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Basic Fraud Prevention
There isn't a single simple solution or tool that prevents all fraud. It takes an assortment of many tools to mitigate it. The best protection comes from knowledge and understanding of the latest tools and trends impacting the marketplace. Reading through the topics listed below will help you determine what your business could do to reduce your fraud risk. Awareness is the first step towards fighting fraud.


Find out what steps you should take to ensure the legitimacy of every card, cardholder, and transaction.


> Card Present

> Card Not Present


Six warning signs of fraud

Certain customer behavior could point to card fraud, but it doesn't necessarily indicate criminal activity. You know your customers, so let your instincts steer you in the right direction.


Watch out for customers who:

  1. Purchase a large amount of merchandise without regard to size, style, color, or price.

  2. Ask no questions on major purchases.

  3. Try to distract or rush you during the sale.

  4. Make purchases and leave the store, but then return to make more purchases.

  5. Make large purchases just after the store's opening, or as the store is closing.

  6. Refuse free deliver for large items.


Chargebacks/Fraud Control Frequently Asked Questions

Q.  What is a chargeback?

Q.  What is a "retrieval request" and how do I respond to one?

Q.  What do I do if I am suspicious about a card or card holder?

Q.  What are the costliest chargebacks?

Q.  How can I avoid fraud at the Point-of-Sale?

Q.  How can I avoid fraud on “card-not-present” transactions?

Q.  What is a chargeback?

A.  A procedure whereby the credit card issuer reverses all or part of the amount of a credit card sale back to the originating merchant in accordance with Visa and MasterCard regulations.  A chargeback is initiated when a cardholder or a cardholder's bank disputes a charge against the cardholder's credit card account.

Q. What is a "retrieval request" and how do I respond to one?

A. A retrieval request is a request from the card-issuing bank to review a copy of a sales receipt that has been processed through your business location.  This request can be the result of various reasons, including a customer disputing a sale, or not recognizing your business name.  However, if you receive such a request, you should reply to it immediately.  If you do not respond promptly to a retrieval request, the card-issuing bank will have the right to charge the amount of the sale back to your business, resulting in a loss of income for you.  Sales receipts can be faxed to the Chargeback and Retrieval Department at 818-871-7896 or can be mailed to: Innovative Merchant Solutions, 26520 Agoura Road, Calabasas, CA  91302.  When mailing or faxing the requested receipt, please include a copy of the original Retrieval Request Form.  If you have any questions regarding a retrieval request, you may also speak with a Customer Service Representative.

Q. What do I do if I am suspicious about a card or card holder?

A.  Call the authorization center and request a Code 10. Code 10 is a term used by the credit card associations to refer to situations that are suspicious. Call your voice authorization center for a Code 10 authorization if, for ANY reason, you become suspicious of a transaction or cardholder.  A specially trained operator will lead you through a series of questions designed to minimize any discomfort to your customer and you.  The operator may give authorization or may instruct you to keep the card.  It is for this reason that you should hold the card throughout the authorization process.

Q. What are the costliest chargebacks?

A. The following are the top ten costliest chargebacks?

1.  Failure of merchant to respond to retrieval request. This is the single most frequent cause of chargebacks. Fortunately, this is often the easiest to prevent. Simply keep copies of your sales transactions and respond to any and all "Media" or Retrieval" requests by sending copies of sales drafts immediately.

Card issuers are responsible for initiating copy requests. Usually they are initiated to resolve billing disputes or to comply with a subpoena. Fulfilling copy requests is very important. When requests are not fulfilled within the prescribed time period, they almost always result in a chargeback. A chargeback for not responding to a copy request is non-reversible per Visa/MasterCard regulations. So it is in your best interest to respond quickly to copy requests.

2. Cardholder was billed more than once for the same transaction. To avoid duplicate processing, reconcile your batches daily and ensure that the register/terminal totals match the credit card receipts for the day. If you do receive a legitimate duplicate processing chargeback, do not issue a direct credit to the cardholder - the credit will automatically be applied.

3. Cardholder denies making or authorizing a transaction. Make sure all transactions (other than mail/phone order) are magnetically swiped or imprinted. Again, timely submission of a copy of the properly completed and signed sales slip along with a written explanation of the validity of the charge will be needed to try to reverse a chargeback. If the disputed transaction is a phone or mail order sale, the order form and signed delivery receipt from any courier or handler will also be required.

4.  Failure of merchant to follow correct procedures in completing the sales slip at the point-of-sale. The sales slip must include both a cardholder signature and the card account number to be valid. The account number must be obtained directly from an imprint of the card itself or from electronically reading the magnetic stripe. Manually entering the account number does not protect you from a no-imprint chargeback even if the sales slip is signed.

5. Account numbers don't match. After swiping a card, if the card number displayed does not match the number embossed on the face of the card, ask for a different form of payment. Always print and double-check the account number on all phone and mail orders. Accepting non-matching transactions will leave you vulnerable to chargebacks.

6.  A credit or refund was not properly processed. Credits must be processed correctly and on time. Make your customers aware of your credit/refund policy at the time of purchase. Have the policy printed on your sales slips directly above the cardholder's signature in accordance with Association policy. Issue credits only to the same account numbers to which the sales were made - refunds paid in cash or merchandise, or to a different account number, will not protect you from this type of chargeback.

7. Failure to obtain proper authorization. Be sure to authorize all transactions, and accurately record the approval code on the sales slip. If your request for authorization is declined, do not attempt to re-authorize transactions to the same account number, as subsequent approval may not protect you from a chargeback.

8. A card was used either before or after its valid date. Never process a transaction on a card prior to, or after, the valid date. Instead, ask for a different form of payment.

9. Merchandise or service not received by cardholder. Sales transactions must not be processed prior to delivery of the product purchased. Proof of delivery, signed by the cardholder, should be obtained for every credit card transaction in which the merchandise or service is not delivered immediately at the point-of-sale. Such proof of delivery may be your only defense if a chargeback occurs.

10. Cardholder disputes quality of merchandise or services. Ensure that your customers are aware of your return policy at the time of purchase. Stick to your policy. Display the policy at the point-of-sale and print it on your sales slips, directly above the cardholder signature.

Q.  How can I avoid fraud at the Point-of-Sale?

A.   Follow these 7 steps to avoid fraud at the Point-of-Sale

Despite the best efforts of all parties in the payment processing business, fraudulent credit card transactions do occur. Take these preventative measures to minimize the occurrence of fraud:

1. Inspect cards carefully.

 ·  Hold the card throughout the entire transaction. 

 ·  Verify that the "valid from" and "valid through" dates include the current date.

2. Check card numbers.

 ·  All Visa® account numbers begin with a '4'.

 ·  All MasterCard® account numbers begin with a '5'. 

 ·  Check that the first four digits of the embossed account number match the four digits printed just above or below the embossed number. 

 ·  Verify that the embossed characters are the same size, style, and in alignment. 

3. Check card signatures.

 ·  Does it match the signature on the sales draft? 

 ·  Does the signature panel appear to be altered or discolored? 

4. Check holograms.

 ·  When a card is tilted, the hologram on Visa or MasterCard cards will move and/or change color. 

5. Be aware of suspicious behavior.

 ·  Pronounced anxiety, nervousness or impatience. 

 ·  Indiscriminate purchases of unusual numbers of expensive items. 

 ·  Repeated purchases in a short period of time.

 ·  Fast talk or other attempts at distraction. 

 ·  Appears overly deliberate and painstaking in signing sales slip. 

 ·  Gives excuses about card Issuer problems or requests that you call a "special" authorization number that he provides. 

6. Report suspicious transactions. 

 ·  Call your authorization center and ask for a 'Code 10'. The authorization center will help you determine if the card is valid. 

7. Train employees in fraud prevention techniques.

 ·  Conduct brief training sessions in fraud prevention. 

 ·  Post fraud prevention reminders and materials near registers or in employee areas. 

 ·  Offer some reward or incentive to anyone preventing a fraudulent transaction

Q.  How can I avoid fraud on “card-not-present” transactions?

A.  Follow these 6 steps to avoid fraud on "Card-Not-Present" Transactions.

Fraud is a particular concern for mail order/telephone order and Internet businesses, since transactions are generally "card-not-present." But, there are a number of things businesses can do to minimize the occurrence of fraudulent transactions:

1. Have the customer provide the name of the bank that issued the credit card. This may discourage the potential thief since they may only have the account number on hand and not the actual card in their possession.

2. Call information services to verify the telephone number that was provided by the customer. 

3. Call the telephone number provided by the customer and verify the information that was originally provided on the sale. Many times the fraudulent consumer will not be able to verify the information that they originally provided since they were ordering at random with no real record of what they requested. 

4. Obtain the billing address on the transaction in addition to the shipping address. Perform address verifications, obtaining the name and phone number of the issuing bank and then having someone call the issuing bank and attempt to verify the billing address. 

5. Train sales associates to be alert to unusual activity during telephone conversations.

  •  Apprehensive behavior.

  • Indiscriminate ordering of fraud-prone merchandise.

  • Background noise that may indicate someone is calling from a public telephone. 

  • If the customer orders a specific size and color, but will take anything available, this could be a fraudulent order. 

  • If the customer has difficulty spelling or pronouncing his name this should alert you to a possible fraud. 

6. Be sensitive to priority shipments for fraud-prone merchandise as this is sometimes an indicator that the transaction may be fraudulent.





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