Five Ways to reduce Credit Card Risk


Tips for a New Merchants and review for the more Seasoned Merchant.

It’s the time of year when everyone one does more – more buying, more eating, more spending, more charging! Merchants benefit greatly from accepting credit cards and can grow a business exponentially! It’s important to know and review the basics to manage risk to your business.

Obtain a positive Address Verification (AVS) and Credit Card Security Code (CVV2) for all Credit Card transactions.

Merchants with a brick and mortar shop should be swiping as many transactions as possible, However, there are times when keying a transaction is the only option. When keying a transaction the terminal or gateway will prompt you to obtain an AVS and a CVV2. This information must match with the billing information at the cardholder’s issuing bank. This insures that the credit card belongs to the potential customer. If you are looking for the lowest processing fees, capturing the AVS will also save you money on your interchange costs.

Verifying the AVS at the time of the transaction is the only safeguard for merchants when it comes to a chargeback dispute on a keyed transaction. It is in the merchant’s best interest to obtain this information.

Ship to the Credit Card billing address.

Obtain a positive AVS match and then only ship merchandise to the address on file until you know your customer. If a new customer asks to charge a credit card to buy products from your company in one city and the billing address on file is another; and on top of that they request the merchandise to be shipped to even another; a merchant should step back and think about this situation. Does this scenario make sense? If it does not, do not ship the merchandise and accept another form of payment.

Know your customer.

When you have phone orders from new customers it’s important to ask questions, understand the needs of the customer and get to know their business. Questions you might ask:

  1. How did you find our business?
  2. Are they a local customer? (Does buying by phone make sense?)
  3. Are they in your industry?
  4. What are they going to be using your product for?
  5. What is the new customer’s business named? (Can you verify the business online?)

Understand the customer and the transaction because sometimes everything doesn’t make sense. You’re in control and if you don’t feel comfortable with the customer or the transaction, make other payment arrangements.

Keep good documentation.

A merchant should have a detailed invoice, a signed sales slip (if swiped) and a credit card authorization form with the details of the purchase and authorization to charge the credit card. Documentation will help you, the merchant, if there is a customer dispute for a charge for any reason.

If you have a Card Not Present (CNP) transaction, the best practice is to ask the customer to send copies of the credit card as well as a form of ID for the person with the name on the card. Again, knowing your customer is always the best practice.

Follow your gut.

Focusing only on the money of a large transaction from a new customer may be a big mistake – and you know it. If a customer asks you to split a charge on multiple cards or gives you multiple billing addresses that don’t match, do these inconsistencies make sense? This is also a big red flag for fraud. Consider other forms of payment in a case where the actions of the new customer do not make sense. Be absolutely comfortable with a transaction before taking a credit card. If dollar signs cloud good judgment, a merchant will end up with chargebacks and no product. Follow your gut and protect your business.

If you want more information regarding credit card processing, contact SignaPay.

Kyle Brown
SignaPay – Credit and Underwriting Manager

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