Validating Credit Cards
Credit Cards Fraud Risks
With fraud on the rise, online merchants face increasing risks. In card-not-present transactions, there are two basic levels of credit card validation used to validate that credit cards presented for payment actually belong to the person initiating the transaction.
The first involves using the Luhn algorithm (also called the “Mod 10 Method “), which was developed as a way to validate unique numbers such as credit card numbers and social security numbers.
To further validate credit cards, you’ll want to obtain authorization from the issuing bank for 1.) address verification (AVS) and 2.) cvv2 – the three or four digit code found on the back of credit cards. Banks will respond with match or mismatch codes for street address, zip (5 and or 9 digits) and cvv2.
What Else Can You Do
These methods are well known and criminals can find ways around them. A few simple precautions go a long way. Here are some tips for validating credit cards:
- Double check orders where the shipping address doesn’t match the billing address. Oftentimes these are legitimate but I still view it as a red flag, especially for international orders.
- Require customers to create accounts or profiles to place an order. You can even validate new customers’ credit cards before they make a purchase by placing a $1 authorization that will fall off the card in a few days (just make sure to inform your customers!). Keep in mind that there is not a standard amount of time for an authorization to remain on a debit or credit card. Issuing banks determine the exact duration but typically most stay valid for three to 10 days. If you’re concerned about it you can call the bank and ask them to void the transaction.
- Use a credit card payment gateway provider that offers multi-level credit card validation and fraud prevention services. Transaction grading, advanced transaction management reporting, BIN blocking and progressive identification tools can protect your business from fraudulent credit card activity and potential chargebacks.
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