Credit Card Fraud Prevention

Credit card fraud detection, protection, and prevention is important for all businesses, no matter their size. The issue comes when those same businesses don’t have the correct tools to do so effectively. A 2019 AFP Payments Fraud and Control Survey revealed that 82% of companies were targets of payment fraud in 2018. This is a staggering number of businesses who have been challenged with merchant account fraud and only a fraction of them had proper mitigation techniques in place. Payment fraud has evolved with advancements in technology and the shift to using credit cards for everyday purchases.

PCI Compliance and Credit Card Fraud Protection

Preventing credit card fraud starts with the industry standard of PCI compliance. All businesses that accept electronic payments must comply with the Payment Card Industry Data Security Standard, or PCI DSS. Meeting their standards will ensure your business has secured the safe transfer of transactions in online credit card fraud detection. This you your customer can pay without worrying about their payment information being unsecured in the process.

Aside from being compliant with PCI DSS standards, there are other protocols that your business can take to reduce credit card fraud in its other aspects. These tips below are credit card fraud prevention for merchants to consider incorporating to their business.

Credit Card Fraud Detection and Friendly Fraud

Friendly fraud makes up a large part of merchant credit card fraud and deserves extra attention. In order to handle online credit card fraud prevention, understanding the biggest causes of it is important. Friendly fraud occurs when a customer disputes a legitimate charge for a product or service through their bank. The amount is then conditionally refunded to the customer while the issuer investigates.

There are some times in which the customers claim is valid: the item wasn’t delivered, the item was returned but no refund was processed, or their credit card was compromised. But unfortunately, this is not always the case. Customers can always make a claim with their bank even if they did receive the product and have no intention of returning it. This is when the transaction becomes friendly fraud (aka a ‘chargeback’) and the customer is looking to get repaid for a product or service that they actually received.

In order to help prevent this type of merchant account fraud, business owners should always talk to their payment processor as well as:

  • Ensure that you have shipping and tracking methods in place for every product that goes out. This way you have a better idea of when the order was received by a customer and in some cases even have photo proof that it made it to their doorstep.
  • Clearly display your refund and return policy on your website. It should state the timeframe that an item can be returned and when the refund should appear as well as have contact information available to the customer.
  • Handle returns in the same way as purchases. Track the shipments so that the customer has no chance of claiming a return was made when, in fact, it wasn’t.
  • Reach out to the customers to get their feedback on the delivery of the product or service. This may include a confirmation that they received the product or service, a confirmation that their card was charged correctly, and a way for you to communicate with the customers if anything pops up in the future.

Merchant Credit Card Fraud Prevention Tips

Every business comes across credit card fraud, but ecommerce merchant accounts see more of this than in-person businesses. The reason for this is mostly that it is easier to hide fraudulent transactions behind a screen. Here are some tips for credit card fraud prevention for online merchants to consider adopting below.

  • Address Verification System (AVS) should be used to validate the cardholder’s information. It’s a simple, yet effective tool in potential credit card fraud detection. Using an AVS, the billing address provided by the customer will be verified with the billing address that the card issuer has on file leading to a small preventative measure.
  • Card Verification Value (CVV) should be used on all card-not-present transactions. This is the three- or four-digit number that is found on the back of the card. While this is a common trait of most payment gateways, be sure that yours is equipped with it.
  • Volume Tracking filters track the number of transactions completed each day and set a limit on the amount. This way high velocity merchant credit card fraud attempts will be stopped and your account will stay safe.
  • Threshold filters can also be put in place to stop attempts at high ticket sizes. In this case you would set a high dollar amount limit that your customers most commonly pay and anything over that will be stopped. In addition to that, a low dollar amount can be set to prevent micro transactions using stolen card information.
  • Tokenization is used to safely transfer cardholder data from one place to another. In this process, important information is turned into a random string of characters which is then deciphered once that data reaches the other end of the transaction. This is an extremely safe transfer because unlike encryption, the data is completely random every time. There is not a key or mathematical equation that can decode the information until it reaches the end user and they gain access to the token vault.
  • IP Tracking is another option that you can utilize if the majority of your customers are from a specific region of the world. Let’s say you only sell to North America, but a cardholder from Europe is attempting to purchase something, your payment gateway will halt and flag the transaction as possible merchant account fraud. With this you will be able to blacklist specific countries using their IP address from making purchases on your merchant account.

Many of these credit card fraud prevention filters are offered by your payment gateway provider, such as, and can be integrated into your existing shopping cart for seamless fraud protection.

Limit Your Risk Factors Concerning Credit Card Fraud

It’s common that the merchant account’s supporting bank assumes the initial responsibility when credit card fraud occurs. As a result they often exercise fraud prevention measures such as maximum limits and high volume filters. And a freeze will be placed on the merchant account if the bank notices unusual account activity.

But after that initial responsibility is fulfilled, the supporting bank will look to you to recoup their losses. This may be by drawing from your merchant account reserve or putting more limits on your payment gateway.

Do what you can to mitigate risk factors for fraud on your merchant account by implementing the filters above, utilizing chargeback protection for friendly fraud, as well as working with your merchant account provider. PaymentCloud provides some of the best credit card fraud prevention for merchants on the market. They utilize tactics that help your account stay healthy and happy longer. Find out more about our process and what your business needs by starting the conversation about merchant account fraud.

Complete payment processing solutions for thousands of clients nationwide

We are Transparent, Reliable, and keep it simple!