Q&A: How to verify a customer transaction made by phone

'Card-not-present' transactions pose a higher risk of fraud; take extra steps to verify these orders

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,
When I get credit card information from customers by phone, what should I do to substantiate the charge or prove that the transaction was agreed to by the customer? – Eric

Answer Dear Eric,
These are great questions to ask. Based on the letters I get, a number of merchants who aren’t sure how to verify credit card charges will wing it – and then regret it later when they lose money on an unauthorized purchase.

Your first step should be to review the authorization procedures set out by the major card credit card companies: American Express (page 25), Visa (page 29), Mastercard (“Transaction processing rules” PDF) and Discover (“Fraud prevention best practices”).

Verifying ‘card-not-present’ transactions
When you get customers’ credit card information by phone or via an online order form, it is considered a “card-not-present” transaction – meaning the purchaser is not in the same physical location as you, the merchant.

It is important to verify phone and online transactions carefully because it is easy for someone to steal a credit card number, pretend to be the cardholder and then order merchandise to be sent to another address than the one listed on the account.

Visa’s recommendations provide a good overview of some of the steps you can take to protect yourself.

  • Make sure you have complete credit card information from telephone and online customers. That includes the card account number, the name as it appears on the card, the card expiration date as it appears on the card, and the cardholder’s statement address.
  • Check to see if the card has a start date, if available. Record that date, and take note of a contact phone number and name for the financial institution that issued the card. These types of records can come in handy if there is a fraudulent charge that needs to be investigated later.
  • Require day and evening phone numbers and then call the customer back at those numbers. This is one of the one of the additional steps Visa suggests you take if you are suspicious when taking an order by phone. 
  • Confirm the order with the customer. To do this, send a note to the email address associated with the customer’s billing address, instead of the shipping address.

If customers ordering by phone seem reluctant to share information like their phone numbers, it’s best to maintain a friendly tone and explain that you are trying to protect them from fraud.

It is also possible that your acquiring financial institution (the bank that processes and settles your daily credit card transactions, and then in turn settles those transactions with the card issuer/association) will have certain verification procedures, so check what they are. 

Learn to recognize potential signs of fraud
All merchants should familiarize themselves with warning signs of potential fraud. Visa has suggested that merchants beware in these cases:

  • A first-time shopper.
  • An order is larger than normal.
  • An order includes several of the same item.
  • An order has many big-ticket items.
  • Rush or overnight shipping is requested.
  • The order is being shipped to an international address.

If you are concerned that a transaction might be fraudulent, contact the credit card issuer.

Get external help
Sometimes, even these detailed procedures are not enough to protect you from card-not-present fraud. If your business takes a lot of phone or online orders, you may want to use an outside service to help verify your transactions.

Call each credit card company to find out about any verification products it offers. For more discussion about these services, see my earlier column, “How a business can fight fraudulent online orders.”

No merchant wants to go through life in “suspicious” mode, but given the high rates of identity theft and credit card fraud, you can’t be too careful.

See related: 7 merchant tips to understanding EMV fraud liability shift, Securely storing customer card data

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Updated: 11-24-2017