It’s a reasonable question – and a good one to ask. Consider credit cards like any other form of payment. All payment forms carry an inherent risk. Someone can pay you by check, but the check can bounce. You can accept cash, but your store can be broken into or your safe can be stolen. All payment forms have risk associated with them, and credit cards have theirs too. Fraud is the biggest risk factor in credit card processing.
Here is what you’re responsible when it comes to fraudulent processing through your merchant account:
- You are responsible for the losses of goods/services associated with any fraudulent transactions. If you ship merchandise out and later find out that the person you shipped to was fraudulent, you’ll lose out on the merchandise and the value of the sale. That’s why it’s important to be sure you’re shipping to a legitimate buyer.
- You are responsible for the costs associated with the sale and the chargeback. The original sale will carry fees, like normal. In addition to these fees, you’ll incur a $20 chargeback fee for any disputed fraudulent sale. If there are retrieval requests (where the issuing bank makes specific documentation requests) you’ll be assessed $5 each.
- If your website gets hit with fraudulent credit card testing, you’ll be responsible for the associated authorization fees. It’s important to always set your gateway’s fraud filters and daily velocity filters to ensure that your account doesn’t get subject to unruly authorization fees if a fraudster decides to attack your website. By blocking transactions at a certain value (say the 20th transaction in a day) then the 21st and all further transactions can be held for your review, saving you from thousands of small authorization fees.