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Credit Card Fraud: What It Looks Like and How to Prevent It


Credit Card Fraud: What It Looks Like and How to Prevent It

Fraudsters are sneaky, there's no doubt about it. And once e-commerce merchants protect themselves against one emerging threat, fraudsters develop new methods of attack.

It's not easy to keep pace with fraudsters, but make sure you're defending your e-commerce business against these six threats to revenue.

1. Account Theft

In this scheme, criminals steal a victim's credit card data and gain unlimited access to the account by hacking the data or installing malware that captures keyboard entries or records digital activity.

2. Phishing

Deceit goes high tech when criminals simply lie to victims in a text message, in an e-mail or over the phone and pose as a figure of authority to get the victims' personal  data.

3. Skimming

In this common attack method, fraudsters use hard-to-detect skimming devices at point-of-sale card readers (like at ATMs and gas station pumps) to copy data from card swipes.

4. Fraudulent Applications

This simple but highly effective scheme has fraudsters using fake or stolen credit card applications to open accounts in someone else's name.

5. Virtual Cloning

This type of fraud consists of cybercriminals testing data from stolen credit cards with small purchases to check if the number is valid. Once a merchant accepts a small order and the criminal realizes the number works, they quickly embark on higher value fraudulent transactions.

6. Friendly Fraud

Customers who file chargebacks don't always do so with intent and malice. Instead, friendly fraud occurs when a cardholder disputes a purchase because they forgot they made the purchase, another family member authorized the purchase or even because the customer misunderstood the return policy. 

Warning Signs of Fraud

One of the simplest ways for e-commerce merchants to prevent credit card fraud is by paying attention to the above schemes. Luckily, most of these fraudulent approaches warning signs that can help merchants see and stop a potentially fraudulent translation before the damage is done.

Different Billing and Delivery Addresses

There are several legitimate reasons why a customer might want an order delivered to an address different from the billing address (e.g., the customer is sending a gift). Unfortunately,  using a customer's legitimate billing address and asking for delivery to another address is an easy way for criminals to order and receive goods before the card owner even realizes their card has been stolen.

Merchant Tip: Require phone numbers for both addresses, and call them both if you're suspicious.

Nonresidential Addresses

Most orders for delivery to hotels, offices and P.O. boxes are legitimate. However, these anonymous shipping addresses also make it harder for the merchant to know who actually received the goods, making this approach popular with cybercriminals making fraudulent purchases.

Merchant Tip: Don't refuse the order, which will frustrate legitimate customers. Instead, simply take some extra time to further analyze these transactions.

Atypical Transactions

Fraudsters are counting on merchants being too busy to analyze every transaction and using fraud filters that don't catch the latest fraud approaches. If merchants aren't careful, subtle fraud attacks, like those below, could slip by unnoticed.

  •  Unusually large orders, often with express delivery
  •  Numerous orders delivered to the same address using different credit cards
  •  Several orders with different delivery addresses made from the same IP address
  •  Several transactions using credit card numbers that aren't significantly different
  • Merchant Tip: These transactions, like the others we've mentioned, may be entirely legitimate. But they're still worth a second look.

Forwarding Packages

Criminals face numerous challenges when they try to use stolen card data. Not only must they hope the transaction will be approved, but then they have to receive the goods before the card owner realizes what happened.

A common tactic to overcome these problems is to request delivery to the card owner's address (speeding up approval). Then the fraudster calls customer service and asks for a change in delivery address. Making this change over the phone bypasses the normal fraud detection mechanisms and lets criminals receive the goods wherever they want. 

Merchant Tip: Establish a process that lets the legitimate customer interrupt any order in which the delivery address was changed or the goods were forwarded.

More Tips for Avoiding Credit Card Fraud

In addition to watching out for the warning signs above, e-commerce merchants should take every measure possible to strengthen their credit card fraud prevention effort, including:

  •  Keeping a record of fraud attempts, chargebacks and problem clients
  • • Sharing information with merchant networks, which gives merchants a larger database for identifying emerging fraud trends

Being aware of the different types of credit card fraud and potential abuse can help you protect your business, but it's not something you can do alone. Another important way merchants can protect both themselves and their bottom line is by partnering with a trusted fraud protection partner.

When you're ready to draw on the resources and experience that ClearSale can offer, just contact us. We'll show you why we're an industry leader in fraud protection and why companies around the world trust us to protect their sales and help them grow their bottom line.New Call-to-action

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