Understanding Credit Card Fraud

credit card fraud


With identity theft at an all-time high, it is crucial for online merchants to protect themselves from fraud. Early detection of fraudulent activity is crucial to the well-being of your business. Con artists shy away from preying on merchants with proactive fraud prevention tactics in place.

The reason why online payment pathways appeals to fraudsters is because there is no physical interaction with the card and cardholder, you are unable to:

  • Physically check the card’s security features to ensure it is genuine.
  • Verify the customer is the genuine cardholder via a signature or PIN.
  • Guarantee that the payment information has been provided by the genuine cardholder.

Some online retailers don’t understand the risks and don’t take steps to prevent fraud – and are easy targets for fraudsters.

Payment fraud prevention should be your first line of defense against defrauders. There are techniques you can implement for each type of payment to avoid getting scammed.

Online merchants commonly accept one or more of the following forms of payment: credit cards, checks, money orders, and PayPal. The ubiquity of credit card fraud is daunting. Unfortunately, completely eliminating credit card fraud is impossible. However, there are strategies you can use to avoid accepting fraudulent credit card orders.



Every credit card has a Card Verification Number. The CVN is a three digit number that can be found on the back of the credit card after the printed card number, except on American Express cards – it is a four digit number on the front of the card. The CVN is not embossed on the card, nor is it in the information provided by the magnetic strip. Therefore, the number must be read from the actual card. This provides a small measure of protection against fraud.

The security code helps validate that the customer placing the online order actually has the credit card in his/her possession, and that the credit/debit card account is legitimate.



The Address Verification System, or AVS, is a security feature that may help reduce merchant liability for fraudulent charges and protect customers whose credit card information has been stolen. When using the Address Verification System with their payment gateway, merchants request the customer’s billing address along with the rest of their credit card information. The merchant submits the billing address along with the credit card information to the customer’s issuing bank. The bank then checks the numbers in the address, especially the street number and zip code, against the address on file for the customer, and returns verification to the merchant through if all or part of the address is a match. Once they receive the response from AVS, the merchant can decide if they want to proceed with the transaction or not.


Shipping address should match the AVS approved billing address

Create a standard shipping policy that states orders will only be shipped to Address Verification System approved billing addresses. Billing addresses are generally the card owner’s residence, which is the most requested shipping location.


Tips for Credit Card users


  • When buying things online, generate a one-time-use virtual credit card number.
  • Make sure you ask for references and information before you extend your card details to a company.
  • Never leave your card lying around. If someone were to slip in your home, it could put you into a large amount of debt.
  • Never allow anyone else to use your card. It is yours and yours alone.
  • Always make sure your credit card is with you at all times and that no-one knows where you leave it or what your pin is, this could tempt the person to take the card and use it for his own personal use.
  • Do not give any credit card information to individuals soliciting sales over the phone.
  • Never write your personal identification number(PIN) on your credit card.
  • Do not leave expired cards lying around.
  • Do not sign a blank charge slip, draw a line through the lines above the total amount and destroy any carbon and canceled receipts immediately.

Several businesses, be it large or small scale, are not safe from the several credit card scams that have become very common in recent years. Please follow the above mentioned tips and guidelines to remain safe in the online world.

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