Reducing Your Business's Risk Of Fraud Related Chargebacks

By Author: Mike Harrigan
Total Articles: 3764
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Credit card fraud affects all businesses, be they large or small. From major department stores to small mom and pop shops, statistics show that credit card chargebacks cost business owners millions of dollars each year.

As hard as law enforcement officials work to fight credit card fraud, new criminals quickly replace the ones who are caught and the trend continues. That's why it's up to businesses to do everything they can to protect themselves from fraud related credit card chargebacks. The question is, how do you go about doing that?

There are a number of steps you can take to reduce losses due to credit card fraud. First and foremost, make sure you review all of your customer's orders carefully. If someone overseas is ordering thousands of dollars in merchandise and the billing details don't match up with the shipping address, don't take the bait. The pie-in-the-sky orders that seem too good to be true usually are.

If something doesn't seem right about an order, ask for identification and further verification. While this is harder to do with Internet orders, you can request that your customer fax you ...
... a copy of the front and back of their credit card along with a copy of their driver's license. Then, to ensure the card you're looking at hasn't been forged, you can contact the issuing bank to make sure the name on the credit card matches the name of the person placing the order.

The question is, how do you know which bank to contact to verify the card in question is legit? That's where the credit card's BIN comes into play.

A BIN (bank identification number) is the first six digits of each credit card number. By using a BIN database and matching up the first six numbers of a credit card to an entry in the database you can get the bank's name and phone number and you'll even know what type of card you're dealing with (debit, credit, pre-paid, etc.)

While these extra steps do take a little more time than just relying on your payment gateway to protect you, they are well worth the effort. Businesses that are willing to take these steps can drastically reduce losses caused by credit card chargebacks.