Archive for the ‘Fraud Alert’ Category

Check out all the great classes from the Larimer County Small Business Development Center

I am really excited to teach classes on Credit Card Processing for Businesses and Non-Profits for the Small Business Development Center.

If you are a thinking of opening a business, or if you are business owner (even if you already accept credit cards), take this class!  It could pay you back in spades in saved fees and headaches.

In this class, you will learn how to:

  • When should you use something like a phone swipe versus a “real” merchant services account
  • Evaluate your statements for red flags and potential fee leaks (or hemorrhages)
  • What to watch for in your contracts before signing
  • How to avoid fraudulent charges
  • How to avoid charge-backs and what to do when you get one
  • What PCI is and why you should pay attention to it
  • The difference between Tier Pricing Structures and Interchange Plus
  • New technology and how it can affect your business
  • New industry fees and how they will affect your busines

Check out all the great classes available through Larimer County SBDC.

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How to avoid charge-backs and fraud when processing credit cards

For a merchant, credit card processing is critically important to your business’s success. If you don’t then you are losing as much as 70% of your online sales to competitors who do accept credit cards according to an article published by Forbes Magazine.  You will also lose brick and mortar sales.   In fact 49% of consumers said they use their debit cards on a regular basis (most of whom swipe them as credit).

While there are many great benefits in accepting credit cards, there are also potential pitfalls.  A few things that you need to consider in order to avoid fraud and charge backs follow.


Stop fraud before it starts

Recently, we had a string of fraudulent purchases by a group of people who rented hotel rooms and then went out and bought hundreds of dollars at stores with stolen cards.  The scary part was that many of the merchants suspected something was wrong, but didn’t question the purchases because they didn’t want to potentially offend the buyers.  Many didn’t ask for a Driver’s License to check the signature.  Most didn’t know to call the number on the back and ask if there was suspicious activity on the card.  Had they done so, they could have denied the purchase and simply said that the credit card company reported suspicious activity on this card.  Until it is straightened out, they will have to hold the merchandise.  Better to lose the sale then the merchandise and the sale.

How to protect yourself from fraud and charge-backs

  1. Insist on getting the CVV number (that 3 digit number on the back of the card, 4 digit for AMEX).  Credit card companies estimate that around 25% of charge backs can be avoided by demanding that number.  This is such an issue that some processing companies refuse to process cards without it.
  2. Don’t hesitate or be afraid to exercise extreme due diligence with suspicious orders. It’s imperative to verify the customer and his address if you get an order that is out of the ordinary, seems strange, or just doesn’t feel right. Satisfy yourself that the transaction is authentic.  Call the credit card 800 number on the back and ask if there has been suspicious activity on the card.
  3. Exercise caution if you have an International Transaction.  Period.  However, the major culprits for fraud are Eastern Europe, Asia, Africa and developing nations.  A warning flag would be an order for a large quantity of high priced items.
  4. If you get a big order that insists on overnight shipment, be wary.  I know this is harder to do over the holidays.  But this is really important if it can be sold on the street.  This applies to very large orders of smaller, easy-to-sell items as well.
  5. If you receive a suspicious order ask for and get copies of identification and the credit card being used.  Did you know it is perfectly legitimate to demand that the purchaser fax in copies of their licenses and credit cards?  This will help offer you protection from fraudulent purchases. A legitimate customer may object and say it’s too much hassle, but consider the fact that in that case you may only lose the sale.  However, if you shipped to a fraudulent buyer you would lose the merchandise and the cost of shipping to him.
  6. Take advantage of the Internet. Use Google.Com or 411.Com (reverse phone lookup) to verify addresses and telephone numbers.  Often you will see people who have posted if they were ripped off.
  7. Pay the extra to get a signature for deliveries.  Specify that the delivery service you use gets a signature when delivering your product to customers.  Get copies of these signatures for your own records.  Your buyer may tell you to have the delivered package left on the porch.  Did you know that you’ll have to replace it if he can’t find it when he gets home without this precaution?  Always get the signature.  I personally experienced this selling items on eBay.  Even after I paid for the signature, this person tried to say they didn’t get it.  Smart, right?  I was able to prove that he did because I followed this rule.
  8. If a card doesn’t swipe, get a copy of it with a manual swiper, write the purchase amount, time and date and “processed electronically,” have the person sign it and get a copy of their Driver’s License or at least write down their number to prove they were there and you visually matched the signature with the card.  If you don’t the person can say it wasn’t them that made the purchase and if you said the card was present (which you would do if you had it in your hand) as you punched it in, they can dispute it.
  9. Make sure the person using the card is the person that is supposed to use it.  Again, if you don’t check against a driver’s license, then it could be contested.
  10. Make sure your employees understand how to handle these situations up front before they happen.  Be firm and consistent with your procedures.  Make sure they understand you back them if they feel suspicious about a sale.

Putting the points above in use will reduce, if not eliminate fraudulent purchases. Most criminals avoid doing business with companies that take safety and security seriously. They will quickly move on to many other places that are easier prey.

Two more tips that could save your business:

If you are taking credit cards on-line, make sure you are using secure servers and that you have great virus protection on your computer.  A single breach could cost you your business because of the fines, not to mention the unpleasant call to your clients.

  1. Don’t store cc data on your laptop.  Seems to make sense, right?  You’d be shocked at how many people do.  A stolen laptop is a huge risk for a business.
  2. Always make sure your computer is protected with a top-notch virus protection software that is updated automatically and make sure your website pages that take credit cards are on a secure server (https://)

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