Fraud Prevention Tips


In our current and ever expanding digital age, merchants can rarely reach their full potential without a web presence and an e-commerce option. While it can certainly help grow a business and increase revenue, the potential for credit card fraud also increases. It is always a good idea to know the ins and outs of how your merchant account works along with precautionary measures you can take to significantly reduce your exposure to credit card fraud.

Firstly, here are some signs that a credit card transaction may be fraudulent:

• Large orders. Fraudsters will tend to maximize the value of each transaction so beware of abnormally large order sizes.
• Orders consisting of big ticket items.
• Several failed attempts by the same customer, possibly using the same card or name.
• Many transactions from the same IP address with different cards.
• International shipping addresses.
• Billing address that doesn’t match the card’s country of origin
• Multiple purchases or purchase attempts of a similar nature on the same day.
• Rush orders

If you’ve noticed any of these anomalies in your credit card transaction history, it may be a good idea to cancel the transaction(s) or investigate further before shipping any goods. Here are some steps that can be taken to minimize fraudulent transactions:

• Address Verification System (AVS): AVS is only available for the U.S. and in a few European countries. In the U.S., AVS checks if the cardholder's address and zip code matches the information on file with the card-issuing bank. AVS only uses the zip code and numeric portion of the billing street address. There are many reasons why AVS may fail (recent address change, AVS computers down, etc.). If the address verification fails on any level, the merchant may decline the transaction. If the AVS fails for any reason, the merchant should contact the customer for additional information (for example, the name of the issuing bank, the bank's toll-free telephone number, etc.).

• Credit Card Verification: Sometimes referred to as CVV2, CVC2 or CID. This is the use of a security code of 3 or 4 extra digits imprinted on the card, but not embedded or encrypted in the magnetic stripe. This verification code does not appear on credit card receipts. Since most fraudulent transactions result from stolen card numbers rather than the actual theft of the card, a customer that supplies this number is much more likely to be in possession of the credit card.

• Know your customer. Be sure to require a phone number and email with all purchases. If a transaction looks suspicious in the least, contact your customer and have them verify the purchase.

• Make sure that you have a working customer service number on file with your merchant account provider and that it appears on your customers’ credit card statements.

• Obtain your cardholders' signed proof of delivery for every credit card transaction in which the merchandise or service is not delivered immediately at the point of sale.

• BIN check. The first 6 digits of the credit card are called the Bank Identification Number (BIN). You can determine if the credit card holder and the issuing bank for the credit card are located in the same country using a BIN checking service like

• Use a credit card authorization form. This comes in handy especially for international orders where you may not be able to verify the address of a cardholder. Have your customer complete and sign a credit card authorization form before shipping any merchandise. You may also want to request a copy of a valid form of identification as well as a copy of the back of the credit card to verify the signature.

• Use a third party fraud prevention service. You may incorporate a system such as Maxmind into your e-commerce store. These services assigns points for different elements of a transaction such as IP Address, free-e-mail account, time of day, AVS results, amount of sale, type of products ordered, shipment method, different shipping/billing addresses, certain zip codes, etc. to generate a fraud score to indicate the likelihood of fraud.

There will always be a potential for credit card fraud in the e-commerce industry. However, if you’re proactive and take precautionary steps, you can heavily reduce your risk while enjoying the rewards. MerchantPlus is always available to assist with any questions or concerns you may have in assessing potential fraud. Please reach out to us anytime at [email protected].