Internet Credit Card Fraud: How to Mitigate Chargebacks to your Internet Merchant Account

Internet Credit Card Fraud: How to Mitigate Chargebacks to your Internet Merchant Account
by Lena Crossan © 2007, All Rights Reserved

If you are new to Internet Merchant Accounts or if you've had an Internet Merchant Account for a long time, you can always learn more about how to protect yourself from credit card fraud.

What steps are available to reduce your chargebacks and losses from credit card fraud?

Credit Card Fraud Prevention Steps

Payment Gateway Setup

A payment gateway is the software that allows your shopping cart to process credit cards online. Choose a payment gateway that offers robust fraud prevention features.

Payment gateway fraud prevention features include:

AVS (Address Verification Service):
   AVS response codes tell you if the billing address matches the actual billing address of the cardholder.

When a transaction is submitted, you will receive one of the following response codes from the issuing bank:

• 1. The customer has possession of his/her credit card.
• 2. The credit card account is legitimate.

CVV2 Response Codes:

• 1. Orders with a shipping address that is different than the billing address. You may need to do additional verification unless it is a known, good-standing customer.
• 2. Orders with large purchase amounts, usually over $250. This number may be higher or lower, depending on the type of products you are selling.
• 3. Orders with multiple quantities of the same product. It is common for fraudulent orders to be large quantities of a single item.
• 4. Multiple orders being shipped to the same address and paid for with the same or different credit cards within a 12 to 24 hour period. Merchants need to be wary of this even during the busy holiday season.
• 5. Orders to be shipped to Post Office Boxes.
• 6. International orders requesting overnight shipping.

International Orders require extra caution

Orders from foreign countries require special caution by the Internet Merchant and should not be shipped to certain high risk countries. Many developing countries do not have the resources to assist merchants with credit card fraud and the largest market for stolen credit cards is outside the U.S. Here is a short list of countries which have a high incidence of credit card fraud:

• Indonesia
• Ghana
• Malaysia
• Nigeria

Following are precautionary steps to verify the credit card and the buyer to mitigate potential fraud. Please contact your Internet Merchant Account provider for advice on how to reduce your risk on international orders.

Precautionary steps to verify the credit card and the buyer:

• 1. Verify the BIN number The first six digits of a credit card is the bank identification number (BIN). The BIN number indicates the specific bank which issued the credit card. Visit http://www.bindatabase.com/search.php and enter the BIN number. If the issuing bank is located in a country other than where the order is originating, further verification is recommended. This service also provides the issuing bank?s contact information.
• 2. Contact the issuing bank to verify the card being used is issued to the name of the person making the purchase.
• 3. Fax Verification Request the buyer to fax the front and back of his/her credit card and another form of identification. This works better than a phone call.
• 4. Overseas banks are different than US banks Many overseas banks do not support CVV2 (Card Verification Value) and AVS (Address Verification System) during the credit card authorization process; therefore, be aware these fraud prevention features may not be available from many overseas banks.
• 5. Contact your Internet Merchant Account processor regarding questionable orders for assistance.
• 6. Purchase advanced fraud-detection tools Many internet payment gateway providers offer advanced fraud protection tools and some internet merchant account processors may offer guaranteed services at modest prices
• 7. Choose an Internet Merchant Account processor which has a dedicated chargeback department to assist you with any chargeback issues.

An Internet Merchant Account is a powerful revenue generating opportunity. Using many of the steps outlined above will safeguard your profit margin on Internet Merchant transactions.

Author Bio:

Lena Crossan is Marketing Manager at GoEmerchant.com that has offered affordable award-winning ecommerce services since 1995.

Discover their proven, innovative Internet Merchant Account and payment gateway services and other solutions today at www.GoEmerchant.com.