Once you have your merchant account you will need to take necessary precautions to avoid chargebacks and fraud. If you don’t have a merchant account already, we recommend Merchant Warehouse.

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Here are some tips to follow:

1. Collect CVC2 and CVV2 Verification Numbers

This tactic alone can not only reduce instances of chargebacks by 26%, according to Visa, but also reduce any pass-through fees that may be charged when a credit card order is conducted. On the back of MasterCard, most Visa and Discover credit cards is a 3-digit security code located right after your credit card number. Requiring customers to provide the 3-digit code acts as an additional verification measure. American Express cards also have a similar security code that is located on the front of the card right above the cardholder’s account number and is usually 4-digits long. Most online payment processors support entering the security codes when processing credit card orders. Check with your payment gateway provider (i.e. Verisign, Authorize.Net, etc) for details.

2. Use Address Verification System (AVS)

AVS checks to verify the address entered on the order form matches the address to where the cardholder’s billing statements are mailed. People ordering products and/or services using a stolen card number will never use the real cardholder’s billing address, so this is your chance to stop the order before it’s too late. AVS only works with orders conducted in the US. Failure to use AVS when processing credit card transactions will always result in paying higher credit card processing fees.

3. Scrutinize orders from developing foreign countries

A large percentage of fraudulent Internet purchases are made from Indonesia, Russia, and other eastern block or developing countries. Accept orders from such countries at your own risk until a worldwide AVS system is developed.

4. Let customers know what name will appear on statements

Many merchants who use 3rd Party Processing companies have run into problems because the company name that appears on cardholder’s monthly statements is usually the name of the 3rd party processing company and not the company name of the site where the cardholder made their purchase. This isn’t always the case, but in many cases it is. If you use a 3rd party processor, and even if you don’t, make sure the customer knows what name will appear on their credit card statement at the end of the month. This will help reduce any confusion that might otherwise occur.

5. Handle suspicious orders accordingly

If an order seems suspicious, the best way to handle the situation is to either call or e-mail the customer and attempt to verify that they placed the order. As a rule of thumb, if in doubt, check things out. It may be a good idea that if a customer makes an unusually high volume purchase from your site to follow-up with a verification call.

6. Watch out for orders using free e-mail addresses

Be wary of accepting orders from people who used a free e-mail address when ordering (i.e. Hotmail, Yahoo, etc.). Tracking people who used a free e-mail address is almost impossible, it’s much easier for them to get away then if they used their Internet Service Provider (ISP) or their own company web site e-mail address. To check whether an e-mail address is a freebie or not just take the part of the
address after the “@” symbol, add “www” to the front of it and see what website it brings up (i.e. joe@yahoo.com = www.yahoo.com).

7. Signatures on delivery

If your business delivers products use a carrier that requires a signature on delivery, and allows you to have a copy of the signature. Retain these for your records.

8. Request fax copies of ID and credit card

You may want to request your customer to fax a copy of both sides of their credit card and driver’s license. This tactic usually works best in a B-to-B (business to business) sales environment. While this is not a defense under Visa or MasterCard rules, it is yet another way to deter fraud.

9. Posting a warning message

Taking the time to post a warning message on your order page to those who may attempt to make a fraudulent order will significantly deter the number of instances of fraud. Be sure to mention that IP (Internet Protocol) addresses are being logged. IP addresses can come in handy when locating people about fraudulent orders.

Another article you may find informative: Merchant Account Warning

Contact us, if you have any questions about merchant accounts.
Need a merchant account provider recommendation? We highly recommend Merchant Warehouse,  read the Merchant Warehouse Review for pricing and other details. Or compare merchant accounts here.