Credit Cards and Internet Sales

Greetings, we are diamond brokers from Vancouver, British Columbia,
Canada. We are now selling Canadian diamonds over the Internet from
our website We’ve experiences a
tremendous amount of attempted credit card fraud. Our merchant
agreement states that we may be ‘charged back’ if we don’t
physically swipe the card and check the signiture. The amount of
fraudulent attempts has caused us to refuse credit card payment for
Internet or phone sales. Is anyone using a third party company for
credit card payment or is the Visa merchant agreement different in
the USA?

Thank you for your help.

I don’t know about the US, but here in the UK Credit Card
legislation is quite strict. Credit Card companies are liable for any
fraudulent dealings, provided that a stolen card number has been
reported. Much UK business would die without phone and Internet card
business, so the regulations are strict. Any buyers from the UK you
can be fairly sure of - we rely on trust and the law, and we bolshy
Brits don’t put up with rip-offs.

I had the same problem , Now I am using a IP locator to track the IP
of the Card submitter and do a IP check to see if the location of
the user and the card match . I also request a telephone number …
then check it on the Internet to whom its registered to and give a
call as well if in doubt. It may be a bit more work but its worth
it in the long run , We have eliminated a lot fraud thanks to this

Ahmed Shareek

Online credit card payment provider will give you an authorization
to charge you customer account if the card is valid. Otherwise the
card will be rejected. Now IT IS YOUR duty is to verify that the card
owner was the one who placed the order and not someone else was his

Here are few points to consider.

  1. Verify the AVS (Address Verification System). Don’t ship unless
    both the address and the zip code submitted match the bank’s
    records. (AVS=4)

  2. Use CVV1 and CVV2 verification. CVV are those 3 digits that are
    not embossed on the card. (3 digites to mastercard and visa, 4
    digits to American Express). A match will give you loose indication
    that the card is at the possession of your customer.

  3. Evaluate the order. Most internet users will NOT place an order
    on their first visit to your site. The Internet standards are 4.5
    visits before actually placing an order. Have your system track this
    variable and pay an extra caution for those who place an order on
    first visit. I call it “The Shake hand factor” (SH>0 is fine) SH
    factor which very high, lets say 30, might result of a bad site

  4. Evaluate the order composition. 2,000$ order shipped by 8$
    airmail smells fishy…

  5. Always have a prof of shipment, FedEx airbill for example. It
    will help you resolve chargebacks.

  6. Get the IP of your user and resolve it to its geographical
    location. You may surprise how many honest looking orders resolves
    to Russia, Indonesia and other online fraud centers. here is a good
    tool that you can freely use

  1. Determine your risk factor. Since Online credit card are RISKY,
    you can limit the $ value orders you are willing to accept online.
    2,000$ is a reasonable figure. For greater orders ask for a wire

  2. Be calm. Don’t rush to ship until you are positive that all the
    signs indicate an honest transaction. If you have just and even just
    a tiny tiny suspicion, ask your customer to FAX you an authorization

Hope it helps

Dear John,

The VISA merchant agreement is roughly the same everywhere, except
as impacted by the laws of various countries. However, the
"chargeback" clause is present in every contract I’ve negotiated.

There are, however, a few things you can do to protect yourself
against fraud and reduce those chargebacks. If you are using a
credit card processing agency such as Cybersource or Verisign (they
are equally good), they can provide you with a tremendous amount of
support to reduce your credit card fraud through more aggressive
verification of the card.

Banks and card processing organizations also “reward” certain fraud
protection behaviors on your part. For instance, if you ask for the
full billing address of the card holder, and insist that the zip code
of the billing address for the card being presented matches what is
in the credit database (most card number thieves have no idea of the
billing address for the card they are using), you can reduce or avoid
responsibility if a fraud occurs. Also, if you collect the CVV2
number (that “new” number that appears on the signature line of the
card – the 3 digits at the very end that are not part of the credit
card number on the front of the card) you can reduce or avoid
responsibility for fraud.

I strongly suggest that anyone taking credit cards over the internet
participate with a vendor who specializes in those transactions,
such as the ones mentioned above. You will pay some fees, but it is
the cost of doing business, and think about how much business you
have to give up if you can’t easily accommodate those sales. There
are operational costs to handling checks and cash as well – we just
tend not to calculate them because they are “absorbed” costs. Also
– don’t forget that those fees are always negotiable. If your card
transaction volume is low, you may not get much off, but every penny

Good luck!

Andrea Hill
The Bell Group

I like to have the client email his phone number to me so that I can
call him and have a discussion about the transaction. I think the
best way to get paid for high value items sold on line is for the
client to wire transfer a deposit into your company bank account. If
he decides to buy the stone, he can then wire the rest of the money
to the account. If he decides to not buy, the seller can wire the
deposit back to him. Any other method is subject to some kind of
charge back. The banks in Canada will put a 6 week hold on any
payments made by paper originating in the United States; ie: money
orders, cashiers cheques, personal cheques, etc. The counterfeiting
techniques are so good now that nothing printed on paper is safe.

Other than a few crazy geologists, who would ever have thought that
Canada would become a player in the diamond trade??

all the best

[ 8 very good points removed ]

Other precautions I’ve seen done on credit cards:

  1. Telephone back the customer to make sure that everything checks

  2. Know your customers. Set a limit on $ value for first-time
    customers, relax once they’ve proven that they are not fraudulent.

Ken “Wirehead” Wronkiewicz