by Rich McIver

As credit card use become more popular, so does the act of credit card fraud. According to a Federal Reserve Payments Study, the estimated number of fraudulent transactions in 2012 was 31.1 million, with a value of $6.1 billion. When businesses process these fraudulent charges, they could lose money and be forced to deal with other long-term issues.

Hotels and other companies will always be faced with fraudulent credit card transactions. Knowing how to detect these possible charges and establishing steps to deter them could save your business time and money. Here are some tips for avoiding fraudulent credit card transactions:

Ask for identification

A simple way to avoid fraudulent credit card transactions is to require identification with the payment. When a hotel guest attempts to pay for a room with a credit card, a copy of his or her driver’s license, passport or other form of identification should be examined with the card. The person’s name, address and signature all could be compared to ensure the card is not stolen or being used illegally.

If a hotel guest books a room online, once he or she arrives to check in, the physical card and identification could be required. This would allow the hotel to verify the person’s identity and determine if it is a match with the credit card. If the person cannot produce the actual credit card, this could be an indication the charge may be fraudulent.

Credit card information often is stolen, rather than the physical card copy. Credit card transactions where the card was not present were estimated to be more than three times as likely fraudulent compared to transactions where the physical card was used, according to the 2013 Federal Reserve Payments Study.

Some hotels, stores and other businesses currently have an identification policy, but they may be negligent when it comes to enforcing it. Ensuring all front desk employees and managers are aware of the rule and adhere to is critical to its success. For honest, actual paying guests, this could be a minor inconvenience. However, it could yield significant results for the hotel.

Recognize a card’s built in security features

Credit card associations like Visa and MasterCard have incorporated a plethora of security features on their cards to help merchants distinguish between real and counterfeit devices. Some of the features vary per association, but they typically are similar. Knowing where to find these features and what to look for can help businesses avoid fraudulent charges.

Authentic credit cards typically will include the brand mark somewhere on the front of the card. For instance, the MasterCard logo most likely would be located on the bottom right corner of the card. The front of the card also will include the card number, expiration date and cardholder name. Now, some cards may feature a microchip above the account number.

Credit card associations also place a hologram on the card to help ensure its authenticity. The hologram is a three-dimensional image that should appear when the card is moved. This sometimes is displayed on the front of the card, but it also can be placed on the back near the magnetic strip.

Additionally, most credit cards have panels that require the cardholder’s signature. These typically are on the back of the card beneath the magnetic strip. The account number or a portion of the number also could be printed within the signature panel, depending on the credit card association.

Businesses also could prevent fraudulent charges by detecting fake card numbers, which could be especially beneficial with online transactions. Credit card associations have a pattern in which card numbers are determined. If a card number’s information is not compatible with the rule, it likely would be fraudulent.

For example, all Visa credit cards begin with the number four and include 16 digits. If a person attempts to use a Visa card that does not adhere to this, it likely would not be valid. MasterCard numbers always begin with the number five and also feature a 16-digit account number. Both Visa and MasterCard numbers are spaced in groups of four.

Discover cards, like Visa and MasterCard, feature 16 digits and are divided into four numbers. American Express credit cards numbers are entirely different. These cards feature 15-digit numbers and are divided into four, six and five digits. Knowing how these numbers are displayed on cards could be an easy way to determine if a card is genuine.

Require the card’s security code

Credit cards also include a unique security code that can be used to determine if the transaction is valid. Visa uses the CVV2, and MasterCard uses the CVC2, both of which are three-digit codes printed on the back of the physical card. This information, however, is not embedded in the magnetic stripe and it is not printed on receipts.

If a customer can supply this information when booking a room online, this likely means the person using the card probably has the physical copy of the card. Because most fraudulent transactions result from stolen card numbers rather than theft of the actual card, this could help deter fraudulent transactions.

If the card verification code has been submitted, the merchant can attempt to process the transaction. After entering the card number, expiration date, cardholder name and transaction amount, the card-issuing bank can determine if the information matches. This does not determine if the transaction is approved, although it can help merchants determine if the transaction is likely fraudulent.


Credit card fraud can cost businesses billions of dollars each year, making fraud detection and prevention crucial to maintaining a successful company. Educating yourself and your employees about credit card fraud is the first step in detecting unauthorized transactions. Although not all fraudulent charges can be prevented, implementing some of the practices discussed can give your business an advantage over criminals.