances of online credit card fraud:
http://www.discovernetwork.com/merchants/fraud-protection/fraud-faq.html