5 Telltale Signs of Credit Card Fraud at Checkout - DirectPayNet

5 Telltale Signs of Credit Card Fraud at Checkout


No one wants to be scammed. Unfortunately, scams happen every day and can result in the loss of money and customers. As a business owner, it is important to be proactive in order to protect yourself from fraud. There are several steps that you can take to protect your business, including being aware of red flags that may indicate a scam is taking place.

Here are 5 telltale signs that your business is facing fraud.

What are the different types of fraud a business can face?

There are many types of fraud in the industry of moving money, but specifically for your online business there are 3 types of fraud you need to pay attention to:

Identity Theft

Identity theft is a type of fraud in which someone’s personal information is stolen and used to open accounts or make purchases without their knowledge. A common example of identity credit card theft is when someone steals a credit card number, makes purchases with it, and then leaves the cardholder to pay off the debt.

There are many form of theft, like phishing, stealing a social security number or using a skimmer to steal card data from a physical card at an ATM or an account number to access that bank info. But taking credit card information and impersonating the cardholder is the most common form of identity theft.

Credit Card Fraud

This includes identity theft if the credit card was stolen and used. But becoming a victim of credit card fraud also happens if a fake credit card is used to make purchases. As in, if the fraudster knows a series series of digits from a credit card issuer or network can work, so they try many combinations until one clicks.

Friendly Fraud

Friendly fraud is the most common type of credit card fraud. It occurs when a customer makes a purchase, is charged for it, but then claims they never made the purchase in order to get their money back from the bank or credit card company. Friendly fraud has become increasingly common online, especially when business names don’t match what appears on a customer’s credit card statement.

Friendly fraud usually happens by accident, but some people make fraudulent purchases on purpose and then request a refund from the bank. This type of fraud has zero risk, zero liability to the cardholder’s credit score or credit report on none of the major credit bureaus (TransUnion, Equifax, Experian).

Red Flags That Signify Your Business Is Being Scammed

Here are the top 5 signs that, as a retailer, your business is under attack by scammers. If you notice any of these happening, take action immediately before you’re out thousands of dollars.

1. Purchasing High-Ticket Products

When a customer purchases high-ticket items, it could be a sign that your business is being scammed. This is because scammers often try to lure businesses in with the promise of big profits, only to take their money and run.

It doesn’t even have to be multiple products, it can also be just one high-ticket item. If there’s a high resale value, then it’s a target for fraud. The scammer can buy the product with a stolen or fake card, receive the item, and then resell it—all without spending a dime.

How to Prevent High-Ticket Fraud

We’ve written previously that simplifying the checkout process down to just the core, required information can help boost conversions. However, that doesn’t apply to high-ticket items.

When a customer want’s a high-ticket item, they’re often dedicated to it. They will try and try and try to get it because they’re committed. So asking for more credit card account information at checkout is a good idea because:

  1. More info won’t disrupt the customer experience. Customers buying this item valued at over $1k are certain of their decision. They want the product, so they’re going to buy it. They’ll jump through hoops if they have to. At this stage, there’s no need to convince them to make the purchase; they’re already convinced.
  2. More info will secure the sale. When asking for more information like shipping address, address verification (AVS) for billing, the CVV, email, cardholder name, and phone number, it helps you prevent fraud and the customer ensure the accuracy of their purchase. You can use 3rd-party services like 3D Secure, too.

2. Buying Too Many of the Same Product

How often do you see someone buying 20 of the same product? It depends on what you sell, but there’s an acceptable limit of how much any one person can and should be able to purchase without it being flagged as fraud.

Generally, these multiples happen with low-ticket items because the approval rate is better. But losing your entire stock to a fraudulent credit/debit card is not in your best interest.

How to Prevent Fraud with Multiples

Most online shopping carts and ecommerce platforms allow you to set limits on what a customer can purchase.

  1. Limit the transaction amount. As in don’t approve transactions that are more than $1k (depending on the unit price of your store’s items). If you typically sell low-ticket items and the average customer order value hovers around a certain amount, then set the order price limit to maybe $50 or $100 above that.
  2. Limit product quantities. In the cart, you can set a limit per item. This helps to avoid running out of stock with a single purchase but also prevents scammy purchases from happening.

3. Creating Multiple Transactions with the Same Credit Card or Address

If you notice that one card is used for 10 different transactions, it’s possible that someone has stolen the card number and is running up charges before the card gets flagged.

Fraudsters move fast. They want to spend as much as possible, as fast as possible.

A more competent scammer will have multiple cards—often, a series of cards are reported stolen and can be discovered by researching the last four digits. This same scam can occur with either multiple purchases on the same card or multiple purchases with the same shipping address.

How to Avoid Credit Card Fraud

Your payment gateway is smart. You can go into the backend of it and toggle options on and off, set up safeguards, and more.

That’s what you need to do in this situation. Go into your gateway and tell it to halt more than 2 transactions made with the same card or to the same address.

If these two transactions occur fairly quickly, notify the purchaser that the orders are under review, call the cardholder’s bank or research the card number/BIN, and get informed on if they’re potentially fraudulent transactions.

The same card could be used with multiple new accounts or with different shipping addresses. The subsequent transactions don’t have to mirror the same information.

4. Ordering from Foreign Countries

A sudden influx of orders from foreign countries is another sign of fraud.

If your company sells products online, you may see an increase in orders from overseas countries, especially if you don’t normally ship there. This may be because someone has stolen credit card numbers and placed orders with them in other countries where there is no way for the buyer to dispute them (or get their money back).

If you don’t normally see foreign transactions and rarely ship overseas, this is suspicious activity.

How to Avoid Foreign Fraud

Just like the last solution, you can limit foreign orders in your gateway. Otherwise, you change up the checkout experience slightly when the customer requests to ship outside of your home region.

  1. Set more details for foreign transactions. Just like the high-ticket strategy, request as much information as possible.
  2. Create order limits for foreign transactions in the gateway. Set a limit to where it can ship, the total order value, the number of orders with that address or card.

5. Using Fake Information at Checkout

Sometimes, flagging fraudulent activity doesn’t have to be a complex, undercover thing.

If a customer makes a purchase and puts in information like (111) 111 -1111 as the phone number, or a string of random letters and numbers in the email field, then it’s probably a fraudster.

How to Safeguard Against Fraudulent Info

During checkout, there are many 3rd-party services you can implement that will help protect you against fraud.

  1. Use 3D Secure or 2FA. Forcing the customer (when information seems fishy) to confirm the purchase at the email address or phone number provided can help prevent fraud. That info can further be checked with the cardholder’s financial institution.

Protecting Yourself Against the Current Increase in Fraud Will Save the Future of Your Business

There are other security measures to protect you against fraud along the lines of the outline given above. Things like preventing multiple tries with the same credit card, blocking certain card networks (Visa, Mastercard), and crossing shipping information with BIN info. You should also set up fraud alerts for when these potentially fraudulent charges occur. And absolutely investing recurring unauthorized charges.

There is a rise in fraud between data breaches and payment processor hackers. Don’t become a victim of fraud. Protect your business today with these tips, especially against card-not-present transactions.

For more ways to prevent fraud and protect your business, get in touch with the experts here at DirectPayNet.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.