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How to Deal with Fraud: A Step-by-Step Guide for Merchants

Posted on 15 May, 2020

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If you accept credit card or debit card payments, there is always a chance that you will have to deal with credit card fraud. This is one of the most common types of fraud and online shopping makes merchants an easy target.

Always remember: It is possible to avoid credit card fraud and deal with it successfully if you do fall victim to it, so there’s absolutely no reason to shy away from doing business online.  Here’s a step by step guide that can help you protect your business or online store, especially if you have a high-risk merchant account:


Step 1: Determine the Type Of Fraud That Was Committed

There are many different types of credit card fraud that merchants might have to deal with, and if you want to be able to prevent certain types of fraud or know how to watch out for them, you need to be aware of those different types. The more types of payments you accept, the more opportunities for fraud. Some common types of fraud include:

  • Credit Card Fraud
  • Chargeback Fraud
  • Return Fraud
  • Identity Fraud


Step 2: Ask For Identification

An easy way to avoid fraud is to ask for identification. While this won’t prevent all types of fraud, it can help you determine if the person trying to use the credit card is the person who owns it. By requesting identification you can compare the name on the ID to the name on the credit card. As long as they are a match, you can continue with the transactions.

If you are strictly an online merchant, this may not be an option for you. There is no way to request the ID of the shopper or view it.

Step 3: Verify Card Information

Another way you can deal with fraud is to verify the information on the card. If you are processing the card in person, you can check if everything matches up. This type of verification can also be done online if you have the credit card information stored in your system.

Many merchants allow shoppers to save their card information on the system so they can check out faster. This makes it easy for hackers to get that information and use it to make purchases with the card and account. You can require users to verify card information by entering the last 4 digits of the card number, or the security code on the back. This is faster than entering the full card information and is also a way to prevent fraudulent use.


Step 4: Call In The Authorization Code

Many credit cards have a number that you can call to authorize the credit card. This allows you to speak with a person to verify the information on the card and to make sure it’s not been stolen and is being used by the right person.

You can find this phone number on the back of the card and may need to read the information over the phone to confirm it. You can use this verification process along with the others above if you still feel that something isn’t right with the transaction.


Step 5: Update Your Equipment

If you want to be able to avoid fraud, you need to have updated equipment and software. The right equipment will verify the card when it is swiped. If the card has been stolen or is invalid for any reason, the equipment and software will pick it up and decline the card. This equipment and software work for both online and in-person transactions. The better your software, the more likely it will be to protect you from the different types of fraud.


Step 6: Add Specific Requirements

If you want to be able to process credit cards quickly, but also want to verify them in the process, you can choose to verify specific things.

You can require a card user to enter the zip code to ensure they are not attempting to use the card fraudulently. If the card has been physically stolen or if the credit card information has been stolen and is trying to be used online, there’s a chance the person who stole it doesn’t know the zip code of the rightful owner. If they are not able to enter this information, the card will be declined, and your business and the real card owner won’t be defrauded.


Step 7: Refuse The Transaction

You can use your instincts to tell if a person is up to something and you don’t have to accept the payment if it doesn’t feel right. You can refuse the sale and the transaction. You can also set up your website to refuse the transaction if the person attempts to use the credit card and can’t verify it. You can adjust the settings to allow them to verify the card a certain amount of times and then decline the purchase if they are not able to do so properly.


Step 8: Contact Your Card Processing Service

If you have a card processing service, they can help you navigate and avoid fraud. One of the biggest benefits of having a card processing service is that they are there to protect you from fraud.

They have various security methods in place to help prevent fake or stolen cards from being processed. This can help you avoid unnecessary refunds and a lot of products or sales based on the fraudulent transactions.

And if the processing service doesn’t catch the fraudulent activity before the payment is processed? Never fear –  they will work with you to set things right and handle the issue for you.

If you are an online merchant or if you have a storefront and you plan to accept credit and debit cards for your payment, you need to protect yourself from fraudulent activity. You can do so by following the steps above. If you happen to be caught up in a credit card scam, there are things you can do to set things right and protect your business from negative consequences. can help you avoid credit card fraud and help make your business more successful.

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High Risk Merchant Account Services

Accept all major credit cards

Regardless of Credit History!