Starting a new business comes with its challenges, and unfortunately, credit card fraud can be one of them. Here’s what small business owners need to know about credit card fraud and ways to prevent it.
1️. What is Credit Card Fraud?
- Credit card fraud occurs when someone uses another person’s credit card or account information to make unauthorized transactions. It’s a type of identity theft that can be done by stealing card details, hacking accounts, or even opening new accounts with someone else’s information.
2️. Common Types of Credit Card Fraud:
- Theft of Physical Card: Fraudsters may steal a physical card by lifting a wallet or breaking into a store. While newer cards have more protection, it’s still essential to keep them safe.
- Credit Card Information Theft: Sensitive card info can be stolen through phishing scams, data breaches, or the dark web. This type of fraud doesn’t require the physical card, making it harder to trace.
- Credit Card Account Fraud: Here, fraudsters gain access to your online card account, making it easy for them to make unauthorized transactions without the physical card.
- New Credit Card Account Fraud: Instead of hacking into your existing card, fraudsters open a new account with your information, using it for unauthorized purchases.
3️. Why Credit Card Fraud Matters for Small Businesses:
- Credit card fraud can lead to financial loss, added processing costs, and damage to your brand’s credibility. If a customer’s card info is compromised after a transaction with your business, they may hesitate to shop with you again.
4️. How Small Business Owners Can Prevent Fraud:
- Implement a Robust Verification Process: For online purchases, ensure an Address Verification System (AVS) and require the CVV for each transaction. For in-store purchases, ask for a government ID if necessary.
- Monitor Purchases Carefully: Watch for unusual patterns like different billing and shipping addresses or multiple cards used in a single transaction.
- Keep Your Systems Updated: Regularly update your POS machines and online systems to reduce the risk of cyberattacks.
- Adopt New Security Technology: Use EMV chip readers for unique transaction codes, and implement 3D Secure technology for online transactions, requiring extra verification from the shopper’s bank.
- Train Your Team: Educate employees about fraud risks and keep them updated on the latest security measures. This can help them spot and prevent fraud in real time.