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| Merchant Newsletter - January 28, 2006 | ||
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End to the ''Fraud'' Chargeback |
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 How to Avoid Credit Card Skimming Skimming is becoming an international problem that now is growing in the U.S. Losses exceed $1 billion a year. What is skimming? Credit card skimming occurs when someone uses a hand-held device called a skimmer, basically just a card reader with a battery and memory.. The credit card is swiped through the device, and the device reads the magnetic strips on your credit cards. Now the thief has the information needed to make a counterfeit card. Each skimmer can hold data from hundreds of different credit cards. The data - often sold to other people - can be downloaded into a computer and e-mailed anywhere, and around the world counterfeit credit cards are being made. Where is skimming most likely to take place? Restaurants are the most likely spot for skimming. In fact, restaurant employees have been prosecuted for skimming. The skimmers are often used outside of your sight when a waiter or waitress takes your card when you go to pay for a meal. Are some people more likely to be victims than others? Anyone who uses a credit card in places where it is removed from his sight can be a victim. However, gold or platinum cards are often targeted because of their higher credit limits. Restaurants, gas stations with the card machine "under the shelf", businesses with the machine "in the back office" are all possibilities. The business may be reputable and honest, but the new kid taking your card may not be! How can you avoid being a victim of this type
of scam? You could watch the waiter as
he processes your transaction, but that's not always practical. Frequent
restaurants that process your credit cards at your table or where you
take the card to a cashier so the card never leaves your sight. The best
thing you can do is keep track of your credit card bills to make sure
there are no strange charges. Report the problems to credit card
company, law enforcement agencies and to the Federal Trade Commission. |
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Chargebacks are just about the worst
possible thing that can happen
to a merchant. You lose the merchandise sold, the sales amount, and
you have to pay a penalty to boot! This is the result of regulations
intended to protect the cardholder, leaving the merchant (you) holding the
bag. What the card associations don't want you to know (Visa,
MasterCard), is there has been changes in card
regulations due to some recent litigations. These changes can mean
a great deal to you, the merchant! Basically, if you follow the
proper steps, and get the required backup from each sale, you can
prevent the loss of your funds if the sale is charged back due to fraud! How does this
all work? Starting
the first of this year, if a merchant swipes a transaction and receives an
authorization, imprints the card, and the transaction comes back for
fraud, the card issuer has to take the loss and not the merchant.
The card issuer must do a chargeback so they can deduct the loss as
a business loss, but the card issuer must refund the merchant the original
charge. The chargeback fees
are still absorbed by the merchant, but at least there are not out their
merchandise and money. The
imprinter is the key to this procedure. You must imprint the
card, and fill out the sales slip with the amount, date (Very Important),
and authorization code (which HAS to come from a swipe - voice or phone
authorizations don't work for this). The imprinter has to have a merchant plate with your correct
merchant name and number, so we have stocked up on desktop and portable
imprinters that have a spot for a merchant plate. To order
an imprinter, click here, and to order a merchant plate, click
here. (a
merchant plate is a little dog tag-like piece of metal with your name
and merchant number stamped on it, so it gets embossed on the sales slip
along with the credit card data. |
Things
to remember-
1) Transaction must be swiped 2) You must have card imprint 3) Imprinter must have a plate 4) Sales draft must be signed 5) Sales draft must have date Accept credit cards anywhere! In addition, when you receive the chargeback notice, you must respond immediately with a copy of the imprint slip, and the authorization from Transaction Central. You will still have to pay the chargeback fee, but at least you will get back your funds from the sale! This
works ONLY on chargebacks classified as FRAUD. This is still not
protection against customer disputes, product not received,
disputes about quality or anything else. Just because you
now have the ability to get your funds back, don't get lax on your fraud
prevention and detection procedures. It is STILL going to cost you
money, and it takes time getting the response to send back when you get
that retrieval notice, which you still MUST respond to with all of the
items we have mentioned in this article. In addition, the standard rules apply,
meaning that if
your chargebacks accrue to over 1% of your total monthly sales, your
account can be in jeopardy of closure by the bank. (not a good thing) I am an Internet and Mail-order company, what can I do? Well, that is a little more difficult, but if you are selling big ticket items, it is certainly worth it. Besides the traditional authorization, you must get a legible image (Xerox or FAX) of BOTH sides of the credit card, as well as their signature on a properly worded agreement. Click here to download a sample agreement. This is a lot of effort, but some companies have been able to get their funds back on big-ticket items that they would have otherwise taken a loss on.
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Copyright (c) 2004 Advanced Merchant Solutions, Inc. All Rights Reserved |
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