How to know when a credit card charge is a scam

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
How can I find out if a credit card charge is a scam? We sell Western boots online and the charge is for $2,443. The authorization went through fine, but I have not captured the amount due to the fact the credit card is international. I have been corresponding with the customer for the “ship to” is in Ohio and the bill to is Japan. Is there a number I can call to make sure this is not a scam? Thank you. – Pam

Answer Dear Pam,
I can understand why you are suspicious. There are a lot of red flags in this situation – such as the customer’s request to ship to somewhere other than the billing address – and when in doubt, it’s always wise to trust your gut. When a transaction seems suspicious, call your authorization center before shipping the product and ask for a “code 10” authorization. Follow the instructions of the operator after that. If the transaction is declined, ask for another form of payment and wait until it has cleared until you ship the products.

Given the rate of credit card fraud, every merchant should review the major credit card issuer’s recommendations for avoiding fraudulent charges as a matter of self-defense. Credit card issuers have seen it all when it comes to fraud. Sometimes, we talk ourselves out of trusting our instincts even when the alarm bells are ringing inside of us. The credit card issuer’s policies for authorizing charges made online can be a good reality check.

You didn’t say what type of card the purchaser was using, but let’s say it was a Visa. Visa’s guidelines (starting on page 41) for “card-absent” transactions, such as those made online, advise merchants to scrutinize any order for which the ship-to address is different from the billing address. Such purchases are associated with a high rate of fraud.

Other potential warning signs of fraud are:

  • An order from a first-time shopper.
  • Larger than normal orders.
  • Orders for several varieties of the same item (for instance, the same cowboy boots in five different colors).
  • Shipping outside of the merchant’s country.
  • Rush or overnight shipping.

These situations don’t always indicate fraud. For instance, just because someone is a new customer, it doesn’t mean he or she is a crook. But if you see a group of suspicious behaviors, be cautious.

Typically, Visa’s guidelines note that a criminal will want to get as much use out of a stolen credit card as possible in a short span of time, before the fraud is discovered and the card is canceled. That is why crooks will place large orders, order multiples of the same product and ask for a rush order.

No one wants to turn away business or offend someone who could be a good customer, but you don’t want to end up eating the cost of a fraudulent transaction, either. To avoid fraud, make sure you follow all verification procedures on every transaction – not just those that seem potentially scammy. Ask for the card expiration date and the CVV2, the three-digit security number printed on the back of Visa cards on the security panel (How to find a credit card’s security code). If an e-commerce transaction doesn’t look right to you, Visa recommends that you use directory assistance or the internet to find the cardholder’s telephone number – rather than the number given to you by the person placing the order – to confirm the order.

Each credit card issuer has its own procedures for fraud prevention, so make sure you check out those for Mastercard (page 125), American Express (page 2) and Discover (page 23), too. Each credit card issuer offers its own fraud prevention services as well, which could be worth trying if you have a high-volume business. Mastercard, for instance, offers the Expert Monitoring Real-Time Fraud Scoring Service, which uses predictive modeling to score each transaction based on the likelihood it is fraudulent.

We all love making a sale, but a sale is only helpful to our businesses if we actually get paid. Fortunately, the major credit card issuers can do a lot to help you avoid getting tricked by scammers.  

See related: What to do when a customer uses someone else’s card?, How a business can prevent fraudulent online orders

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Updated: 09-23-2018