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Keeping Your Eyes Peeled: 5 Warning Signs You May be Dealing with Credit Card Fraud

Businesses are on the front line of dealing with credit card fraud. We have the responsibility to exercise diligence and ensure any suspicious activities or behavior is fully investigated before proceeding with the payment.

Credit card fraud destroys lives. In 2016, 31.1% of those that suffered from credit card fraud said they went on to lose their homes as a result, while 60.7% said they had to take out loans to make ends meet.

The average merchant processes 156 fraudulent transactions each month, with the average fraudulent transaction being worth around $114. We, as merchants, therefore have an obligation to do what we can to prevent credit card fraud among our customer transactions.

This is why it is imperative that any businesses taking credit card payments, in person or over the phone, comply with the PCI regulations. For more details, Ivrnet has a full PCI compliance guide available on its site.

While none of these tell-tale signs of credit card fraud amount to solid proof that the customer is engaging in fraudulent behaviour, they should be a cause for concern and prompt the merchant to ask further questions to establish the legitimacy of the transaction.

The Customer Doesn’t Care About Price

If the customer is making indiscriminate purchases, with little thought or concern for the prices, it could be a sign that they are engaging in credit card fraud. Similarly, if the customer is a new customer, putting in an order far larger than most customers typically do, it could also be a sign something is amiss.

Criminals engaging in credit card fraud typically order a large quantity of items, with little regard for the price or costs.

Using Different Cards on the Same Order

Placing multiple orders with the same delivery address, with payment taken from multiple credit cards, should also raise some red flags. The same applies to multiple orders to different addresses all placed on the same card.

This is abnormal financial behavior and should be treated as such when it comes to verifying the validity of the transaction.

The Transaction is Taking Place at Unsociable Hours

The payment platform, Stripe, conducted a comprehensive analysis of all its fraudulent credit card transactions and revealed an interesting pattern.

The total number of transactions greatly decreased between midnight and 5am, however, the percentage of fraudulent transactions of the total transactions actually increases during these hours.

This means that transactions taking place between midnight and 5 am perhaps merit more scrutiny than transactions during typical business hours.

Declined Purchases are then Followed by Smaller Transactions on the Same Card

If a fraudulent card user attempts to make a large purchase, only to have the card declined, they will then often attempt to make a series of smaller purchases, to see is the reason the card was declined was due to insufficient funds.

This is textbook fraudulent behaviour. Make your employees aware of this and get them to raise questions is they notice this highly unusual pattern of financial behavior.

High Shipping Costs

Transactions with shipping costs far higher than they should be for the relative value of the order are also sometimes a sign of fraudulent activity.

Typically, criminals engaging in credit card fraud have a sense of urgency regarding the transaction. This means they often pay for expedited shipping, in the hope that the purchase reaches its destination before the cardholder detects the fraudulent transaction.

While not always a sign of fraud, disproportionately high shipping costs can be an indication of criminal activity and should be treated with suspicion.