How to detect an online customer using a fake credit card

Fraud is a fact in today's day and age, especially with the birth and growth of online purchases. Merchants want tools and resources that confirm transactions are legitimate, thereby avoiding fraud. Consumers want assurance that their account information is being guarded.
So here are some things to detect an online customer using a fake credit card.

First of all, validate each order carefully. Don't accept orders unless complete information is provided (including full address and phone number).
The merchant can require the customer to also fax copies of both sides of the credit card. Some merchants also require a copy of their state-issued ID, or driver's license. It also provides additional proof the person authorized the purchase, preventing a chargeback.
The Card Security Code can also be requested. As this number is printed on the card's signature strip or front but stored nowhere on the card, it can be used to verify that the customer has the card in his or her possession and that the card was not stolen by a "skimming" process.
A merchant may call telephone numbers. If told that the telephone number has been disconnected, or the number has been changed. This should certainly send up some red flags for filling an order that was made.
A common preventive measure for merchants is to allow shipment only to an address approved by the cardholder, and merchant banking systems offer simple methods of verifying this information.
Be wary of orders with different "bill to" and "ship to" addresses. Make customers who use a different "ship to" address send a fax with their signature and credit card number authorizing the transaction.
Be especially careful with orders that come from free email services. There is a much higher incidence of fraud from these services. Anyone can open a free, anonymous email account in another person's name and then send the merchant an order using the fake email account and a fraudulent credit card number.

Additonally, ScamBusters recommends taking these precautions:

Be wary of orders that are larger than your typical order amount and orders with next day delivery. Crooks don't care what it costs, since they aren't planning on paying for it anyway.

Pay extra attention to international orders. Do everything you can to validate the order before you ship your product to a different country.

Consider using software or services to fight credit card fraud online.
If you're suspicious, pick up the phone and call the customer to confirm the order. Believe us, it will save you a lot of time, and money, in the long run.

Behavior to Watch Out For during fraud protection and to control fraud, you need to recognize the signs. Be alert for transactions with several of these characteristics:

First-time shopper. Criminals usually hit a merchant once and don't return.

Larger-than-normal orders. (This requires knowledge of what a "normal-sized" order is.) Because they may be using stolen cards or bogus account numbers that have a limited life span, crooks need to maximize the size of their fraudulent purchase.
Orders consisting of several of the same products. As these items are intended for resale, having more of them increases the criminal's profits
Orders made up of "big-ticket" items. These items have maximum resale value and therefore maximum profit potential.
Orders shipped "rush" or "overnight". Crooks want these items in their hands as soon as possible for the quickest possible resale and are not concerned about extra delivery charges.
Orders from Internet addresses making use of free e-mail services. For these services, there is no billing relationship and often no audit trail or verification that a legitimate cardholder has opened the account.
Orders shipped to an international address. A significant number of fraudulent transactions are shipped to bogus cardholders outside of the U.S. In addition, the Visa Address Verification Service cannot validate non-U.S. addresses.
Transactions on similar account numbers. This is particularly popular among criminals who are using account numbers generated by a CreditMaster-type scheme.
Orders shipped to a single address but made on multiple cards. This is characteristic of a scheme based on CreditMaster-generated account numbers or a batch of stolen cards.
Multiple transactions on one card over a very short period of time. Sometimes this is an attempt to "run" a card until the account is closed.
Remember, none of these by itself means fraud-but several of them together might. Check everything. Never ship a valuable order unless it checks out and you have received a valid authorization.