Over the years, business credit card fraud has become a growing concern for many organizations worldwide. In 2023, the AFP reported that 80% of organizations were victims of payment fraud attacks—a 15% increase from the previous year. Of this number, 30% were unable to recover the funds lost.
Today’s criminals take advantage of data breaches and leverage sophisticated phishing scams to obtain the personal financial details of your customers. They then use constantly evolving tactics to exploit vulnerabilities in your business’s payment processes.
In this article, we share ways to identify and spot business credit card fraud and fraud prevention best practices to keep your business and customers safe.
What Is Company Credit Card Fraud?
Business credit card fraud is a criminal activity in which bad actors steal credit card details from the original cardholder and use the stolen information to their benefit. The criminal can use the card to withdraw funds, purchase items for personal use or resale, or fund their account.
When business credit card fraud occurs, it can have serious consequences for the original cardholder and the business where the criminal used the card to make purchases.
Employees have also been known to commit internal business credit card fraud by using the company’s credit card for personal gain, leading to revenue loss.
Here’s how credit card fraud affects businesses:
- If a criminal transacts with your business using a stolen card, the original card owner has to deal with the bills incurred. When the victim discovers the unauthorized charges on their card, they can contact the credit card company to dispute the charge
- A disputed transaction could result in the credit card company initiating a transaction reversal. They reverse the costs of the items purchased from your business, leaving you at a loss. Financial loss due to credit card fraud could also include the cost of the merchandise and ensuing chargeback fees
- If customers link your business to credit card fraud, the association could harm your reputation, resulting in a loss of customers. This damage to your brand’s credibility may lead to potentially reduced revenue
Types of Credit Card Fraud in Business
Credit card fraud could occur in different ways, often leading to severe consequences for the affected business. These types of fraud center around different methods the fraudsters use to steal card information and make unauthorized purchases. You can find more information in the table below:
| Type of Credit Card Fraud | How It Occurs |
| Card-not-present (CNP) fraud | The thief makes the transaction without having the physical card in their possession |
| Card-present fraud | The thief has the physical card and uses it to transact with your business |
| Identity theft | The fraudster uses the stolen information to open new credit card accounts, pretending to be the original owner |
| Employee theft | An employee uses a company card for personal gain by unauthorized overspending or covering personal expenses |
| Friendly fraud | This is a chargeback fraud where a customer disputes a legitimate charge, claiming the transaction was fraudulent. It results in the business being responsible for incurred chargeback fees |
| Card testing | In this case, the fraudster uses stolen credit card details to make small purchases to test if the card is functional |
| Account takeover | Here, a fraudster breaches a regular customer’s account and makes unauthorized purchases with their credit card |
How To Spot Credit Card Fraud in a Small Business
Even though it may not always be obvious, some tell-tale signs could indicate credit card fraud is at play. If you notice any of the following signs during a credit card transaction, take a close look to ensure nothing is amiss:
| Credit Card Fraud Red Flag | What It Looks Like |
| Unusual transaction patterns | A customer suddenly starts to order goods atypically. For instance, they order 20 items at once when they previously used to order one item every three months |
| Hurried shipping | A customer places an unusually large order and wants it shipped hurriedly. This may be so that the card owner doesn’t detect the purchase and stop it |
| Unusually large or multiple small orders | A fraudulent customer may order high-value items like jewelry or technology to make the best use of the card details before they get discovered. They may also make multiple small orders over time to remain undetected for longer |
| Orders from unusual countries | A customer sends in an order request from a country where you typically don’t do business. It may be that the customer traveled to a different country, but sometimes it may be a fraud attempt |
The above red flags may not always indicate fraudulent activity, but it’s always good to verify so that no fraud cases slip through the cracks.
Business Credit Card Fraud—Prevention Strategies
Here’s what you can do to reduce in-person and online credit card fraud:
- Have customers dip or tap their card instead of swiping—If you have a point-of-sales terminal compatible with EMV chips, ask customers to dip or tap their card instead of swiping it. This shifts the liability of credit card fraud to the card issuer instead of you
- Keep an eye out for suspicious cards—If you notice a card looks damaged or tampered with, or the card chip repeatedly declines, it may be a counterfeit card. Be wary of such cards
- Request an ID for high-risk transactions—Ask for customers’ ID for every high-risk transaction, including high-value purchases where items could be resold. You can also ask for an ID when the bill goes over a specific amount
Steps To Prevent Small Business Credit Card Fraud
Small businesses are often a major target for credit card fraudsters because they usually have limited resources to combat fraud attacks. Here’s how you can prevent small business credit card fraud:
- Use an address verification service—These services help you compare the billing address on a credit card to the one included in the order. A different billing address may indicate that the card has been stolen
- Ask for expiration dates and CVC codes—The card expiration date and digital card verification code can prevent fraudsters from using skimmed card details to make a purchase. If they don’t have those details, they can’t make the purchase
- Implement the latest 3D Secure (3DS) protocol—The 3DS protocol prevents fraudulent transactions by prompting new customers to verify their identity when they try to shop from you. Using this protocol helps shift the liability for authenticated one-time purchases to the card issuer
What To Do if Business Credit Card Fraud Occurs
If you fall victim to business credit card fraud, take the following steps to mitigate the damages that may ensue:
- Take immediate action—Begin by contacting your card issuer to report the fraud. They’ll put an eye on your account to identify and stop further unauthorized transactions. You should also file a report at your local police department, presenting evidence of the fraud to assist the cardholder in resolving the issue
- Train staff and set internal control measures—Educate your staff on the latest fraud practices so that they can spot payment anomalies quickly. Set up internal control processes to identify potential risks of fraud
- Strengthen your fraud protection measures—If you fall victim to business credit card fraud, your fraud protection measures may be ineffective, which means you’re still vulnerable to fraud attacks. Bolster your financial security by implementing extra security measures, including tokenization or encryption for payment processing
Beyond safeguarding against business from credit card fraud, it’s crucial to recognize the vulnerabilities of your business savings or checking accounts.
If fraudsters gain access to your company’s financial data, you risk losing your cash reserves, which can cripple business operations.
