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How Can Credit Card Fraud Affect Small Businesses?


Staying ahead of credit card fraud is a task that large corporations and state and federal governments struggle with. The challenges to small businesses can seem insurmountable. When one solution is found, another form of fraud interrupts business transactions to begin the process of prevention and awareness again. 

Even more challenging is that the individuals committing fraudulent activity are not just down the street in a Florida neighborhood but often half a world away. Finding effective resolutions to the illegal activity of credit card fraud in Florida is vital to the success of a small business. 

How Can Credit Card Fraud Affect Small Businesses?

Credit Card Fraud is Costly to Small Businesses

Fraudulent transactions by individuals who make unauthorized purchases cost small businesses in multiple ways. These charges can have a crippling effect on small businesses, cutting into operational funds that keep a business functioning. Some of the damages to small businesses in Florida associated with credit card fraud include:

  • Funds from the questioned transaction are not released to the merchant until a resolution has been reached.
  • If the bank agrees the transaction is fraudulent, the small business must pay a chargeback fee to the bank.
  • The merchandise is lost.
  • Any shipping and handling fees also result in a loss for the business.

These fees only take a short time to stack up against a small business. Chargeback fees can vary according to the payment processor a company uses, but these fees can start at $15 and reach amounts up to $100 per incident. Additionally, small businesses that exceed acceptable chargeback limits are often placed in monitoring programs (p.21) that subject companies to additional fees until chargeback levels drop.

Fraud Costs in Labor

Countless hours are spent by small businesses investigating, fighting, and resolving credit card fraud. Regardless of the amount of time invested in the process, small businesses never recover an estimated 60% of losses due to fraud. Hours that could be used to build a business are spent fighting a losing battle. 

Operating Expenses for Small Business Increase

According to the previously documented report by Florida Atlantic University College of Business, small businesses are the biggest losers to fraud. One of the reasons is that larger businesses and corporations have invested in internal anti-fraud controls and measures, adding additional layers of protection. These investments, like fraud, can drive up small businesses’ expenses, and in this cited report, 42% of fraudulent activity occurred because these controls were not in place.

Trust Becomes Damaged

While a small business may encounter multiple fraudulent charges, the fraudulent charge that a customer experiences can lessen the trust in the security of a business, driving consumers to make purchases elsewhere. Small businesses often build a rapport with customers that does not exist with larger corporations. When that trust is damaged, it has far-reaching consequences, lessening the likelihood of a customer giving repeat business or recommending a small business to others. 

Training Expenses Increase

There are steps to initiate that can minimize the risk of credit card fraud. We will discuss those below. Taking these steps requires cooperation from employees and training in verification and recognizing red-flag purchases to be aware of. 

Limiting access to sensitive customer data, such as credit card information, can reduce the chances of fraudulent charges occurring within a company, which can severely damage the integrity of a company with its clients. Continual training does pay off in the long run, but as fraudulent practices change, so must the training that employees receive, the cost of employee hours, and the pay they receive for the time spent in training.

Small Businesses in Florida Tourism Can Experience Significant Impacts

Ticket scams have become one of the most considerable challenges in credit card fraud, which can significantly impact small businesses whose income is fueled by tourism. How does this happen, and what prevention methods can be used to prevent this type of fraud? Online social media platforms and resale sites are the latest market for private sellers to benefit from ticket fraud. 

Individuals posing as independent re-sellers often purchase a large number of tickets for tourist attractions, events, or travel passes using a stolen credit card number. This large amount of tickets is shipped to the scammer before the unsuspecting small business is aware that the credit card was stolen and the purchase is invalid. This discovery is typically made when the small business receives a chargeback or reversal on the transaction.

At this point, the tickets have already been shipped and obtained by the scammer, who has received them for free and can sell them to unsuspecting individuals on internet platforms at a discounted rate.

Preventing Fraud as a Small Business

While it may be difficult to prevent every incidence of fraud, there are ways to lessen these occurrences, and employee training is critical in its reduction. Ultimately, educated, trained employees are essential components in prevention. It is vital to receive help from a trusted credit card fraud attorney in Florida and follow these recommendations to reduce the incidents of fraud.

  • Secure your website with vigorous security measures using effective encryption and regularly updating software.
  • Use multi-factor authentication to strengthen security further and prevent stolen credit card purchases.
  • Use a secure payment processing company that complies with the Payment Card Industry Data Security Standards.
  • Upgrade to the latest processing technology, such as EMV chip-enabled point-of-sale systems.
  • Implement a daily review of credit card transactions for fraudulent activities to detect unusually substantial purchases or irregular transactions.

The task can feel daunting and time-consuming, but proactive steps are always more effective than reactive measures. The savings in money, time, and effort will pay off, benefit small businesses, and lessen the impact of credit card fraud. The EMV Compliance Law has required companies to only process credit cards using updated systems for some time and failure to comply results in a business being liable for the costs of fraudulent purchases.

Fight Florida Small Business Credit Card Fraud

Sharmin & Sharmin P.A. is dedicated to fighting for individuals and businesses impacted by the growing threat of credit card fraud. Let us help you take the necessary legal steps to protect your business from the high cost of these crimes, resulting in increased operational expenses, high fees from credit card processing companies, and a loss of client trust and business. Schedule your free consultation today and begin fighting to protect your Florida small business.

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