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 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

Ask a question.

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

Meet CreditCards.com's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.





Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


Updated: 11-24-2017