How can you avoid credit card fraud as a merchant and as a consumer? Credit card fraud is unfortunately a very common occurrence, even in this day and age of enhanced security. The Federal Trade Commission stated that credit card fraud or theft has increased 21% in the year 2008. Though 21% may seem like a small number that actually translates into nearly a billion dollars’ worth of criminal activity.
Some of the most common types of credit card fraud or theft include the physical theft of the card, or perhaps the theft of the card’s account numbers. How does this happen? This could happen when a store clerk copies a sales receipt for later use or when a random stranger picks up a receipt left on a table. The smartest crooks wait a while before charging the card, assuming that the cardholder will be on the lookout for any suspicious activity immediately after the card goes missing.
True, most cards do have a signature panel but they can be forged. Many merchants wisely take precautions when scanning cards, because after all, when the cardholder requests a charge-back (or reversal) it causes everyone to lose money. Therefore, many merchants will ask to see a picture ID whenever POS restaurant software or credit card terminal pricing is used. This is so they can verify the identity of the buyer.
Most card providers are introducing new fraud protection features every day, including automated systems that limit daily withdraws or even put a block on suspicious withdraws. (For example, large withdraws taking place in another country) Online credit theft is another major issue, as is telephone theft. Bogus online companies can ask for credit card information and mysteriously disappear; hackers can break into accounts and steal account information. Buyers are often advised not to give their account information over a cellular phone, as these signals can be intercepted and heard by third parties.
Common suggestions given to cardholders on how to avoid credit card fraud include buying only from trusted sources, paying cash when possible, and avoiding impulse buys. Be sure to hide or shred any and all copies of your account information. Check your monthly statement and call about any unauthorized purchases.
For merchants, more emphasis is placed on getting proper authorization and verifying ID. Some merchants are careful to compare signatures of the buyer with signatures on the card. Some merchants will only allow shipment to an address that has been personally approved by the cardholder, while others refuse to send packages to a PO Box. Another defense method is when the merchant asks the new cardholder to send a photocopy of the physical card to the company or to voice-activate the card.
Never follow your instinct, especially when it’s not your money at stake! Always consider the evidence in front of you and ask for some proof of identity or authorization. Using discretion and caution is the best way for customers to prevent identity theft, the best way for merchants to protect against charge backs, and the loss of your merchant processing privileges.