Online commerce brings shoppers and vendors together for sales that are speedier and more convenient than traditional in-store transactions. Unfortunately, as cyber-attacks become more sophisticated, it is very difficult for the average store owner to tell if a payment is fraudulent.

Credit card fraud is a reality all businesses must be prepared for – an excessive number of fraudulent credit card charges could cost your organization a substantial sum, and will tarnish your reputation with card companies and customers alike. Fortunately, there are a few sensible steps you can take to guard yourself against this crime.

Keep Your Eyes Open for Suspicious Activity

Most illegitimate purchase activity can be detected if you’re diligent enough. Be wary of unusually large orders from new customers or purchases from parts of the world in which your organization doesn’t have a large clientele. Another red flag to watch out for is next-day delivery requests that require the payment of huge shipping costs that legitimate buyers wouldn’t wish to pay. When you identify an unusual transaction, you don’t have to cancel it right away. You should, however, follow up to make sure that it’s a real order perhaps by calling the customer to verify that he or she actually wants the merchandise.

Use Rigorous Validation Methods

Most credit cards enable multiple levels of validation, and if you use them appropriately, you can eliminate many instances of credit card misuse. The CVV2 number on the back of cards can only be provided by someone who has the card right in front of him or her. If you require that the customer enter this number into your order form, anyone who has illegally obtained the credit card number but not the CVV2 number will be out of luck. Similarly, you can use address verification services to weed out transactions placed by fraudsters who wish to have goods sent to an address that the legitimate cardholder is not connected to.

Automated Software Tools

If your firm is a small one, then manually reviewing each purchase might be all right. As your online retail presence grows, however, you’ll want to automate the process. Analytic software “learns” about the characteristics common to credit card fraud, and can therefore create comprehensive, multifaceted rules for blocking fraudulent transactions. One of the most desirable advantages of these algorithms is that they stay up to date on the latest criminal techniques for you, keeping your company protected against types of fraud that you may have never seen before.

Pay Attention to Cyber-Security

Always keep your online storefront patched up to the latest version of the software. After sales are processed, discard credit card information rather than storing it. This protects customers and yourself not just from outside hackers but also from employees within the company behaving badly. Two-factor authentication on users’ accounts provides an extra level of security for shoppers beyond just entering their usernames and passwords. Speaking of passwords, it may be prudent to invest in a password-management system that will create and store your passwords for you to keep them away from prying eyes.

Plan Your Response to Fraud in Advance

Forewarned is forearmed in many areas of life, and this maxim applies to online credit card security as well. Whenever you detect activity that appears fraudulent, be ready to contact the card issuer. They may be able to tell you if the card was reported lost or stolen. If you’ve already sent out merchandise for a fraudulent order, it may be wise to call the local police in the area that the packages were sent to. Although it’s impossible to prevent 100 percent of credit card fraud, you can take measures in advance to reduce the impact it has on your bottom line.

Smart consumers check their credit balances and transactions every few days to make sure all is in order, and it’s important that you, as a businessperson, also take regular steps to defend against fraud. There are many avenues open to you for achieving this goal, and you’d be remiss if you don’t implement them in your retail operation.

Beth Kotz is a contributing writer to She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.

About The Author

Scambook is an online complaint resolution platform dedicated to obtaining justice for victims of fraud with unprecedented speed and accuracy. By building communities and providing resources on the latest scams, Scambook arms consumers with the up-to-date information they need to stay on top of emerging schemes. Since its inception, Scambook has resolved over $10 million in reported consumer damages.

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