High Risk Credit Card Processing and Reducing Risk of Fraud

High Risk Credit Card Processing and Reducing Risk of Fraud

Credit card processing is a big issue for many business owners, and credit card fraud can be financially devastating. With credit card fraud on the rise it’s more important than ever to make sure you’re reducing your risk as much as possible. The credit card industry has developed many new security features to help reduce credit card fraud and make credit cards more secure than ever. However, it’s still important to take precautions with the credit cards that your customers use when they’re shopping online or in store.

Check out these high risk credit card processing strategies and how they can help reduce potential risks of fraudulent transactions!

Internal and External Environmental Risks

There are certain industries that have a higher risk of fraud due to the nature of what they sell and high-pressure sales tactics. Industries that typically utilize questionable marketing and sales tactics, like debt reduction scams and for-profit college recruiters, to coax customers into committing to an excessively expensive product or service tend to experience higher rates of chargebacks or fraud.

There are additional risks involved when selling to other countries and currencies. Many of these countries have less-restricted, less-regulated credit card transactions, which in turn increases the potential of participating in risky credit card transactions.

High-Risk Businesses

The term “high risk” business describes any enterprise that operates in a legal grey area or otherwise engages in questionable marketing and sales tactics. High risk businesses are often offshore, sell illegal items or engage in high-pressure sales.

Some may be at a high risk because they sell in nations with notoriously bad political and regulatory regimes, or due to the amount of sales which are made. Other risks can include country specific fraud like where there tends to be higher instances of card-no-present transactions.

The following types of businesses are considered high risk for credit card processing and fraud:

  • Auctions
  • Timeshares
  • Event ticket sales
  • Drug paraphernalia
  • Multi-level marketing
  • International merchants
  • Many types of travel services
  • Coupon/rewards-points programs
  • Weapons
  • E-cigarettes
  • Counterfeit goods
  • Magazine sales (including subscription sites with third-party processors)
  • Prepaid debit cards
  • Vitamin supplements
  • Online gambling/gaming
  • Anything related to pornography
  • Discount health/online pharmacies

Risk Reduction Services

Choosing a credit card processing company for high-risk businesses often becomes an ordeal. With excessive fees and restrictions, many small business owners are discouraged to pursue the unlimited earning potential of global expansion that comes with today’s highly competitive marketplace.

However, there are also risk reduction services offered by credit card processing companies that can help you lower your credit and debit card fraud risk. These services include online credit card terminal, EMV chip cards, etc.

One of the best strategies to protect your business from chargebacks is by being proactive. This includes implementing a chargeback management program that assesses the customer’s behavior throughout the transaction process to identify potential high-risk customers who may later on initiate a chargeback.

Reduce Fraud Vulnerability

In order to reduce credit card fraud vulnerability, it is important to take credit card processing seriously and use the right solution that can help you protect your business.

There are credit card processing solutions that can help you reduce exposure to high-risk customers, like those with a history of chargebacks or identity theft. They offer credit card security features such as EMV chip cards and online credit card terminal services.

ID/Signature Verification – Requesting identification to verify the identity of a customer can reduce credit card fraud by over 90%. Additionally, merchants should request a signature from customers for their purchases.

IP Tracking Software – One way to deal with fraud is to restrict payments made from certain IP addresses. This strategy can reduce the risk of fraudulent activity, but it does not work for the most sophisticated cases. Fraudsters can mask their location by using proxies. When that happens, you need to use fraud prevention software that tracks IP addresses.


Failed – Many fraudsters steal credit card numbers in order to exploit them for online purchases. They are only semi-successful when filling out the checkout form, as they may not know or guess some of the information about the card, including the CVV code or billing zip code.

You can strengthen the security of your payment gateway by setting up a threshold for failed transactions that will block an account when reached. For example, if you set your limit to 5 transactions before locking out the card number, customers who make typographical errors will only have 5 attempts at entering their information despite following correct procedure.

Large – When making large purchases, it’s important to take an extra step or two to make sure the transaction is legitimate. Typically, fraudsters just want to get as much from a stolen credit card for as long as they can before it gets flagged and their stolen credit card numbers become unstable.

Your credit card processing company can help you to prevent fraudulent transactions by setting up a payment gateway for high-value charges. For example, the amount charged should be above the average ticket in order to secure the payment with your credit card. When a transaction alerts as high risk, take the time to manually review it and ask for more information from the customer.

AVS Mismatch – One way to reduce fraud is to use an address verification system (AVS) which goes through every transaction. Any transactions that don’t pass this filter can be flagged, reviewed and even blocked by your credit card processing company. This prevents not only the fraudulent activity of others, but also those who have received stolen credit card numbers but no other identifying data.

Final Thoughts

The risks of fraud and chargebacks are high when you use a credit card for online transactions. But with the right kind of protection, these risks can be reduced significantly. That’swhy we recommend using an Authorize.Net or PayPal to process your customers’ payments as opposed to other third-party processors that don’t offer this level of security. Contact us today for more information on how our secure payment processing solutions can help reduce risk and increase sales!

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