The costs of credit card fraud can be frightening. In 2019 alone, the US Federal Trade Commission reported dollar losses were in the region of $135 million. As problems of identity theft continue rising, so too, is there an increased impetus on merchants and business owners to recognize credit card fraud when it takes place. If you’re a business owner – whether with an online e-commerce store or you own a brick-and-mortar store – you can play a role and prevent credit card fraud from happening even before you receive a consumer transaction dispute. Wondering how? Let’s take a look at some of the telltale signs of this social evil.
A small purchase followed by a big one
A customer makes a small purchase first, say for example that they pay a relatively small amount for petrol for their vehicle. Seems pretty harmless so far, right? But the next step is the problem. The customer then purchases a flat-screen television set or some other extravagant purchase. This is an important sign of credit card fraud as fraudsters typically want to test the card with a small purchase and then go on to buy bigger items, which they can subsequently sell. Banks, financial institutions, and payment providers will be on the lookout for such suspicious transactions to detect credit card fraud.
A large number of online purchases in a short space of time
Another important sign of credit card fraud, and this is especially the case if you’re an online merchant, is the purchase of a large number of items from your online shop in a short space of time. With this trick, the fraudster is trying to max out the credit card, and purchase as much as possible before the card is frozen or blocked. If you’re an e-commerce business owner, you’ll want to pay attention and look out for such suspicious activities and report them or flag them if you see them taking place.
Standard cardholder operating procedures
Standard cardholder operating procedures refer to typical purchases made by a shopper. It goes without saying that if you use your credit card primarily for purchasing groceries, and all of a sudden there’s a purchase of an expensive jewelry item or other expensive items such as a PC, TV, or laptop, it’s a likely indication of fraud. Most banks and financial institutions will have some sort of background on their clients and their typical purchases. If a purchase falls outside these “standard cardholder operating procedures”, the card might be blocked, and check your credit score.
It’s always advisable to indicate to your financial services provider if you’re planning on taking an overseas trip or a trip out of state so that they don’t block your card. If payment is made in Paris one minute, and in London a few hours later, this too, calls for suspicious behavior. This is why notifying your financial institution that you’re traveling will save you the time and hassle of dealing with a blocked card.
Suspicious shopper behavior
We now move on to brick-and-mortar stores and the staff there, who should be trained to pick up on shopper signals of suspicious behavior. Take a close look at the shopper. Are they restless, fidgety, and nervous? What information appears on the card that they’ve presented you with and does this information seem to fit the profile of the customer? Have they purchased items with a high and quick resale value that can be sold on the streets like electronics, jewelry, and other SIM chip? If you think the transaction is suspicious, you need to flag it right away before the fraudster can get away with using funds that are not their own but rather stolen from innocent people.
The type of items being purchased
The types of items being purchased can also be a red flag for detecting credit card fraud. If they’re expensive, in bulk quantities, and if the cardholder is willing to purchase them as soon as possible, you’re likely dealing with a fraudster. Why? Because fraudsters who steal people’s credit cards typically want to get as much money out of the card as possible so that the purchases are beneficial to them in the long run. This makes sense, especially since these individuals will be looking to sell these items on the black market, trying to make a profit off some unsuspecting individual.
Suspicious credit cards
There are also suspicious-looking credit cards to look out for. For example, some cards might have characters that are not the same height, size, and style. Other characters might not be properly aligned. Further examples of these types of cards are that they appear to be re-embossed. In addition, they may have a damaged hologram and lack either a magnetic stripe or chip. Finally, a suspicious card might have an altered signature panel. If you’re a physical store owner, look out for these suspicious signs of a fraudulent card and do not accept it by swiping it through your card payment machine.
Algorithms and the human factor
Luckily, most banks, financial institutions, and payment providers have strict controls in place to detect credit card fraud. They make use of complex algorithms to determine typical cardholder behavior and flag any out-of-the-ordinary purchases as being fraudulent. But these algorithms won’t be of much help unless there’s a human factor involved. It is often a real person from your financial institution who will call you to find out if it’s really you making the purchases you’re making.
However, be careful of phishing scams that try to trick you into believing that your bank has called you. These fraudsters will typically ask you for sensitive data that are only known to you. This is why you should be extra careful when receiving calls or even emails regarding the use of your card. Check, double-check and triple-check that the person calling you is really from your bank, be careful of clicking or downloading suspicious attachments, and avoid giving out your personal and sensitive information over the phone or via email, especially if this is out of the norm of your bank’s typical operating procedures.
Credit card fraud can seem like a scary experience, and it often leads to rather unpleasant consequences, one of which is the loss of your hard-earned funds. While there are remedies for addressing this issue, it’s a situation no one would like to find themself to be in in the first place. As a cardholder yourself and also as a business owner, always be aware of the purchases that are made at your store with various credit cards. Examine the cards carefully, check the customer’s behavior, look at the type of products they are buying. On the other hand, for online stores, look out for bulk purchases with high transaction amounts. Ultimately, if you notice anything suspicious, it’s your responsibility to report it right away. Red flags exist for a reason and if each one of us pays attention to them, then this social evil of credit card fraud can be addressed incrementally and for good.
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