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Credit Card Processing: Fraud Avoidance 101

There is a wealth of information available on how consumers can avoid credit card fraud. But what about businesses that process credit cards? Advice is not as plentiful, but just as needed.

Luckily, credit card processing companies have done much of the work already, by making it difficult technically for thieves to treat credit card processing as an opportunity. Nevertheless, knowing what is being done to prevent credit card fraud is always a good idea.

And there are also actions that the business itself can take to avoid this problem.

Processing Credit Cards Without Fraud

  1. Watch Patterns. The behavioral models credit card companies have developed are marvels of modern science. Credit card processing is better and less fraud-prone because of it. By watching for unusual patterns in the sales of a business--for instance, a large spark in credit card volume--credit card processing companies can help identify possible fraud in real time. Many companies will actually call the business, to make sure that everything is okay.
  2. Verify Addresses. Many credit card processing terminals have an address verification feature. This is a very small feature that can make a big difference. On some credit card processing machines, this feature can be turned on or off. Keeping it on is the safer option.
  3. Adequate Training. Processing credit card transactions may seem like the epitome of easy, but at first, its often not. Some training on the machine, as well as general training as to how to handle peoples plastic, can help ensure reliable and secure credit card processing. Fraud prevention should be a point of emphasis during training sessions.
  4. Ask For ID. Of course, businesses are ideally busy, so this is not always the most efficient practice for every single situation. A bustling restaurant, for example, may not choose to check every ID every time. However, generally speaking, asking for ID before processing credit card transactions will prevent a large majority of credit card fraud.
  5. Match Signatures. As old-fashioned as it is, theres still no substitute for a signature. Businesses that are in the habit of glancing, however quickly, at the signature on the back of the card and making sure its the same (or close enough) to the signature on the receipt are protecting themselves. The truth is, most thieves dont want to work that hard.

Ultimate Responsibility
When a consumer has their credit card stolen and used fraudulently, the current protocol is for the credit card issuer to eat the charges rather than the consumer. When it comes to credit card processing at a place of business, though, things are not so simple.

Exact arrangements can vary quite widely, but the onus is much more on the business to prove that fraud was not caused by some action that the business did or did not take. For example, if a credit card company can show that a business never asked for ID, no matter the situation, they may request that the business pay for fraud-related damages.

In that case, an ounce of prevention can be worth thousands of dollars of cure.

CARD--Credit Card Industry Research
Federal Trade Commission
Entrepreneur Magazine

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