How Retailers Can Limit the Risks of Credit Card Fraud


Retail credit card fraud isn’t fair, but it’s sadly a problem retailers can’t afford to ignore. 

It Survey of Retail Security for 2021From the National Retail Federation:

  • Nearly 40% of respondents stated that they experienced the highest fraud rate in multichannel channels like buy online, pick up in-store (BOPIS) compared to 19% in 2020. 
  • Only 28 percent of respondents said that the largest increase in fraud was due to in-store sales. This is down from 49% the previous year, but heavily affected by the mandated closings in the pandemic. 

The fraudsters keep coming up with new and better ways to scam people. Transaktions with credit cardsFor criminal gain. This article will bring you up-to-speed.

Let’s start with a simple definition.  


What to look for in a credit card processor

When shopping for your new credit card processor, learn what to watch out for, and ask the right questions.


How do you define credit card fraud? 

Fraud with credit cards is when stolen details or a lost card are used for unauthorized purchases. 

  • Credit card expiration dates can be stolen by fraudsters who then use that information to purchase products online or over-the-phone.  
  • Fraudsters organized in a criminal network are known to interfere with ATMs, or payment terminals, to steal credit card data. They then use that information to make counterfeit cards. 

Is credit card fraud a problem?

“Credit card fraud typically occurs when retailers lack a strong detection plan, both in terms of shopper behavior and on their payment processor,” said Brigitte Hodge, a retail export at Fit Small Business

“Retailers can look out for things like damaged cards, agitated shoppers, avoidant behaviors around signing the receipt, signature discrepancies between the card and receipt and unusually large purchases to help detect fraud before it happens,” she added.

Credit card fraud is often caused by social engineering.  

Card fraud and social engineering: What does it mean? 

These are scams designed to get victims to divulge personal information. They include email and phone scams such as phishing as well as text messaging scams, sometimes called smishing.

“Social engineering frequently involves persuading people to violate standard security processes and best practices to gain unauthorized access to systems, networks, or physical location or to earn a financial advantage,” said Kathryn McDavid, CEO of Editor’s PickBeauty and Wellness ecommerce business.

These are the top forms of credit card fraud made possible by social engineering. 

Malware in computer systems

Morgan states that malware is the number one social engineering tactic in retail. “The attacker visits a retail store disguised as a customer or as an interviewee and leaves behind a USB. Unknowingly, an employee tries to find the owner of the USB by plugging it into the store computer,” he said. 

The malware then gets installed on the computer automatically without an employee knowing. “The hacker’s attack begins the moment the USB is seen by an unsuspecting worker,” said Morgan.

Phishing attacks

Phishing is one of the most prominent social engineering methods. 

  • Phishing attacks are designed to get victims to click on a link, email, website or SMS and prompt them into taking action. 
  • Phishing attacks can imitate a bank, delivery service, or government agency or they might imitate a specific department within the victim’s firm, such as HR, IT or finance.
  • In phishing attacks emails there is a call for action. It asks victims to go to a fake website, or click on malware-laden links.

Skemming with credit cards

The practice of skimming credit cards continues despite the wide use of credit cards. 

  • Skimmers are devices that steal information from a credit card’s magnetic strip.
  • This device is often used by fraudsters to install ATMs in gas stations or retail stores.
  • This information can then be sold on to others or used to charge the card. 

What is the outcome? AfterAre retailers victims of credit card fraud

You could be held responsible if your credit card data is stolen or your store’s security breached. This could also refer to:

  • Card associations can impose fines
  • Forensic investigations
  • Re-issuing costs are recouped by banks
  • Government fines and litigation

According to Mike Cannon, the most frequent result of credit card fraud involves a chargeback. Chargeback Gurus. “When the victim discovers the fraud and contacts their bank, the bank may hold the merchant liable for the fraud, especially if it was an online purchase. The funds will be taken out of the merchant’s account and they will be charged an additional fee.” 

What merchant can do to avoid credit card fraud

Retailers need to fix the biggest cause of credit card fraud, which is inadequate fraud prevention tools. These are the steps that you should take. 

1. Retail staff should be trained on fraud

Most people think credit card fraud only happens online, but they’re just as frequent offline. “It is best to train your entire staff on fraud detection and take cyber security measures as credit card fraud can seriously impact your business’s bottom line,” said Brigitte Hodge, a retail export at Fit Small Business.  

There are three steps to take when accepting credit cards. Staff should verify the cardholder’s identity by comparing the credit card to the sales receipt:

  • You should verify that there are no differences between the signature on your sales receipt and the one on your credit card.
  • Check if the credit card’s last four digits match the last four digits listed on the sales receipt. This method is most effective in detecting counterfeit cards. Experienced fraudsters may have a matching identity to go along with the credit card, so if these numbers don’t match, you know it’s a fake. 
  • Tell the person you need to call for authorization — at this point, the fraudster will likely realize they’ve been caught and will leave the store.

But it’s often just as much about the purchase, as the person making it. 

2. Halt suspicious purchases

“Certain items are more vulnerable to fraudulent credit card purchases than others,” said Adam Wood, co-founder of Revenue GeeksThis tool helps online businesses to understand the fulfillment options offered by Amazon (FBA). 

“Jewelry, video and stereo equipment, computer hardware, shoes, and men’s clothing tend to be vulnerable to credit card fraud. That’s because they are things that are easily resold,” he said. 

  • Your staff should be aware of fraud-prone items such as three gold chains, two tablets and three gold chains. 
  • Keep an eye out for transactions with large dollar amounts—a transaction value that is significantly higher than your average transaction value is a tell-tale sign. 

Even though not all transactions of high value are fraud, you should investigate them.

3. Use PCI-compliant payment processors

  • Payment Card Industry Data Security Standard, (PCI DSS), is a standard for data security that aids financial institutions in processing cards securely and decreasing fraud. 
  • To protect cardholders’ data, the PCI Security Standards Council established (SSC), the payment card industry data security standard (PCI DSS). 
  • To do business with banks, credit card companies and payment processors, every retailer that accepts cards transactions must comply with these guidelines.

“Compliance with PCI DSS ensures all companies that accept, process, store or transmit credit card information maintain a secure environment by requiring card processors to meet a set of security standards and rules,” said Hodge, of Fit Small Business

4. Make sure you have the correct point-of-sale hardware

She added that it was important for your employees to be trained on fraud signs and to also have a payment processor with fraud detection and prevention tools. 

“These include address verification, two-factor authentication, card verification value (CVV), device identification, large purchase flagging and payer authentication.”

Accept EMV payments

“Payment processing software and hardware can certainly minimize the risk of credit card fraud,” according to Christopher Morgan, CEO at Get Credit Information

“Retailers must switch to Acceptance for EMV. They will be less likely to commit fraud and they can shift their liability. It is also important that they transition. Contactless payments and tokenization, which help secure a customer’s data through encryption.”

Mike Cannon from Chargeback Gurus is in agreement. “Using payment terminals that can read EMV chips will eliminate many of the older, easier methods of credit card fraud,” he said.

Incorporate your POS system

Software is also important. This may be why you might consider integrating your point-of-sale with your accounting and payment processing software. “In ecommerce, payment processing software that includes even the most basic fraud checks can spot many low-effort fraud attempts, such as stolen credit card numbers without the correct billing address,” said Cannon. 

Keep one step ahead fraudsters

Secure POS hardware and modern payment processing software can provide key defenses against fraud. To learn more, talk to an expert Small Biz Sense PaymentsThe modern, secure and integrated payments system for our eCommerce platform is referred to as. 

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Cyndy Lane

Cyndy is business journalist with a focus on entrepreneurship and small business. With over a decade of experience covering the startup and small business landscape, Cyndy has a reputation for being a knowledgeable, insightful and approachable journalist. She has a keen understanding of the challenges and opportunities facing small business owners and is able to explain them in a way that is relatable and actionable for her readers.