Credit Card Companies

Credit Card Fraud Articles & Best Practices

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The majority of fraud committed online is through using stolen credit card information; various methods are employed to obtain this, such as copying information from retailers, stealing it from company databases and even buying credit card information from company employees. We are constantly being told by the credit card industry that online purchases are safe, but, as with any transaction there are always risks involved.

Fraudulent transactions cause losses for credit card organisations as only a small percentage is actually recoverable, either by locating the thieves or recouping a portion from merchants. In the Visa and MasterCard rules, a merchant's processing bank is fully accountable for every transaction processed. If the merchant conducts business illegally or recklessly and causes lots of chargebacks, the provider can be left with huge losses. To prevent this, the provider passes some of the costs on to the merchant if they haven't carried out sufficient security checks and completed all the card details correctly, these are the chargebacks. The merchant then has to cover the total cost of the transaction, transaction fees and is forced to pay chargeback penalty.

Because of these chargebacks, online merchants are recognising the need to take some responsibility in installing precautions to protect their online stores from credit card fraud. Anti-fraud systems are being acquired by merchants using highly secure anti-fraud tools and merchants are commonly signing up for services offered by the main credit card organisations, Visa and MasterCard SecureCode aim to dispel some of the apprehension customers feel when buying products online. These services involve customers registering a password with their card issuer and every time they use the card online they are asked for their personal password.

Many merchants believe that banks and credit card organisations don't devote enough energy on searching for thieves in order to reduce the number of fraudulent transactions, as costs associated with an investigation can work out greater than abandoning the search. In particular, small fraud transactions are unlikely to be scrutinized too closely as the cost of research and prosecution will generally exceed the loss caused by the fraud. Thieves that perpetrate credit card crime are either never found or go without punishment and so are free to carry on persecuting customers and merchants.

Associations of merchants have tried to bring into practice various anti-fraud measures, such as single use card numbers, however they are not popular with customers as it involves a new number each time, so is quite impossible for customers to memorise card numbers. People require credit cards with no aggravation and because of laws that limit customer liability in the event of fraud there is little motivation to engage in extra security.

Online security cannot be fully guaranteed, but then what can? If you employ a system that provides anti-fraud tools they can only help you in cutting down the number of fraudulent transactions in your online business. As your business experience grows, you will start to recognise suspicious transactions and can check them out before proceeding. As an online business you will have little time to investigate every transaction you are doubtful of, so have a look online where there are now lots of companies to be found that offer ant-fraud tools to minimize credit card fraud risks to merchants.