Avoiding Credit Card Fraud at Your Business

Man using credit card at cafe.

Safeguarding your business against fraud is important, particularly if your business is accepting credit cards. Credit card fraud is something that can never be eliminated, but rather something that must be managed.

Preventing Credit Card Fraud

Accepting credit cards is part of most typical business models, either over the phone or through an online store. Opportunities to reduce the chance of fraud include:
  • Take extra care to validate the customer's full name, address, and contact details and question any changes if customers request you amend their credit card details. Talk to someone you trust to confirm the change. 
  • Be wary if the address the goods are sent to differs from the cardholder’s address (especially if the credit card address and shipping destination are different countries). 
  • Question an order to be shipped overseas if the customer could purchase the goods locally for a similar or lower price. 
  • When receiving card payments, never request that credit card numbers be sent by email. Email is not a secure channel, and card details can be intercepted and used for criminal gains.
  • For paper invoices and mail or telephone orders, utilize options such as click-to-pay invoicing solutions. They allow your business to create a payment order that can be copied into an email. This is a far safer way of processing card details. 
  • If you are an e-commerce merchant, using an approved outsourced third party to capture and process payments is the safest option.
Learn more about point-of-sale solutions from SouthState

Protecting Your Business

Instances of credit card fraud are less if the cardholder is physically present to swipe, insert their card or enter a PIN. For most scammers, it’s easier and faster to defraud you from a distance online.

If you do experience credit card fraud, possibly the first you’ll know is when you get a chargeback (a reversal of a credit card payment from your account). Other situations you may encounter as a merchant include:

Authorization Approval

Authorization approval does not mean that you’re guaranteed payment. Approval only indicates that at the time the approval was issued, the card hasn't been reported stolen or lost, and that the card credit limit has not been exceeded.

If someone else is using the credit card number illegally, the cardholder has a right to dispute the “approved” charges, and the transaction could be charged back to your business.

Refund Fraud

Refund fraud involves issuing credits (refunds) from one of your payment terminals. It is often committed by employees processing refunds to their own debit and/or credit card. To avoid detection, they may create a large sale on a fraudulent card and then process a refund to their own card.

To guard against this type of fraud, we recommend you closely monitor all refunds, checking they all correspond to a legitimate sale and are refunded back to the card used in the original purchase.

Shipping scam

Shipping scams are another popular fraud technique. These types of scams involve a malicious third party using a stolen credit card to pay for goods. The scammer contacts the business requesting goods to be shipped overseas, requesting that the price and shipping costs be split between several credit cards.

The scammer insists that the business use a particular shipping company and provides a phony email address. The business then contacts that “shipping company” which requests the freight charges be paid upfront by cash wire transfer.

The business is fooled into making the wire transfer, even after checking that the credit cards have sufficient funds and are not stolen. But the shipping company’s email address is a front for the scammers and the credit card details are stolen, probably from online card accounts which may take some time to discover.

At the end of the day, the business can be out of pocket for the cost of the shipping.

If your business does become a victim of credit card fraud, contact your banker immediately. Learn more about protecting your small business here.

  • This content is general in nature and provided for informational use only. Content may be used in connection with the advertising and marketing of products and services offered by SouthState Bank, N.A. and its subsidiaries and affiliates. This is not to be considered legal, tax, accounting, financial or investment advice. You should seek individualized advice from personal financial, legal, tax and/or other professionals, as appropriate depending on the specific facts of your situation. We do not make any warranties as to the completeness or accuracy of this information and have no liability for your use of this information.

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