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How do I identify a scam?

When starting an online business, it's important to be aware of fraud—how it typically works, what the common attack vectors are, and what your liability is. Online fraud is fundamentally different to fraud that occurs in brick-and-mortar business. When accepting payments online, it's harder to be certain that the person you're selling to is who they say they are.

If your customer makes a payment with a credit card that isn't their own, the actual cardholder may dispute the legitimacy of the charge with their bank or card issuer. The bank then performs an investigation to determine whether or not the charge was authorized. In these situations, banks often side with their customers first and make the assumption that the disputed charge is fraudulent, unless it's proven otherwise.

In order to better understand and prevent fraud, please check out these articles from our payment processor Stripe:

- Regarding the kinds of fraud resulting in chargebacks (this page also addresses how to prevent each type of fraud): https://stripe.com/docs/fraud/guide#types-of-fraud

- Regarding fraud and how to identify it: https://support.stripe.com/questions/avoiding-fraud-and-disputes

- Some tried and tested fraud prevention strategies: https://stripe.com/docs/fraud/guide/strategies

- Regarding the various reasons for chargebacks(=disputes) and the evidence you'll need to produce to respond to them appropriately: https://stripe.com/docs/disputes/types

I recommend that you explore these support documents when you can, just in case something pops out as especially relevant to your business. Keep a close eye on your Stripe dashboard whenever you can, and most importantly give full refunds for any payment that you find suspicious. With the payment refunded, there is nothing to charge back, and at this point if there is any doubt about the legitimacy of a payment you can reach out to your customer and confirm that they are the true cardholder before asking them to retry the payment. This might be a bit of a hassle, but it keeps you in good standing with Stripe, and protects you from the $15 chargeback fee levied by the banks for each dispute initiated against you.

 

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