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5 Types of Credit Card Frauds That Are Targeted Towards Small Businesses

The biggest problem that small businesses have to deal with is the availability of funds. Thus, their payment solutions are also relatively primitive. As a result, they remain more vulnerable to fraudsters and their antics. However, the truth is that it’s comparatively easier to protect oneself against such fraud. This is because tons of affordable, secure payment gateway services provide enough security against potential cyber-attacks.

As per recent research, more than five thousand ATM transactions and 160 million point-of-sales transactions were made using credit cards in India in April 2021 after which credit card fraud has become a lucrative action for fraudsters. That’s why businesses need to be proactive in tackling such a situation. But, first, merchants must understand the threat to find a way against it. This blog lists out five types of standard credit card frauds that can affect small business owners.

Most Common Credit Card Frauds

Wire Fraud

One of the most common frauds associated with credit card processing is wire fraud. In this, the fraudster claims to have made the credit card payment. They may also come with fake receipts, such as an edited credit card statement claiming to have made a transaction error that ended up debiting them more of what was needed. In return, they request the merchant to send the value of the overpayment directly to some bank account.

Wire fraud is quite common in today’s online market, where many small businesses sell their products via social media. By using a secure payment gateway service like Zaakpay, merchants can easily avoid wire fraud. Gateways generate real-time data for all transactions that are accessible from the dashboard. When faced with such a scenario, they can verify the receipt of the payment from the dashboard before initiating a refund.

Chargeback Fraud

Credit cards have a chargeback facility to protect customers against fraudulent transactions. However, they are also a scope of fraud in themselves. A chargeback fraud begins with a customer placing a legitimate order and paying for it. Once the payment is received, the merchant releases the product, after which the customer initiates a chargeback request citing that they never ordered the product in the first place. They might also claim to have never received the product. In response to this, the issuing bank approves the chargeback, and the merchant loses money.

In this situation, the business loses the money and runs the risk of getting blacklisted or fined by their gateway service provider. Using a reliable service is essential to avoid falling into such a trap in the future. The transaction statements generated by the service are proof of the transaction and can be raised against a chargeback claim.

Online Skimming Fraud

Hackers attempting to get hold of credit card details to access bank accounts are examples of a typical credit card fraud. Once they get the key, they can transfer the funds to another account by exploiting loopholes within the gateway system. Fraudsters identify bugs and weak security systems in a gateway to inject malware or trojan, giving them access to credit card details.

Combatting skimming attempts is all about using a secure payment gateway with up-to-date technology. Bug checks should be conducted regularly and patched immediately. Following the regulations iterated by PCI DSS is a mandatory step against skimming threats. As a precaution against such fraud, Zaakpay uses tokenization and encryption to replace the actual card numbers with one-time use tokens, making the overall transaction more secure.

Force-auth Fraud

These frauds are the easiest to identify. The customer requests the merchant to accept a card despite being declined by the credit card processing system. They might also share a fake authorization code to force the transaction. Generally, stolen credit cards are used in this process.

Merchants must be aware of ignoring any such request from the customers. Payments must be processed only upon meeting the required criteria, and products must be dispatched after that. If somehow the fake amount goes through, the merchant would be liable to face a chargeback.

Return Fraud

As can be inferred from the name, this fraud involves returning a product after purchasing. Generally targeted towards small businesses with no concrete payment gateway system, fraudsters request a refund for a product they had purchased recently. However, while sending back the product, they either send damaged goods or nothing at all. If the refund is processed meanwhile, the merchant has to face losses. Businesses can incur losses further if they offer some gift card or rewards for refund.

Having a well-defined refund policy is crucial to avoid such fraud. Only returns that comply with the policy should be approved. Zaakpay has a refund feature that merchants can use to process safe refunds.


With suitable measures, merchants can reduce the chances of credit card processing fraud up to great extents. Zaakpay is a reliable gateway that can safeguard small businesses against many online scams at flexible and affordable pricing. This empowers small businesses to be at par with their mid or big-sized counterparts in resisting digital fraud cases while running smooth business operations.