Are merchants responsible for fraudulent orders placed with them?

Unfortunately, in the case of a fraudulent transaction, the merchant it was placed with bears certain financial responsibility (this is an especially big problem for certain industries). The merchant is just as much a victim as the cardholder whose card information was used to place the order is, yet there are certain transaction fees that have been incurred in processing the payment.

When you set up a small business merchant account, you agree to pay certain credit card payment processing fees and charges on every transaction that you accept. It is important to understand that payments are not actually at your processor until you submit your daily batch at the end of your day. The reason it is important is that it gives you some extra time to try and verify the validity of every payment that you accepted that day. Your credit card processing company will provide you with a set of tools to help you fight fraud. They have a financial incentive to minimize fraud, just as you do. If you employ these tools, along with CVV2 and AVS verification services, you will be sure to reduce and possibly, eliminate fraud.

It is a good idea that you establish a set of credit card transaction processing best practices to fight fraud. Make it a point of always using AVS but try not to use voice authorizations because they bypass the credit card merchant processor’s system and cannot be used as supporting evidence in chargeback representments. Also, personally check a new customer's payment details and make sure there is nothing suspicious. Often, common sense is your most effective fraud protection asset.