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$1 charge - how does that check for fraud?
Amazon and a few others do it, but how does that help?
MrFishGuy




msg:3848432
 1:14 am on Feb 13, 2009 (gmt 0)

I ordered a computer from Amazon and they first charged my credit card $1. Then they charged the rest of the amount of my order. I got a call from my credit card of a suspicious charge and they verified my last like 8 charges.

I understand that Amazon charged my card the $1 to put all that in motion to make sure the card isn't stolen, but how does that help them?

My credit card company isn't going to contact them and advise Amazon that we spoke and everything is cool, so what information does charging my card the $1 first give them that charging the whole amount doesn't?

 

piatkow




msg:3848530
 6:58 am on Feb 13, 2009 (gmt 0)

This is all guessswork:
In some jurisdictions it is illegal to take the whole amount until shipment. If shipment is from a third party warehouse it may be impossible to stop the delivery if there is a problem. So they verify the card with a trivial amount then debit the full amount once the warehouse confirms shipment.

jecasc




msg:3848561
 7:51 am on Feb 13, 2009 (gmt 0)

Call Amazon and ask.

HRoth




msg:3850690
 3:52 pm on Feb 16, 2009 (gmt 0)

I just found out this morning that thieves do the exact same thing--seeing if they can get a $1 charge to authorize through some service like Itunes, and if they can, charging up a bunch of stuff, esp. giftcards.

HugeNerd




msg:3850698
 4:11 pm on Feb 16, 2009 (gmt 0)

I just found out this morning that thieves do the exact same thing--seeing if they can get a $1 charge to authorize through some service like Itunes...

My understanding is that gas station pumps are a favorite place of thieves to test stolen cards. This is because they can walk-up with a gas tank in hand and easily hide their face from identification. Not to mention that gas stations, until rather recently, made no attempt to verify billing address, etc. Also, gas stations rarely trigger fraud alerts because, well, who hasn't used their credit card at a gas station to avoid going inside? -- so the charges never seem out of the ordinary.

As for the Amazon $1 charge, I don't have an exact answer to share... However, I get my car insurance through Progressive and have them automatically withdraw the payment from my account. Every time, right before the payment hits, I see a charge for a small amount. I am assuming this is to make sure the card/account is still valid a few days prior to withdrawing the full amount; doing so gives them time to contact me and resolves any problems before the payment is actually due.

lgn1




msg:3850882
 7:57 pm on Feb 16, 2009 (gmt 0)

This is rather stupid. The proper procedure is to place a hold on the funds, which will reduce the room on their credit card. The customer is not charged any interest, but they don't have access to the funds on hold.

When the article is ready to ship, then the hold is converted to a sale.

Hotels and Car companies have been doing this for years.

BananaFish




msg:3851095
 2:29 am on Feb 17, 2009 (gmt 0)

The reason for the $1.00 authorization is for fraud check. The amount of $1.00 is authorized so that AVS and CVV2 can be checked without placing a large hold on the customer's account. The issuing bank does not check AVS or CVV2, they simply return this information and place a hold on the customers funds. If the transaction does not pass fraud checks, such as AVS (perhaps the customer mistakenly entered an old address), only $1 is held rather than the entire purchase amount.

SiliconValley




msg:3908209
 8:12 pm on May 6, 2009 (gmt 0)

Also PayPal and other services will place a code with the transaction so the customer needs to reply back saying I see the 1.00 charge and code 4465087KNM. Ecommerce merchants use this in different ways but the end result is the same. It shows the person making the transaction has access to the statement online or via other means (like fax)

This is different then pre auth which as stated above allows systems like CyberSource to run AVS and CVV(2)

CernyM




msg:3908699
 3:23 pm on May 7, 2009 (gmt 0)


The reason for the $1.00 authorization is for fraud check. The amount of $1.00 is authorized so that AVS and CVV2 can be checked without placing a large hold on the customer's account. The issuing bank does not check AVS or CVV2, they simply return this information and place a hold on the customers funds. If the transaction does not pass fraud checks, such as AVS (perhaps the customer mistakenly entered an old address), only $1 is held rather than the entire purchase amount.

A successful authorization is a two step process. First, the authorization is submitted to the issuing bank. They approve or decline. If they approve, a hold is placed on the account.

If approved, the billing address is then submitted to AVS. If AVS fails, the entire transaction is declined, but the authorization hold remains.

Putting a small authorization through first ensures that customers won't have a large phantom hold in their account if AVS fails.

trinorthlighting




msg:3908971
 10:05 pm on May 7, 2009 (gmt 0)

Sounds like Amazon is wanting to make an extra dollar on every sale to me.

radeckd




msg:3909655
 6:09 pm on May 8, 2009 (gmt 0)

I do the same thing. I process my orders offline. Avarage transaction is about 1000 USD so first I would run authorization for 25 cents and see if AVS/CCV returns with match. If it doesn't, I void it and I call customer to verify billing address (and most of the time they do). Often customers do not know the difference between shipping and billing address. Than I run authorization again. Again 25 cents. If it returns with match I still void it and run another Authorization or sale for full amount. This way if I don't receive match at first time, I don't place authorization for full amount on customer's card. Only 25 cent and it will be gone in few business days. If I tried to autorize ful amount and it didn't match, authorization would still go through putting that 1000USD on hold for up to 7 business days. If customer doesn't have more available credit, I would have to wait to have a chance to run his credit card again. And waiting for so many days is not good for any business.

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