Protect Your Business From Credit Card Fraud
 By Terry M. Blair

U.S. consumers now have roughly 690 million credit cards. The amount charged on those cards grew from about $69 billion in 1980 to more than $1.8 trillion in 2005.

Those figures from the U.S. Government Accountability Office are good news for small businesses that sell online or accept orders via the telephone. More buyers using more plastic should translate into more sales and bigger profits for business owners.

Unfortunately, there’s also a bit of bad news: Some of those credit cards are being used fraudulently.

An Experian-Gallup Personal Credit Index survey in 2006 found that one in five consumers report they have had their financial information stolen, including a credit card number or bank account number.

Stolen credit cards aren’t just a pain for consumers. They can be an expensive problem for small online retailers, too.

Here are some tips you can use to protect your small business from credit card fraud.

Learn To Spot Suspicious Orders
Most likely, no one action will trigger your suspicion that a thief is attempting to use a stolen credit card. But set your radar on a wide alert. Watch for these clues:

• Credit card billing addresses that don’t match the address on file with the credit card company

• Orders that are shipped to an address different than the credit card’s billing address

• Sales charged to a U.S. card, but shipped to a foreign country

• Orders from foreign countries (unless you normally make those types of sales)

• Customers who won’t provide complete billing information, such as a phone number

• Unusually expensive or large orders, especially by a consumer who hasn’t done business with you in the past

Steps To Prevent Fraud
You can take steps that will make it difficult for the bad guys to use stolen credit cards at your online business.

• Insist that buyers provide the cardholder’s complete name, address, ZIP code and telephone number.

• Require that customers enter the three-digit Card Security Code (CSC) number of their credit cards. On most cards, the number is printed on the signature strip on the back of the card. For American Express, the four-digit number is found on the front of the card.

• Use an address verification service (AVS). These systems help protect merchants against fraudulent credit card use and chargebacks. At the time of the credit card transaction, an AVS verifies that the address and billing information provided by the customer matches the information that the credit card company has on file.

What To Do If You Suspect Fraud
Don’t be afraid to err on the side of caution. If a sale doesn’t look or feel right to you, take action.

Thieves who place orders don’t provide their real telephone numbers. So if you suspect fraud, call the telephone number that the customer provided when she or he placed the order. Ask to speak to the cardholder.

One of two things will probably happen.

1. You’ll reach the cardholder and find out that the order is legitimate. Simply explain that your company is vigilant about protecting its customers against credit card fraud. Most likely, you’ll gain the customer’s trust and appreciation.

2. Or, you won’t be able to reach the cardholder because you were given a false telephone number. If that happens, don’t ship the order.

Other Preventive Actions You Can Take
To deter thieves – and to assure customers – dedicate a space on your Web site to fraud prevention.

Explain your policies and procedures in detail. Tell customers why you require CSC numbers. Explain why you use AVS. Alert customers that you will contact them if you suspect fraudulent orders.

Giving customers a heads up about your procedures will build trust. And telling the bad guys that you’re on alert will encourage them to go to a business that’s easier to fool.


(Posted Janaury 2007)

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