How to Avoid Credit Card Processing Scams?

Posted by Daniel Brain on May 11th, 2018

‘FRAUD’, the word itself generates a warning sign to both customers as well as the merchant.

According to recent studies, every fraud valued 1 dollar, costs merchant .40.

The amount may seem less but has a huge impact on annual revenue.
One of the main reasons for these frauds is the credit card processing scams. Credit card payment processing companies have noticed a significant growth of such scams among small or medium-sized businesses as compared to large industries. And, if these SMBs do not have sufficient resources to handle them, the impact of scams are much more significant. A major retail can bare the impact of the loss of a couple of dollars but it is not the case with small or medium-sized businesses.

Most Common Credit Card Processing Scams

Let us discuss in detail about the most common credit card processing scams and a few tips to avoid them.

Forced Authorization Scam

To complete the transaction when customer’s credit card is declined, the merchant can perform forced authorization. Now, to finalize the sale, where the merchant already remits good, forced authorization is conducted. To do so, merchant calls the issuing bank directly to obtain the authorization code when a card is declined and overrides it. Few things to remember while conducting forced authorization are:

The customer might provide you with an alphanumeric code, which is not valid to override.
If the authorization code is not valid or fraudulent, the merchant cannot file a dispute.
In this case, the merchant will be subjected to chargebacks and a fine.

Wire Scam

If the order placed by a customer is much larger than what merchant processes, beware, as wire scam might occur. It is a scam where customer overpays for the orders he/she has placed and asks the merchant to wire the exceeding amount to a third party. This third party is responsible for picking up ordered product from the merchant and delivering it to the customer who ordered it.
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