What is Credit Card Fraud and How Do You Minimize It?

What is a fraud transaction?

One kind of fraud is what we call a sloppy fraudster. A professional fraudster is basically someone who steals credit cards and they order something they ship it to either their own address or they ship it to a warehouse or a big apartment building where they can pay to pick it up. UPS drops it off and they pick it up.

You can sometimes identify those kind of transactions being shipped to a warehouse or being shipped to a big apartment building. Often, the billing address entered during checkout doesn’t match the billing on file for the card holder and this is something that’s more easily identifiable. This is called an AVS (address verification service) mismatch error.

These fraudsters always try to outsmart someone who is selling online as an e-commerce seller.

TransUnion says in 2021 that fraud has increased 46 percent year over year of digital transactions. This means that everyone who is selling online will have a fraud attempt.

The bottom line is that the business is the one who is going to be at risk. The business is going to lose out twice because they’ll ship the package and then they’ll get a charge back for fraud. This will cause them to put out the money for the product plus the money for the charge back.

Businesses with the highest risk would be jewelry, electronics, luxury items and beauty products.

This is true for those categories for a few reasons. It’s a very easy kind of item to resell so if the fraudster wants to buy something for $1,000, they’ll just resell it for $500. He just made $500. If they cannot afford it because it’s a luxury item, but they want it, they’ll just take a credit card and steal it.

Sometimes with newly launched businesses, when they set up an e-commerce store, they build a website and they are very excited as the business gets started and orders start coming in. The business owner will start shipping and fraudsters have a feel for these kind of businesses. When they start marketing online and you get people to come to your website, you get the good, the bad, and the ugly. Newly launched websites are a very big target to fraudsters.

Taking credit cards in store in a retail environment

Retail environment is basically when you come into a store you have a card with a chip as well as taking credit cards online where there is no card present there is a online transaction. We all know this is called e-commerce.

In the last 2 years many brick and mortar businesses have moved to selling online and they have become very successful online. Along with the good, come challenges. If you do a lot of business online then one of the challenges you run into is fraud.

96 percent of businesses will experience some kind of fraud fraud attempt to their website. And whether you are running a website or a different type of organization or you’re running a retail store and you don’t have a card present and you’re taking a credit card payment, you at risk.

How do you handle fraud With an online e-commerce store?

the risk taker

The risk taker says – I do a lot of business online. What is fraud going to cost me? It’s going to cost me a fraction of my profits. I’m just going to live with it. I’m going to sell to everyone and not going to do any restrictions on my site and I’ll eat the few frauds that get in. It’s okay.

Obviously, this strategy would increase his sales but he’ll get a lot of losses and he does not know the limit because fraud has no limit. What he will be hit with is usually the businesses that sell low ticket items you know $20, $40, $50 ticket items and they sell a lot. It’s a risky approach but that’s what some people do.

overly cautious

When you’re overly cautious yes you’re going to have less fraud but you’re going to lose a lot of good orders. For example, if you put restrictions on your payment gateway such as you decide not to ship to certain places or you won’t ship if the shipping and billing address doesn’t match. You’re losing the sale and it does not mean it’s not a good sale. If I’m buying something and I want to send to someone so I want to have a different shipping address or I travel somewhere and I have a different shipping, that’s still a good sale.

Manual Oversight

Businesses that sell very high luxury items, for example, somebody who sells watches with a $20,000 average ticket would be very cautious because losing $20,000 is a lot of money. When you sell higher ticket items you have the manual review, which means with every order that comes in you check it then you recheck it. If it has anything that sends up a red flag you’ll just get to the bottom of it. This gives you a good opportunity to complete good sales and to take away the bad orders. It’s still a very time consuming process and becomes very costly because the person doing it is actually someone who is on payroll or they can do something better with their time.

Businesses who have very low volume in sales often have enough time for staff to do it and they will probably use that as part of their process – reviewing and filling every order manually. The other option is to get a provider.

The Provider

The fraud security provider is someone you can go to and outsource the oversight, who checks every order for you. This is done in a automatic system that’s integrated into your shopping cart allowing you to be worry-free about any order coming through. As your provider, the fraud is stopped and you get your money back. There’s no fear for you selling online – but there is a cost involved and you’ll pay for this protection.

Ready to accept debit and credit card payments safely?
Call 201-592-5927 or Contact Us Now


  • Arthur Bergman

    Arthur Bergman, owner of Redstone Payment Solutions Nationwide, LLC, leverages 28 years of diverse payment processing experience. Starting as a hospitality director at a major hotel and restaurant chain, he mastered the intricacies of high-volume credit card transactions, igniting his entrepreneurial journey. Recognizing the need for improved payment processing, Arthur founded Redstone Payment Solutions Nationwide, LLC, anchored in client-centricity. Beyond merchant account setup and competitive rates, he prioritizes enduring relationships built on trust and unwavering support. Arthur's philosophy that "a sale isn't over after the close" drives RPSN, fostering confidence, referrals, and client loyalty. Under his leadership, the company not only expanded but sustained merchant relationships for up to 25 years. Believing in "Life as Art," Arthur considers each merchant's business their masterpiece. Redstone Payment Solutions Nationwide epitomizes his dedication, offering the lowest or no-fee processing. With a rich industry background and unwavering client commitment, Arthur Bergman thrives as a trusted figure in payment processing.