Worse, are you aware that while consumers are generally protected against unauthorized charges of more than $50, it's the merchants who get stuck with the fraudulent sales?! You see, Internet credit card transactions fall under the heading of MOTO (Mail Order / Telephone Order) transactions, also called CNP (cardholder not present transactions). As a result, most credit card merchant account agreements leave the merchant 100% liable for fraud committed via online transactions.

And there's more…

Many merchant account agreements require that you pay a $15 to $25 chargeback fee for fraudulent transactions that result in a chargeback on the credit card. If you experience a particularly high level of chargebacks, you can also expect to be hit with an increase in the discount rate you have to pay on each transaction… Or worse, you may even have your account terminated! And once you've lost your merchant account, it can be almost impossible to get another!

The unfortunate reality is that fraud rates are much higher online than offline… and for obvious reasons. In most cases, you will never meet your customers, so these scam artists don't think twice about ripping you off. So not only are these crooks wasting your valuable time… they're stealing your hard earn profits!

Products which are particularly susceptible to credit card fraud include downloadable software, entertainment sites, high prices items, downloadable information products, and information sites. If the fraud is not detected when the transaction is being made, the scam artist can download the product and disappear before you are even aware of a problem!

Quick Tip: If you are interested in publishing an information product online and are looking for a truly SECURE way to do so, then stay tuned for our next newsletter! Here at the Internet Marketing Center, we're about to revolutionize the world of online publishing!

So what can you do to ensure that you're not ripped off by these low-life crooks?

Check out the following 15 tricks and techniques which have been specifically designed to help you reduce the amount of credit card fraud that your business experiences:

1. Keep records of phony names and addresses, problem customers, and bad credit card numbers.
   
2. Collect as much customer information as you can. It makes detecting fraudulent orders and recovering lost money that much easier. Information that is valuable includes the customer's address and telephone number, the name of the bank that issued the credit card, and the IP address of the computer from which the order was placed. Now, of course, there is a fine line between collecting the information you need and adversely affecting your sales. This will be a judgement call on your part.
   
3. Take the time to verify the address of each order. Is the address provided by the customer a P.O. Box in a large city? If so, you may wish to do some further investigation! If you are using credit card hardware or software, you can automatically verify the address as you process the order. This is very important as thieves are not going to order merchandise to be delivered to the cardholder's address. Do not accept online orders with a shipping address which differs from the credit card billing address. For those customers who want to have the goods shipped to a different address, provide alternate methods of payment, such as credit card by fax (Require that the customer fax you both sides of the credit card!).

   You can also require that shipment to a different address requires advance payment with a money order or cashier's check. As well, all four major credit cards have toll-free numbers for verifying addresses and sometimes names of card holders.

   Always verify the customer's billing address. This can be done automatically with the Address Verification System ("AVS"). The AVS system compares the statement billing address on file with the credit card issuer to the customer's billing address provided with each order. This provides added assurance that the customer is the legitimate cardholder. Check to see if the processing equipment or software provided by your merchant provider supports AVS. (AVS only works for addresses in the USA.)

4. Keep an eye out for unusual orders. For example, beware of customers who order all sorts of items without regard to size, style, price, or color. Also, watch for customers who make large purchases and then return later to buy more. Thieves tend to place orders that differ significantly from what legitimate customers typically order. Watch for large orders of "big ticket" items and orders where the customer is prepared to pay a lot for quick delivery.
   
5. Both American Express and Optima cards have a four-digit, non-embossed CID number printed on the front end of the card. It appears on the right border of American Express, and the left border of Optima. Ask customers who place orders with these cards for the CID number.
   
6. Visa card customers will have a non-embossed number appearing above the first four digits on their card. Ask them for that number, and verify that it matches the first four digits of the card's account number. Also note that all Visa accounts begin with the number "4".
   
7. You should not accept orders with free or web-based e-mail addresses such as Hotmail. Instead, require that your customers provide you with their "real" e-mail address -- the one provided to them by their ISP. Crooks love free e-mail addresses because they allow them to hide their true identity. If someone refuses to give you their real e-mail address, there is probably a reason for it. By asking for their "real" e-mail address, you will likely scare off most scamsters… they'll move on to an easier target and leave you alone. When in doubt, check it out! This is easily done… If the email address given is "smith@hotmail.com", simply type "www.hotmail.com" into your browser window. Does the page that appears belong to an ISP that offers free e-mail? There are over a thousand sources of free email accounts! Don't accept them! You can find a list of free e-mail domains on the

   AntiFraud Web site at http://www.antifraud.com/redflag.htm

8. Be sure that you offer alternative methods of ordering such as by phone or by fax in case there are legitimate reasons that your customer has only a free e-mail address. This will happen VERY infrequently, and when it does, customers generally don’t mind receiving your phone call for the order. They tend to be very understanding.
   
9. If you suspect a fraudulent order, take a moment to check it out. Check their e-mail address by visiting their ISP's web site or their personal domain. (Ex. If you are given the e-mail address scamartist@middleofnowhere.com then you would go to http://middleofnowhere.com) Things to look for include empty or "under construction" web sites or sites where the contact information differs significantly from the order information. For example, the web site might display a US business address while the order requests that the delivery be made somewhere in Peru.
   
10. To prevent scamsters from entering phony credit card numbers, you'll want to interface your order form with a real-time processing system. At the very least, you'll want to use this CGI script which will check for valid credit card number syntax.
    
11. Have your CGI script record the IP address. If necessary, you can compare the email address to the IP address. If they are from different sources, you can be sure that something is not right and further investigate. When you receive a numerical IP address, you can check it using such programs as WS Ping. Of course, there will be times when you do not get a matching site name. When this is the case, try phoning etc…
    
12. Place anti-fraud notices on all of your online order forms. Tell customers that you're very aggressive when it comes to preventing and following up on fraud. State that you log and manually investigate each and every order. Scare tactics will sometimes work wonders. Warn visitors of anti-fraud devices and the consequences of fraud. This is often enough to scare off would-be thieves. Key Strategy: If you sell information, software, or an online service and use an automated electronic fulfillment system, be sure that you go the extra mile and send customer's their login password and download URL via e-mail rather than by an automatic pop-up screen. That way, the customer MUST have access to the e-mail address they give you in order to receive your product… And it will therefore prevent tricksters from giving you phony e-mail addresses!
    
13. Use this great Whois Lookup Tool to determine who owns the domain and where they are located. If a customer says that they live in New York when filling out your order form, but their IP or e-mail address indicates that they live in Australia, be suspicious.
    
14. Call the customer. This may sound simple, but it's another pretty effective tactic. If you get a "This number is no longer in service" recording or somebody's grandmother rather than John Smith, you can be pretty sure that the order is phony. Our experience has taught us that customers who do not provide complete information frequently have a reason. When in doubt, call the customer to confirm the order and information provided.
    
15. Don't be afraid to get the authorities involved. Be sure to capture as much information about the "customer" as you can, including their IP address and the exact time and date of their order.

With that said, I think it's important to warn you that online merchants who become victims of fraud generally receive very little support from the police. Unfortunately, the police tend to view the loss involved too insignificant to worry about… or out of their jurisdiction. This is why it is so important that you be pro-active when it comes to fraud protection!

In terms of resources available to merchants, there do not seem to be many that deal with the topic of online fraud. However, a good one that we did locate is AntiFraud.com. This site is full of some great tips that will help you combat fraudulent orders. While most of the suggestions can be implemented for free, if you prefer a more "hands off" approach you can subscribe to AntiFraud's service and enjoy all of the benefits for a reasonable fee.

Take a moment to decide which of these techniques you can apply to your online business, and get busy! It's only a matter of time before one of these crooks comes knocking on your door.

Prevention is easy… It doesn't have to cost you a dime… And the time commitment involved in setting up these preventative measures is relatively small. Particularly when you consider that these steps will SAVE you money in the months to come.

ABOUT THE AUTHOR: Derek Gehl specializes in teaching real people how to start profitable Internet businesses that make $100,000 to $2.5 Million (or more) per year. To get instant access to all his most profitable marketing campaigns, strategies, tools, and resources that he's used to grow $25 into over $60 Million in online sales, visit: http://www.marketingtips.com/t.cgi/892189

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