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Steps to Prevent Credit Card Fraud

A Credit Card Fraud Prevention Checklist for Businesses


Credit card fraud is bad business. In Canada, credit card fraud cost merchants $365,916,944 in 2010 according to the RCMP. And while 'no-card' fraud is growing, most credit card frauds are still being committed using lost, stolen or counterfeit cards. Whether you have a brick-and-mortar business or an online one, credit card fraud is costing you money. So what can your business do to prevent credit card fraud?

Credit card fraud prevention when dealing with credit card customers face-to-face

  • Ask for and check other identification, such as a driver’s license or other photo ID. Check to see if the ID has been altered in any way as a person trying to use a stolen credit card may also have stolen or fake ID.
  • Examine the signature on the card. If the signature on the credit card is smeared, it could be that the credit card is stolen and the person has changed the signature to his or her own.
  • Compare signatures. Besides comparing the signature on the credit card with the person’s signature on the credit card slip, compare the signatures as well to those on any other ID presented.
  • Check the security features of the credit card.
  1. Have another look at the card’s signature panel. It should show a repetitive colour design of the MasterCard or Visa name. Altered signature panels (those that are discoloured, glued, painted, erased, or covered with white tape) are an indication of credit card fraud.
  2. Check the credit card’s embossing. “Ghost images” of other numbers behind the embossing are a tip-off that the card has been re-embossed. The hologram may be damaged. (The holograms on credit cards that have not been tampered with will show clear, three-dimensional images that appear to move when the card is tilted.)
  • Check the presented card with recent lists of stolen and invalid credit card numbers.
  • Call for authorization of the credit card – remembering to take both the credit card and the sales draft with you. That way if the customer runs away while you’re making the call, you still have the credit card. Ask for a “Code 10” if you have reason to suspect a possible credit card fraud, such as a possible counterfeit or stolen card.
  • Destroy all carbon copies of the credit card transaction, to ensure that no one can steal the credit card information and help prevent future credit card fraud.

It’s also very important to be sure that your staff is educated about credit card fraud. You can use the points above as a “to do” list for dealing with credit card transactions. For information on the suspicious behavior that may indicate someone trying to commit credit card fraud, see Suspicious Behaviors That May Indicate Credit Card Fraud.

When dealing with credit card customers over the phone or through the Internet, credit card fraud prevention strategies such as scrutinizing the credit card aren’t going to work. You can, however, be alert to suspicious behaviors and shape your credit policies to nip credit card fraud in the bud.

  • Don’t process credit card orders unless the information is complete.
  • Don’t process credit card orders that originate from free e-mail addresses or from e-mail forwarding addresses. In such a case, ask the customer for an ISP or domain-based e-mail address that can be traced back.
  • If the shipping address and the billing address on the order are different, call the customer to confirm the order. You may even want to make it a policy to ship only to the billing address on the credit card.
  • Be wary of unusually large orders.
  • Be wary of orders shipped to a single address but purchased with multiple cards.
  • Be wary of multiple transactions made with similar card numbers in a sequence.
  • Be wary of orders you’re asked to ship express, rush or overnight. This is the shipping of choice for many credit card fraudsters. Call the customer to confirm the order first.
  • Be wary of overseas orders – especially if the order exhibits any of the characteristics noted above.

Credit card fraud may not be entirely preventable, but by establishing and following procedures to check every credit card transaction, you can cut down your credit card fraud losses.

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