How to Reduce Credit Card Fraud

Credit card fraud can be curtailed through a variety of measures

The next day, fraud screeners in the processing department review all the transactions that have been flagged. Most of the orders get released for shipping within secondsâ¬for instance, when a customer has previously had an order shipped to an alternate address, with no resulting chargeback.

6. The Screeching Stop

When an order is truly suspect, fraud screeners may call the bank to verify some information about the cardholder. If theyâ¬"re still unsure of the order, they call the cardholder. "Weâ¬"ll just verify whether theyâ¬"ve placed the order," Williams says. "In many cases they say, â¬ÜNo, I havenâ¬"t ordered anything from you.â¬" Then we know itâ¬"s a fraud, so we just drop the order." On average, he says, it costs less than a dollar to do the highest level of screening for a suspect order. Potentially significant trendsâ¬such as a large number of purchase attempts with the same delivery addressâ¬are reported to law enforcement.

7. The Payoff

In 2004, Sharper Image stopped $13 million in merchandise from going out its doorsâ¬compared with $2 million three years earlier. Williams attributes this dramatic jump mostly to the escalation of Internet fraud over the past years. Chargebacks for Internet and telephone orders were an impressively low 0.33 percent. (Anything less than 1 percent is a good number, according to the Merchant Risk Council.) "Probably the trickiest thing about the whole process is that the profile of a fraud person is exactly the profile of a top customer," Williams says. "They buy a lot, and they want it now."