This time of year, consumers are doing a little extra shopping to pick out the perfect gifts for everyone on their lists. Saving money, taking advantage of sales, and enjoying the sights and sounds of the joyous holiday season are what all shoppers eagerly look forward to. Probably the last thing that’s on anyone’s mind is credit card fraud. Yet, statistically, the holiday season is one of the best times for thieves to get their hands on innocent victim’s credit card information and wreak havoc on their finances.
Holiday credit card fraud and information theft is especially troubling for a small business owner who depends on credit cards and small business loans to make it through an otherwise slow period for operations. Just having one credit card stolen can take days and even weeks to prove to the banks and credit card companies, tying up critical income.
On the other side of the equation, for small businesses engaged in any kind of retail sales or online e-commerce sales; the fear of falling victim to credit card fraud and other scams is at all-time highs. Sure, accepting credit card payments from customers is convenient, but it can also be risky during the holiday season.
COMMON TYPES OF CREDIT CARD FRAUD
There are several kinds of credit card fraud that small business owners need to be aware of. According to a Huffington Post article from earlier this year, credit card fraud can take many forms, including:
- Bait and switch schemes – Buyers buy an expensive item and then attempt to return it for a refund, but slip in a counterfeit or cheap knock-off item. Then the thief resells the original item for profit.
- Credit card disputes – A scammer acting as a consumer purchases items using a credit card and then reverses the charges by filing a false credit card dispute. The company is out the merchandise and the payment.
- Unauthorized use – A thief either steals the credit care information from an unsuspecting consumer or attempts to coerce another customer to use their card to make a purchase on their behalf. Or they just swipe the credit card data off the reader using a sneaky card device.
- Identify theft – It’s been estimated that in the past 6 years, thieves have stolen around $112 billion from consumers based on their identifying information. It’s common for people to steal each other’s mail during the holidays and take advantage of all those one-time free credit offers. Problem is, this isn’t discovered until months later when the bills arrive and the scammers are already long gone.
- Small business loan fraud – During the holidays, small business owners may be tempted to take out loans with extremely high interest rates and difficult terms. Or they try to sell them credit card processing programs that charge ridiculous fees. Just don’t do it.
- Mobile payment fraud – In an age where people can pay for items with just a swipe of their credit card, it’s easy to see how credit card fraud can affect anyone at any time.
HOW TO STOP CREDIT CARD FRAUD FROM MAKING YOUR BUSINESS A VICTIM
Fortunately, there are some measures that you can take as a small business owner to protect your finances and avoid credit card fraud. It’s important to educate both your employees and your customers about protecting their information too. Here are some steps to reduce fraudulent credit card and small business loan practices.
STEP #1 – MAKE SURE ALL CREDIT CARD ACCOUNTS ARE PROTECTED.
Choose a financial institution that backs up all credit card transactions in your favor as the customer. Some have programs that insure your business in the case of a breach of information, and cap credit card spending limits. Others offer free credit monitoring and alerts for suspicious behavior.
STEP #2 – USE A SECURE CREDIT CARD MERCHANT SYSTEM.
When choosing the right merchant credit card processor, find out about the security level that’s offered. You will also want to inquire as you take out small business loans, merchant cash advances, and other forms of small business credit to ensure the highest level of security is protecting your data, as well as your customers’.
STEP #3 – REGULARLY CHANGE CREDENTIALS FOR ALL ACCOUNTS.
Make it a practice to change your credit card and small business banking credentials frequently. Use a password generation software to create long, hard to discover passwords. When accessing new credit cards, set up your own PIN numbers and passwords right away.
STEP #4 – UPDATE YOUR E-COMMERCE WEBSITE.
If you operate a small business that offers items for sale online, now is a good time to protect your business by updating your e-commerce security settings. Choose a checkout process that’s encrypted and doesn’t leave forms filled out with sensitive information if someone backs out of the sale process.
STEP #5 – SECURE A QUALITY INVENTORY TRACKING SYSTEM.
Avoid getting scammed by knock-offs that can cost your company money and reputation. Inspect all items before issuing any credit card refunds, and make it a practice to charge a restocking fee for all returns. Assign an inventory tag to every item and make sure serial numbers or other identification is validated. Also, maintain a customer tracking system for credit card chargebacks.
STEP #6 – INSIST ON ADDITIONAL AUTHENTICATION FOR ALL CREDIT CARD SALES.
This includes verifying all credit card holders by asking to see a copy of their driver’s license. Update point of sales systems to new card chip readers instead of swipe card readers. This gives all clerks a chance to alert management if something seems strange.
STEP #7 – BORROW FROM COMPANIES WITH SOLID BBB RATINGS AND PLENTY OF REFERENCES.
If you are approached by a new credit card or small business loan company, take heed. You may be dealing with a scammer. Instead, reach out to a reputable company that provides legal and reasonable small business capital products and services. Work with a company like United Capital Source because we have a great rating and plenty of positive references we can share.