What merchants should do when they suspect card fraud

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.

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Question Dear Your Business Credit,
I take credit cards at my store. What do I tell my employees to do when they spot one they think is bogus? Are they required to seize the card? Call the cops? Cut up the card in the customer's face? What can and should they do? Obviously I don't want to put them or my business at risk, but I don't want to facilitate fraud, either. -- Tamara

Answer Dear Tamara,
Great question -- and I applaud you for trying to do the right thing.

Obviously, this is a sensitive situation. No merchant wants to offend honest customers by turning the shopping experience into what feels like a prosecution. At the same time, you can't afford to turn a blind eye to fraud.

The major card issuers have published recommendations on what to do if you or a cashier on your team suspects fraud and I recommend that you follow them closely to avoid dangerous situations. As you probably suspected, no card issuer expects you to get into a dramatic verbal confrontation with a customer you think is misusing a card or to become a vigilante and wrestle a card from a fraudster's grasp.

American Express' guidelines say you should never put yourself or your employees at risk when you suspect credit card fraud. "Do not, under any circumstances, confront or attempt to apprehend the customer," the company's website says. I suggest you take that warning very seriously.

AmEx, MasterCard and Visa all say that if you or an employee suspects credit-card fraud, you should call your authorization center and, in a normal voice, say you have a Code 10 authorization request. Follow instructions from the operator after that, answering questions in yes or no answers. MasterCard says that the operator will notify the police for you if it is necessary.

Visa suggests on its site that an employee who notices suspicious signs should also "hold onto the customer's card if you think you can do so safely." I would venture that, given how violent society has become, there aren't any situations where you have 100 percent assurance you can do so safely, and I would err on the side of caution.

To prevent fraud, follow the card issuers' guidelines for fraud prevention to the letter with each and every customer -- and train your cashiers to do that, too. In Visa's list of card acceptance procedures, for instance, cashiers should make sure customers sign the receipt and compare it to the card. Many cashiers don't do this, even though they should.

Know the circumstances when you should decline a card and train your team in them, too. Politely explaining that someone's card has been declined because it has expired, for instance, should not offend honest customers. Many will appreciate it that you take fraud-prevention seriously.

Visa has published a helpful list of warning signs of potential fraud that I'd suggest you read and share with your employees, if you haven't done so already. For instance you'll want to be especially observant if a customer tries to purchase a lot of merchandise without regard to size, style, color or price. Someone who tries to distract you or rush you on a sale -- or doesn't have a single question about a major purchase -- may also be up to something, according to the guidelines.

At the same time, you have to use your judgment. For instance, parents who are shopping with young children might try to rush you on a sale because they are worn out from shopping with their kids. Your common sense and instincts are your best weapon in the war on fraud, so use them as your guide.

See related: How can I protect my point-of-sale system against security breaches?, Who goes to jail for fraudulent credit card use?, How soon should retailers switch to EMV?

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Updated: 06-18-2018