Credit card fraud impacts innocent people in Iowa and other areas at break-neck speed daily. Although consumers fall victim to this crime, merchants are sometimes on the hook when it happens. This is who pays when merchants are victims of credit card fraud.
Understanding credit card fraud
Credit card fraud is one of the most widespread financial crimes. It occurs when a person’s credit card is lost or stolen and a thief uses their information to make unauthorized purchases. In some cases, someone may not have a physical credit card but gains access to a victim’s credit card information to make fraudulent purchases online. Skimming on ATMs or payment terminals often allows thieves to gain such access. Whatever means is used to commit credit card fraud, the crime costs billions of dollars each year.
Credit card fraud affecting merchants
Credit card fraud doesn’t only affect individuals; merchants can also be victims when someone gains another person’s credit card information and uses it to make fraudulent purchases. In that situation, the credit card holder is usually not responsible for paying for the fraud. The merchant or bank has to cover the costs of the crime instead.
A merchant must pay when credit card fraud occurs without a card being present or if they use a swipe terminal instead of an updated one that takes cards with a chip and pin. However, if merchants that use updated payment terminals fall victim to credit card fraud, banks are responsible for paying.
Unfortunately, credit card fraud can cost merchants their reputations. This can lead to higher chargeback rates, leading to a merchant being considered high-risk and having trouble running their business.
Although credit card fraud can’t always be stopped, merchants can take measures to safeguard their businesses. Using up-to-date payment terminals and being wary of purchases without physical cards can reduce the risk of it happening.
