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tips_on_avoiding_fraudulent_credit_card_transactions

Tips on Avoiding Fraudulent Credit Card Transactions

On a charge back request, if the merchant did not have the customer sign the credit card transaction slip, and the merchant did not verify the signature against the card signature, the merchant is usually held responsible for that transaction.

Protection against charge back requests.

Fraud related charge-backs occur when the cardholder does not recognize the transaction and/or the transaction was not properly authorized.
Charge-back reason codes for fraud include: No Cardholder Authorization, Fraudulent Transaction-Card-Present Environment, and Fraudulent Transaction-Card-Absent Environment.

If you are unable to obtain a signature and verify the signature the following tips may help to minimize fraudulent transactions.
These tips will not protect you in the event of a charge-back request, but they will help prevent the charge back requests from occurring in the first place.

  • Ask for the CVV number. This may only prove that the thief has stolen the card, not just the card number.
  • Use address verification. Only ship to the address provided and require signature on delivery.
  • Do not allow the customer to phone in an order and have someone else pick up the order. Perhaps offer to have it delivered and obtain a signature when it has been delivered.
  • An obtained signature only protects you if the signature matches. A faxed or mailed in signature only protects you if it was the actual card holder who made the transaction. It does not protect you against someone else making the transaction.
  • If a customer has written “ASK FOR PHOTO ID” in their card signature panel, you can not verify the the card holder signature, and according to most merchant agreements you MUST NOT accept the transation.
  • Every transaction must be authorized. If a transaction declines, the amount should not be split into smaller amounts. This could result in the cardholder not recognizing the transaction. Simply ask for another form of payment.
  • Asking for Photo Identification may be in violation of your merchant agreement. Some states have laws that allow or disallow asking for Photo ID. Asking for ID if the card is unsigned is allowed, also if you have to call in for authorization, the merchant may be asked to check the customer's ID.

To respond to fraud related charge backs, ensure you provide all supporting documentation including signed, swiped sales receipts, imprints for manually entered transactions, contracts, and any correspondence relating to the transaction.

Transaction Receipts

Credit transaction Receipts must include the following:

  • Merchant name and location
  • Transaction date
  • Truncated credit card number*
  • Truncated expiration date of credit card*
  • Transaction amount
  • Authorization code
  • Merchant location code
  • Space for signature
  • Clearly stated refund / return policy

Duplicate Processing

Charge-backs for duplicate processing occur when the cardholder’s account is charged more than once for a single sale. This can happen when the same transaction is entered into the POS more than once, the same batch of transactions is submitted more than once, receipts are deposited for the same transaction with more than one bank, or more than one sales receipt is created for the same purchase.

Avoid duplicates by processing one transaction at a time. If there is more than one purchase in a day from the same customer, create separate invoices for each purchase. Balance deposits and confirm batch totals at the end of every business day to check for duplicate billing. If a customer has been charged more than once for one purchase, immediately credit the cardholder’s account.

Take the following steps for a duplicate processing charge-back:

  • If there was more than one transaction, provide sales receipts to support the purchases.
  • If a credit has already been issued for a duplicate transaction, present documentation of the credit. If there has not been a credit issued for the duplicate transaction, accept the charge-back as the credit is not needed.

Retrieval Requests

An easily avoidable and fairly common charge-back happens when a retrieval request is not responded to properly within the required time frame. The reason code is Requested Tran Data was not received within Max Time frame. Before a charge-back is issued the merchant receives a retrieval request for a sales draft for a particular purchase. If the sales draft is not received in the specified time frame or the sales draft does not meet certain criteria, a non-reversible charge-back can be issued. To avoid this charge-back, simply respond to the retrieval request with the documents requested within the required time frames.

Signs of suspicious transactions

  • Unusually high purchases of goods that are easily resold such as tobacco, alcohol, electronics, or sports equipment.
  • Phone orders with request for someone else to pick up.
  • Deliveries to a box number or other location than the customer's location.
  • Customers who want to purchase a high value item, but it does not really matter what, as long as you have it in stock.
  • Customer tries to distract or rush the merchant during the sale.
  • Customer makes purchases, leaves the store, but then returns to make more purchases.
  • Card will not swipe or the magnetic stripe has been altered.
  • Customer tries using alternate credit cards when one previously declined.
  • A wire transfer is requested on a phone order.
  • Customer gives invalid call back phone numbers
  • A phone order is placed through a hearing impaired service
If your business relies heavily on phone, and ecommerce orders, be prepared to loose some money to fraudulent transactions.
Do not make a transaction for more than what you are willing to loose.


PIN based transactions such as debit and EMV Credit/Debit are an excellent way to lower your transaction costs and your fraudulent costs.
tips_on_avoiding_fraudulent_credit_card_transactions.txt · Last modified: 2013/08/21 09:15 by craig