Why Large Transactions Are Frequently Flagged as Fraudulent

Many businesses that have had a merchant account for a long time are surprised when some transactions are flagged as being possibly fraudulent, while others tend to go through with no problems. One of the most common things that many businesses encounter is large transactions being declared fraudulent. While this is usually resolved with a few phone calls, it can be difficult to explain to customers.

Part of payment processing is checking the credit card payments that are being processed for signs of fraud. Since it’s impossible to run a complete background check on every transaction, however, most merchant account services rely on a computer program that flags transactions that are out of the ordinary. This runs for both the business and the credit card holder. For example, a credit card holder that typically shops in his or her hometown might be flagged for possible fraud if his or her card is swiped in a store thousands of miles away without any transactions made to show that he or she was on vacation. Similarly, a business might be flagged for a transaction that doesn’t line up with their regular transactions.

Retail businesses that tend to process a lot of small transactions are the most common recipients of this flagging. For example, an ice cream shop that rarely has a bill over $20 will probably get flagged if they try to process a transaction over $1000. This large transaction simply does not line up with the “normal” transactions that the business processes. Of course, a good merchant account service realizes that this may simply be the bill for a large group of people or a catering order. For this reason, most of these cases can be resolved with a phone call.

Service-based businesses can also get flagged. If a business typically runs small bills through its credit card machines, a merchant account service will probably flag a particularly large transaction. Just like with the ice cream shop, this transaction might be completely legitimate, such as a service performed on a large building or a major repair job.

In some cases, however, these large transactions can be the result of fraud or mistakes.It is possible that a decimal point was dropped, for example.

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