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Card Processing Scams: Keeping your Business Safe

A LexisNexis study on the cost of fraud included a terrifying statistic—that every $1.00 of fraud ends up costing merchants in the U.S. $2.40!! It’s no wonder some merchants think twice, or even three times about accepting credit card payments, and which company they’ll trust to process them.

However, accepting credit cards for small business need not be as scary as all that. The benefits to your business far outweigh the risks. What’s more, arming yourself with knowledge will reduce the fear and keep you wise to the potential threats in this dynamic fraud environment.

Let’s take a quick look at a few of the most common types of fraud.

Force Authorization Scams

When a customer’s card doesn’t go through, merchants can actually force-authorize the card to complete the transaction. Some scammers know this, and have taken advantage of the fact. They’ll say something like, “Oh, sorry, this happens all the time,” and offer a code to override the denial. If the code is fraudulent, and the payment goes through, the business is on the hook for the fraud amount, and will be subject to costly chargebacks and fines.

To play it safe, force authorizations should always be taken with care. Make it a point to always call the issuing bank to get an authorization code.

Wire Scam

Vendors that process large orders may be susceptible to a wire scam. The story goes like this: an order is placed, say for $5,000 of coffee. The fraudster offers to pay $7,000, and requests that the extra $2,000 be wired to a distributor, or some other scheme. When the payment doesn’t go through, the business is on the hook for any fines and fees related to the transaction, not to mention the $2k that was wired to who knows where…

Unless it’s to someone you know personally, it’s best to simply institute a “no wires, ever” policy.

Gift Card Scams

There are a range of ways for scammers to profit off of gift cards. Two of the most common are skimming the numbers to create counterfeit cards, and returning stolen goods in exchange for gift cards. If you’re a smaller retailer, the second, and even the first of these may not be much of an issue. Still, offering gift cards is a convenient service for your customers, and with the proper security measures, you can do it safely. Look into digital gift card providers like gyft that may suit your needs.

As we said, fraud should never deter you from accepting credit cards as a small business. With knowledge, and the right tools at your disposal, such as a dedicated merchant account from Moolah, powered by the safety and security of Authorize.Net, fraud won’t be an obstacle to your business’s success.