The stolen credit card and debit card number and their illegal use is prevented by the Federal law. This law is beneficial to a majority of Americans whose payment data was exposed by the fraud case in the Home Depot, Inc. (NYSE:HD) computer system, which was invaded by the hackers. But for merchants there is no silver lining because they have to suffer losses because of the sales that are made to hackers.

 

As soon as the fraud is identified, the credit card company seals the cardholder’s cash and if the merchant is unable to prove the authenticity, the cash is debited from their accounts. The chargeback money is the fee that the merchant has to pay for letting the thieves use the stolen cards. The higher the number of chargeback fee, the higher will be the chances of specific vendor of losing the ability to accept certain credit cards.

 

These costs keep on adding up. LexisNexis published a survey according to which in 2013, an average merchant lost about .68 percent of annual income to fraud. A merchant has to pay around $3.08 on each dollar to replace the losses, penalties and chargeback fees.

 

The New York Times published a report which says that around 60 million credit cards and debit cards were exposed in Home Depot, Inc. (NYSE:HD fraud case. The Target hacking affected as many as 40 million accounts last year, similar cases happened with Neiman Marcus, a luxury retailer and a Chinese restaurant chain P.F. Chang. Hacking crimes involving retailers are on the rise like never before.

 

Chief cyber security officer at the Trend Micro, Tom Kellerman says that at least one transaction is made by 70 percent of stolen cards. Thugs mostly use these cards for luxury and expensive items like branded clothing, airline tickets, cars on rent, electronics etc.

 

“Friendly fraud” is when the customer fights over the charges they themselves have made. According to LexixNexi this type of fraud is more common than we can imagine.

 

Jason Richelson who is the co-chief executive at ShopKeep – the main point of selling softwares to the small businesses – says that these thugs can cause a major setback to any business. He recalls when he cofounded the Green Grape, a Brooklyn based wine shop. A customer bought expensive wines with stolen credit cards. And a mistake by cashier of not being able to swipe the card and manually entering the number, made the setback charges inevitable. The fax of penalty was received a week later.

 

Chargebacks911 helps merchants to deal with such frauds. Monica Eaton-Cardone, who is their Chief Operating Officer, says that if a merchant proves the verification of cardholder and that the credit card was there at the store, the chargeback can be fought off. This can be done by getting customer’s driving license, his signatures or making an imprint of card by an old fashioned card reader.

 

Eaton-Cardon says that online retailers are the main cause of these fraud cases. Even if you go to the court and fight for it, the event is still going to stay on your records afterwards.

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