Why Should Small Businesses Be Wary of Counterfeit Credit Cards



Almost everything branded and expensive is now being cloned. The latest of this counterfeit series is credit cards.

Photo Credit: Wikimedia Commons

In a buy-bust operation conducted by the New York Police Department (NYPD) early October, at least 111 were arrested in Queens, New York for identity theft and credit card counterfeits. Authorities said more than $13 million were spent by the accused using fake credit cards. Yes, the said counterfeit ring managed to pull its trick since 2010 in the so-called capital of the world!

In a similar story, The Atlanta Journal Constitution reported late October that a woman from DeKalb County in Georgia is on trial in aid of two others using counterfeit credit cards. The fake credit cards were used to buy around $12,000 worth of gift cards. Oh well, one of the owners of those counterfeited credit cards was U.S. Senator from Hawaii, Daniel Inouye (D).

To make the counterfeit credit card scenario worst, the National Gang Intelligence Center (NGIC) reported that U.S. street gangs follow suit. Gangs are now in for mortgage fraud, counterfeiting, bank and credit card fraud and identity theft and enjoying the ride. From ordinary scammer to syndicated rings and gangs, counterfeit credit cards are the talk of the town, the darling of the underground world!

NYPD Deputy Inspector Gregory Antonsen, however, assured 'customers' that card companies will charge-back amount billed to their credit cards due to counterfeits. What Antonsen forgot to address were those merchants, small business owners included, whom under the law bear some or all of the expenses brought in by counterfeit credit cards. According to a recent report by Cybersource, in online transactions alone, merchants lost $2.7 billion in 2010 due to credit card fraud.

So, how is the counterfeiting done?

Counterfeiter will steal credit card numbers through skimming, in which information was stolen when a card is swiped for payment. The stolen information will then land on forge Visas, MasterCards, Discover and American Express among others. After that, the fraudster can go on a shopping spree, online and offline, in a small shop in a remote community, or large chain stores in a busy urban area. With this in mind, small businesses should be wary of counterfeit credit cards & protect themselves from their negative effects.

What are counterfeit credit cards' costs to small businesses?

In an offline setting, the merchant is entitled for payment by the card companies even the credit card authorized for a transaction was counterfeited or stolen. However, the cost for credit card processing fee might increase or the small business might completely loss the accounts with the card companies. When the transaction happened online, the small business is solely liable for charge backs and other expenses caused by the fraudulent transaction. Aside from the financial setback, the pressing reasons for owners to make necessary steps to prevent or lessen counterfeit occurrence are the lost of trust and the shying away of customers. Perceived carelessness of small business' worker and the firm's loss of accounts with the credit card companies could have a long-term sales impact.

Below are the basic but necessary steps a small business can take to prevent or lessen counterfeit credit card transactions:


1.) Check IDs and signatures and look for security feature on the credit card like hologram. I've experienced this ample of times: small business owners or attendants do not compare/contrast signatures on the card and on the receipt. Worst, there are those who do not even ask for ID. They just go and swipe the card when handed to them. This practice is very inviting to all counterfeit credit card users.

2.) Check your transaction machine for skimming devices. Unethical worker/s may install them even in the presence of unsuspecting small business owner.


1.) Stall the latest anti-fraud devices on your website and let it be known to everyone who visits your website. Perceived higher chances of detection will cause the fraudsters to have second thoughts before targeting your business as victim.

2.) Get the customer's full name, address, telephone number e-mail and card-related information like card verification value code, card-issuing bank and the bank's toll-free telephone number printed on the card. Use the Address Verification System (AVS) to confirm if the cardholder's address and zip code matches the information on the card-issuing bank.

3.) Be suspicious of any bulk orders for many different items from single/multiple customers of same shipping address. Ask the issuing bank to verify to their registered cardholders if indeed they are the ones placing the orders.

There's no cure-all approach to the prevention of counterfeit credit card use. It is, however, injudicious for a small business to opt out from accepting credit cards as a mode of payment just because of this possibility. A consumer credit report prepared by the Federal Reserve indicated that as of 2008, Americans had an estimated $960 billion in outstanding balances on their credit accounts. As such, it's important for a small business to minimize the chances of becoming a credit card counterfeit victim but still be able to capitalize on the billion dollars of possible sales through the said mode of payment.


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