What to do when a customer uses someone else's card

If you didn't verify the cardholder, you could be liable for the charge

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 own a business, and someone used another person’s credit card to purchase a service from me. What should I do? – Egzon

Answer Dear Egzon,
Without knowing more details of the transaction, it is hard to give you specific advice, but I’ll do my best.

As a merchant, you are responsible for following the card issuers’ rules for verifying that someone using a card is actually the cardholder or an authorized user of the card. If you did not do that, you may not run into trouble if the cardholder does not have an objection to how the card was used.

If, for instance, you run a termite-control business, and a husband used his wife’s credit card to pay you for work done on the house where they live, you probably won’t face many repercussions.

That said, it still isn’t a good practice to skip the verification procedures the card issuer has set. Doing so could be grounds for the issuer to drop you from its network if your failure to do so comes to light.

Where you could face repercussions is if someone used another person’s credit card without that cardholder’s knowledge and permission and has committed identity theft. If a fraud has been committed, then it is your obligation to follow the card issuer’s procedures for reporting the fraud.

If you have not followed the card issuer’s policies for verifying card usage and fraud prevention – and someone makes an authorized purchase – you may have to eat the loss from the fraud. A liability shift took place on Oct. 1, 2015, under which merchants who had not adopted chip technology became liable for in-store counterfeit fraud.

Prior to the shift, credit card issuers were primarily responsible for covering fraud affecting consumer accounts, and they would repay cardholders if funds were lost because of fraud. Now, card issuers may be able to go after the merchant, the bank or the company that processes payments on behalf of the merchant to seek reimbursement if the merchant was not prepared to accept EMV payment technology.

If you are manually entering transactions instead of using chip card technology, you could be exposing yourself to liability for fraud.

It’s hard to stay on top of all of the details of running a small business, but it really is essential to familiarize yourself with the procedures card issuers require you to follow when accepting their cards. These rules are easy to find in their merchants’ guides on the internet, but vary based on circumstances such as whether the customer is making a purchase in person.

Many businesses are heavily dependent on credit card sales, so you never want to jeopardize your ability to accept particular cards in the future – or take on big financial liabilities that might result if there is a fraud.

See related: Video: Chargebacks hit merchants not ready for EMV chip cards, 8 tips for merchants to avoid credit card chargebacks

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Updated: 03-23-2019