Validating Credit Cards for Merchant Account Services

If your business uses credit card merchant account services to process credit card payments from your customers, you should be aware that there is always a certain amount of risk involved in accepting credit cards as a form of payment. While most credit card processing banks will quickly make funds available to you from the proceeds of a credit card transaction, those funds are always subject to a chargeback or being taken by processing bank directly out of your business checking account. Therefore, there are always certain things you should do in order to validate credit cards and minimize your risk and exposure to charge backs or transaction reversals.

Validation Considerations for Brick-and-Mortar Businesses

If you accept card payments at your small business, and you use a credit card machine to swipe the customer's credit card, you should always be vigilant to make sure the person that offers a credit card for payment is actually the person listed on the card.

For example, when accepting a credit card from a customer, it is always a good idea to ask for a valid form of identification to prove the identity of the cardholder. Most of the time, credit cards are carried in the wallet or change purse of the consumer along with a driver's license or state identification card. Therefore, if a customer cannot provide adequate proof of identification, you should avoid accepting the credit card payment because the credit card may or may not actually belong to the individual.

If you do accept a credit card payment from a person not authorized to use the card, the actual cardholder may file a dispute with his/her bank and the funds that are made available to you from the purchase may be withdrawn from your business checking account.

Also, you should always carefully inspect the credit card itself to make sure it is a genuine card. These days, many unscrupulous criminals are quite adept at making authentic appearing fake credit cards. Therefore, always look for raised and embossed information on the credit card as well as carefully inspect the credit card itself for imperfections in the magnetic strip and raised lettering. Also, most credit cards and debit cards today have some sort of hologram on the face of the card; therefore, you should also hold the card up to the light and make sure that a hologram is visible.

Online Credit Card Validation Considerations

If you accept payments over the Internet, you would need to be particularly careful when accepting credit card payments. If you use a large Internet credit card processor like Authorize.net, the processing service will generally do a good job of ensuring that the billing or shipping address is associated with the credit card holder’s account.

Most of the time, online credit card processors will give you the option of setting default security address verification service requirements. You should all ways make sure that these features are enabled and always choose to only approve transactions where the shipping address matches the billing account billing address information on file with the customer's credit card company. By making sure that the address and shipping address for online products matches the address listed on the cardholder's account, you can avoid most types of Internet credit card fraud and the charge backs that are associated with them.

Furthermore, you may want to consider doing a follow-up phone call or e-mail inquiry for new customers that use credit cards. Many times, simply attempting to contact the customer after a credit card purchase has been initiated will help deter many types of fraud and credit card scams. Remember, if you ship out a product where fraud was involved with the credit card transaction, you will generally lose the money for the purchase and the product. So, always be vigilant in validating online credit card transactions.