Investigators advise consumers to watch credit card statements for fraud

By , CardRatings contributor
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Credit card users often take fraud prevention for granted, say law enforcement and banking industry officials. Approximately one in 60 credit card transactions results in a chargeback, according to Visa's electronic payment processing company, Cybersource.

While most of the high-profile press coverage about credit card fraud involves big-ticket items like personal electronics and vehicles, Cybersource data shows that the average potential chargeback loss to a merchant is about $60 per claim. Chargeback procedures protect customers in situations like these three recent news reports:

  • In Akron, Ohio, a bar got so busy on St. Patrick's Day, its credit card terminal accidentally charged many patrons twice for the same bar tabs. In an interview with the Akron Beacon Journal, the bar's managing partner admitted that he relied on customers to submit chargeback disputes. Otherwise, he said, his company would run the risk of refunding patrons who hadn't been double-charged.
  • In Stamford, Conn., the former owner of a liquor store faces charges that he retained the credit card information of a customer. Investigators allege that the merchant then paid some of his own personal bills using the customer's credit card, along with charging other customers for purchases they never made.
  • A Cherry Hill, N.J. man attracted attention from state attorneys after opening and closing at least eleven companies under different names. Investigators claim the companies charged customers' credit cards for memberships in discount travel clubs, then go out of business before customers could use any of their benefits.

Harsh consequences can befall a merchant with too many chargebacks. In the Cherry Hill case, processing banks have prevented the merchant from opening any new merchant accounts. Therefore, investigators say, he now resorts to asking for money orders sent to a Post Office box.

When legitimate merchants experience high chargeback percentages, payment processors like Visa and MasterCard can enroll them in monitoring programs designed to ensure compliance with best practices. The best credit cards tout the effectiveness of their fraud detection and loss prevention benefits, but law enforcement officials advise consumers to review statements carefully and to submit disputes quickly.

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