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How to Stop Credit Card Chargeback Fraud Scams

Updated on May 28, 2013

UGH....a Fraudulent Chargeback

Credit Card Chargeback fraud can happen for numerous reasons, and most likely you are reading this article because you own a business and have been hit with the awful chargeback and you’re probably pretty upset and possibly even nail-biting if the amount is large.

Let’s first discuss a few different kinds of credit card fraud -

Types of Chargeback Scams


  1. Of course we have the issue of International credit card fraud. Both Adam McFarland and myself have had to deal with international card fraud in amounts over $6,000. - Talk about a bad way to start your week, eh?
  2. There’s also the United States scammer who just wants free merchandise. From claiming they never got the parcel and wanting a free reshipment (despite tracking and signature showing they got it)
  3. Then there’s the US scammer who wants free merchandise who will make up bogus claims in effort to keep the product and be refunded; “the item was trashed” (AKA: “Not as described), “this wasn’t what I ordered”, “the item is fake / counterfeit”, etc. Yet when you, the merchant, try to resolve these issues with the buyer, they refuse to cooperate no matter what you offer, even if you offer a full refund upon the return of the item plus a gift card to your eCommerce store.
  4. “Items are missing from my order” – yet you check your inventory and your records accurately reflect that the items were shipped. I have even went to the extent of pulling a second, identical order and weighing it to prove that no items were missing because the weighs match identically (obviously if items were missing, it would be impossible for the parcel to weigh the same).
  5. Buyers remorse…yet the buyer simply doesn’t want to pay to ship it back or pay restocking fees. I have only had this happen a few times and it’s typically with orders that (ironically) are placed after the bar closes on weekends… I call it “drunk online shopping”. If you get drunk and “drunk ebay” a life-size Betty White statue, it’s NOT the sellers fault and the seller should not have to pay for it to be shipped back then pay their employees to re-inventory it, re-SKU it and re-shelve it, all because you had a few too many martinis.
  6. Complete “Blackmail”. I realize that theres a lot of “crazy” people out there who get “upset over nothing”, but I find certain issues to stand out; for example, I once had a customer order a perfume for $50. After it arrived, she complained she was shipped the wrong scent. I pulled up her invoice and she was sent the correct scent (the scent which she ordered). Regardless, I told her I would be happy to ship her the scent of her choice, but she will need to return the item she rightfully purchased and was properly shipped. Instead of cooperating, she responded “if you don’t ship it today I am going to the news, the BBB, and filing a chargeback”. It was clear to me that she just wanted $100 worth of perfume for $50. When she realized I was not going to give in, she never took any action. This is the same issue with people who claim their order was damaged, yet refuse to cooperate in any way; they will not return the item, they will not even send photos of the damage… they just make threats or file a dispute without ever even contacting you.


If you’re reading this article now, its probably because you have already been hit with the credit card chargeback scam, but there’s no reason you can’t take preventative measures to try to stop future fraudulent chargebacks. Here's a few things I have been doing for the past two years to try to cut back on Chargeback Fraud BEFORE it happens -

  1. MERCHANTS - be VERY SKEPTICAL of items being shipped to FL with any address with "NW" in it. Simply copy and paste the whole SHIP TO address into google and put Quotation marks " " on each side of the address (see photo below):

98% of these addresses are FREIGHT companies. These companies forward your merchandise overseas, they are NOT "real" addresses, per say. Whenever I come across one of these addresses, I contact the customer VIA EMAIL and tell them that my bank is NOT ALLOWING me to process their card due to something not matching. I then ask them to call me. They NEVER DO. Any REAL customer would gladly contact the business to resolve any issues.

2. Any order I find suspicious, I will google the customers name and state. If I can't find a Facebook page or ANYTHING that matches the person, it is most likely they are planning fraud. Suspicious orders, in my industry, consist of abnormally large orders, orders that contain a multitude of different sizes, orders that contain the most expensive items I sell. Go ahead and try it using your own name and state, for example "Bob Newman" KY (or whatever your name is. Use quotations around your name but not around the state.

3. Very tiny orders are also skeptical. Many credit card thieves want to "test the water" with the stolen card info so they will purchase the smallest priced item possible - something for $2 (or less). If the item arrives and the credit card is still active, the thief can then go in for a bigger and bigger hit. One solution to this is to simply not carry items that are this low priced. Honestly, unless you're selling tons of them, you're not making money anyway (unless your shipping is profitable enough to cover all your costs, including time when you sell an item for $0.99)

4. Different BILL-TO and SHIP-TO names or the same name, but an address that is in a different state or across the nation. While its possible someone could be buying a gift for someone else and having it shipped directly to the giftee, I have ran into problems here as well. If the BILL-TO and SHIP-TO name matches and the state matches, it is likely that someone is simply having an item shipped to their work. If you're nervous, don't hesitate to use Mapquest. A 6-hour drive to work should be a "red flag".

5. Suspicious orders through which the customer has opted to "checkout" as "guest". Of course, simply checking out as "Guest" is not a reason for alarm, but if the order is sketchy on top of the refusal to give contact information; raise that red flag!!!! Would you EVER "invest" in a very expensive order and NOT give information for the company to reach you? I know I wouldn't.

6. "Rapid-fire orders" - It is important that you, or someone, tries to keep up on customer names. This can be daunting if you are loaded up with orders, but I swear to you, having someone "screen orders" instead of just putting them right through to "shipping" / warehouse will save you a lot of damages. Some eCommerce sites show you how many times a customer has ordered and dates, others do not. If you notice 3 orders in 3 days, all being shipped to the same address, be very careful. Would YOU order through a site 3 times in a row before package #1 even showed up?


While you will never be able to catch 100% of scammers, you can use all of the techniques discussed earlier. IF you come across an order you believe to be suspicious, you have several options:

1. Call your credit card processing company and request verification of the card used for the transaction. This can be timely because they will likely give you a second phone number to call. But if 20 minutes of your time is worth saving your assets and avoiding a chargeback (too many chargebacks will result in the loss of your merchant account), then you need to evaluate how much 20 minutes of your time is really worth.

2. OR, an alternative I often employ is simply emailing the customer and telling them to contact me to verify credit card information because it appears there may be a typo or an issue that is preventing my bank from processing their card (OK, it's a white-lie, but NONE of them have EVER called my bluff and actually contacted me.) You can typically get a pretty good feeling for someone when you talk to them on the phone if you're street-savvy, which, I assume every good business owner is. If someone does call you and you're STILL skeptical, look up their phone number.

3. OR, if the order is big (like thousands of dollars), demand a fax be sent. This is very common and anyone who is buying in large bulk should have no problem sending a fax.

4. You can also insist on only accepting Western Union payments from International Buyers from "red flagged" countries - and by accepting a Western Union, the buyer must go into a Western Union in their area and send it, electronically to you - NEVER accept a mailed Western Union, Money Gram or Check.

5. An alternative to Western Union is to have a bank account that you use ONLY to accept wire transfers. As soon as the funds are received, transfer them online to your business account, but NEVER give out your business account information. For example, you can have a personal account that you keep a $25 minimum balance in that you use only for transfers, but this account can be connected to a different account online. Be sure to sign up for FRAUD PROTECTION TEXT MESSAGING. Even if you only maintain a $25 balance, if the buyer attempts to use your account info to purchase a single thing, you will get a text message immediately and you're protected.

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Of course the article you have just read doesn't healp if you are currently holding the fraudulent chargeback form in your hand, so continue on and read my next article: MERCHANTS: How to Win Against a Fraudulent Chargeback


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