Best Practices

KCSourceLink: Keep Up Your Guard Against Credit Card Fraud

Published Dec 08, 2014 by SourceLink Administrator
creditcardfraudYou may not notice it, but credit card fraud could be taking a toll on your small business. Infrequent as incidents may be, they can quickly add up—as much as $155,000 a year for businesses with fewer than 100 employees, according to the Association of Certified Fraud Examiners (ACFE). Not only do you lose the cost of the goods or services involved, your bank may also impose fees if the transaction is disputed by the card’s true owner.

Many small business owners often wrongly assume that their computers and account systems are protected when, in fact, they’re vulnerable to hackers in search of business credit card numbers and other information to make bogus purchases subtle enough to escape routine statement reviews.

Just because your business is small doesn’t mean you’re defenseless against credit card fraud. Here are some simple ways to safeguard both your point-of-sale and back office operations:

Train your employees. Make sure they consistently follow all procedures for verifying the card and cardholder information. They should also look for signs of stolen or bogus cards, such as old expiration dates and the absence of magnetic stripes, card verification value (CVV) security codes, and holograms. Each card should be signed on the back, and that signature should match the one on the customer’s receipt. Also, don’t assume someone you know or recognize isn’t a potential thief. Apply the same authorization checks to everyone; no exceptions.

One swipe, and one swipe only. If a card is declined in the automatic reader, call the bank for authorization after the first attempt. Though cards can sometimes be accidentally demagnetized by cell phones, thieves can deliberately wipe out information on a stolen card. Regularly test your readers using known secure cards, and service or upgrade them as needed.

Keep an eye on the customers. Suspicious behavior such as little attention to a product’s characteristics or price, attempts to distract sales staff, or an eagerness to conclude the transaction may indicate that someone is using a stolen or bogus credit card. If you suspect a customer is attempting to misuse a credit card, hold on to the card and call the authorizing bank immediately. If the card proves to be legitimate, the customer may be understandably upset, perhaps even walk out on the sale. Apologize, but remember that such checks are designed to protect honest customers as well as businesses.

Speaking of your employees… Properly screen all prospective employees who’ll be handling credit cards, cash, and high-value merchandise, as well as those with access to financial and accounting data. Background checks are an option, but they can be expensive. At the very least, ask for references from previous employers and contact them to get as accurate a picture as possible of your prospective hires.

Protect IT infrastructure. Every computer should be regularly updated with the latest firewalls and anti-virus software. Change passwords regularly, and limit access to computers that contain sensitive financial and accounting data.

This post comes from the national SCORE office. For local assistance, contact Kansas City SCORE.