5 Must-Follow Rules for Accepting Cards Online

Running an online store has its fair share of unique challenges. Sure, you don’t have to worry about renting a storefront or dealing with customers face-to-face, but you’ve got to deal with the logistics of shipping and maintaining a robust website with up-to-date inventory. There is one challenge about operating an online business that many e-commerce professionals fail to give proper attention to: accepting card payments.

Running an online store has its fair share of unique challenges. Sure, you don’t have to worry about renting a storefront or dealing with customers face-to-face, but you’ve got to deal with the logistics of shipping and maintaining a robust website with up-to-date inventory. There is one challenge about operating an online business that many e-commerce professionals fail to give proper attention to: accepting card payments.

I’m not talking about choosing a processing provider or integrating into your chosen platform here. I’m talking about the actual transaction that occurs when a customer decides to purchase your product. The truth is that online stores are far more susceptible to fraud than their physical counterparts. As an e-commerce entrepreneur, it’s imperative that you take the necessary precautions to prevent fraud in your business. Here are five must-follow rules that will help you reduce fraud on your e-commerce site.

1. Communicate Regularly with Your Customers

Have you ever heard of “friendly fraud”? It’s a huge problem for online businesses. Basically, a fraudster places an order on your site, and after receiving the product, claims that they never placed an order and seeks a chargeback from their bank. This way, the customer gets their desired product without having to pay for it. 

You’ve probably encountered this before, even if you haven’t recognized it. Experts estimate that as much as 86% of chargebacks are cases of friendly fraud. If you’ve seen a chargeback, there’s a good chance you’ve been a victim.

The best way to avoid this is to maintain regular communication with your customers. When aa customer places an order, send a confirmation email. Send another when the order ships, and another when the order is delivered. Make sure that each of these emails specifies the product and order total. Basically, you need to build an arsenal of evidence proving that your customer knew what was ordered and how much it cost.  With this evidence in hand, you will have a strong case to present to the bank when they try to take the funds back for their customer.

2. Obtain and Verify All Card Information

When you visit a physical store, it’s fairly easy for a cashier to verify your identity. For online stores, that’s not the case. There’s no surefire way to know that the person ordering from your online store is who they say they are, but there is a way to minimize the risk of being bamboozled by a badly-behaved burglar. Just be sure to collect and verify as much card information as possible. 

During the checkout process, ask customers to provide the card number, name on the card, billing address, expiration date, and card verification value (CVV) code. When your customer submits their order, your card processor will cross-check all of this information with the customer’s bank, verifying that everything matches. If something’s amiss, the card will be declined and you will have successfully avoided a fraudulent transaction.

Of course, this won’t work 100% of the time -- some tricksters are able to obtain this information before completing a transaction. But if you want to stop the guys who have purchased just a card number somewhere on the dark web, you’ll want to make them provide as much information as possible.

3. Authorize the Transaction Before Shipping Product

Most online orders are done in two steps: first, the customer places an order online and second, the merchant ships the order and charges the card. In many cases, days pass between these two steps. It’s not uncommon for customers to forget their order, or think they have already been charged when the order ships. This misunderstanding can lead to complaints, chargebacks, and other unnecessary trouble.

The best way to avoid this is to run an authorization on the card as soon as your customer places the order. Basically, an authorization verifies the card information and holds funds in reserve for the transaction. Once the order is shipped and the transaction is completed, the funds are taken from the customer’s card and sent to the merchant. This allows the merchant to verify the card information as soon as the order is placed but still allows the customer to cancel the order before it ships.

There are a few different ways to do this. Some authorizations hold the full order amount. This is fairly common among higher-ticket merchants, as it allows them to verify that the cardholder has sufficient funds on the card to complete the transaction. Other options include zero-dollar authorization, which verifies the card but does not hold funds, and $1.00 authorization, which verifies the card and shows only a $1.00 transaction on the account. Each has its pros and cons, and it’s really up to you which you will pursue. As long as the card is verified before shipping and customers have a record of the transaction on their bank statement, you’re doing your part to prevent complaints and chargebacks.

4. Cautiously Review Shipping Addresses

For online businesses, moving fast is a necessity. In the age of Amazon, consumers expect to receive their products faster than ever before, which poses a unique challenge to many e-commerce merchants. Don’t let your need for speed get in the way of common sense. In most cases, the customer’s billing and shipping addresses should match up. Of course, there will be times when people will ship packages to their office or to a relative’s home, so don’t assume any order with a mismatched address is wrong. Instead, reach out to the customer with a phone call or email to verify the shipping address before sending the package their way.

Be wary of orders shipped to hotels, office buildings without a unit number or business name, or post office boxes. These shipping destinations are hotbeds for fraudulent online transactions. Some e-commerce sites have made it a policy not to ship to these locations, but whether you pursue that policy for your store is up to you.

5. Make Sure Customers Opt-in to Recurring Payments

If your online business sells any sort of subscription -- whether that be a subscription box, subscription service, or subscription shampoo -- recurring payments are vital to your business model. If you’re going to process these payments on a regular basis, you need to make sure that your customers understand the transaction schedule and what they’ll be receiving in exchange. Don’t hide these terms deep in an account sign-up page or auto-enroll every customer into a subscription service.

The best way to do this is to require every customer to opt-in to their recurring payment schedule. Whether that’s a checkbox during the checkout process or confirming their subscription through email, make sure that the terms are clearly stated and customers must complete some sort of action to be enrolled. This will prevent any complaints or chargebacks related to a recurring payment. Of course, once they’re enrolled, be sure to follow step 1 with each ensuing transaction. Let them know when their next package will be sent and what the total cost will be. 

These five tips won’t mitigate every possible issue with accepting cards online, but they’ll work wonders in reducing fraud and keeping your customers’ information safe. If you’re looking for a great payments solution with all the security features necessary for running your online business, visit SwipeSum.com. We help businesses of all sizes find their perfect payment processing solution at no charge. Click here to get started.

Taft Anderson

Taft Anderson is the former Product Marketing Manager of Swipesum. A graduate of Washington University in St. Louis' Olin Business School, Taft is a content and branding expert.

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