Avoiding Credit Card Fraud (part 2)

This is the second article in a two-part series. Read the previous article in the last issue of Banking Business. 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.

PROTECTING YOUR BUSINESS

Credit card fraud is minimized if the cardholder is physically present.

If you do experience credit card fraud, initially you’ll probably know when you get a chargeback (a reversal of a credit card payment from your account). For this reason, it’s important that merchants take steps to identify the purchaser and ensure that every transaction is legitimate.

Here are some examples of increasingly common scams.

Authorization approval

Authorization approval does not mean that the merchant is guaranteed payment. Approval only indicates that at the time the approval was issued, the card hasn’t been reported stolen or lost and the credit limit has not been exceeded. If someone is using the credit card number fraudulently 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) via your EFT/ POS terminal. It’s 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 then process a refund to their own card.

To guard against this type of fraud, closely monitor all refunds, ensuring that they correspond to a legitimate sale and are refunded back to the card used for the original purchase.

Shipping scam

This type of scam involves using stolen credit cards to pay for goods. The scammer contacts the business requesting goods to be shipped overseas and the price (plus freight charges) to 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 the “shipping company,” who requests the freight charges be paid upfront by cash wire transfer.

The business is fooled into making the transfer after having checked 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.

Ticket scams

Ticket scams relate to sales (generally for tourism activities, travel passes, etc.) via private sellers on social media apps or resale sites.

The scammer poses as an independent re-seller offering discounted prices for tickets via an online platform. The seller purchases the tickets from the rightful ticket company using illegally obtained credit card details.

These tickets are then sold to the unaware consumer who pays for these tickets at a discounted rate via bank transfer. The ticket company then receives a reversal/chargeback for the fraudulent transaction a short time later.

You are within your rights to decline suspicious orders, as it will be your business who will be liable for any loss if the legitimate cardholder disputes the transaction.

Visit HeritageBankNW.com/fraud-resources for more fraud prevention tools and information and contact us immediately if you suspect you are the victim of a scam.