Information on Merchant Accounts,
Ecommerce and Credit Card Processing

December 15th, 2021 by J B

How Fraud Affects Businesses

Filed in: Fraud, Merchant Accounts |

Everyone loves the holidays, but with the holiday rush, traveling employees, and chaos of busy schedules, it is very easy for fraud to fly under the radar, especially for small businesses.  But fear not!  We are here to explain to you how fraud works so that you can be proactive in protecting your business from it.

What is Return Fraud?

One of the biggest types of fraud that affects small businesses during and after the holidays is return fraud.  Return fraud is “an online scam that occurs when a person purchases an item from a retail store with the intent to return it immediately or use duplicate receipts to get money back.”  These sneaky fraudsters use the company’s return process against itself to acquire extra money, gift cards, or benefits from items.  With Christmas and New Years being over, many people try to return things they do not want.  And the heavy influx of in-store traffic and returns around and after the holidays makes it that much harder to catch this type of fraud.  To protect your business from return fraud, you need to know the different types and how to combat them.

Price Tag Swap

Price tag swap involves a customer swapping the price tags of two items to buy the more expensive one for a cheaper price or to receive more money back from the return of a cheaper item.  This type of fraud is very prevalent in self-checkout, which has become commonplace in many businesses. 

Solution: Preventing this fraud can be difficult, but it can be reduced by using price tags that are difficult to remove, which means avoiding stickers.  Also, have employees double-check items at check out.

Returning Shoplifted Items

With this type of fraud, a person takes an item from the store and tries to return it either without a receipt for in-store credit or with a fake or duplicate receipt for cash. 

Solution: To reduce this type of fraud, all you have to do is require a valid receipt when people try to return items– no returns without receipts.  Also, have employees mark the receipts when the item is returned so it cannot be reused.

Rent and return

This fraud is very common for clothing.  It involves buying an item, using it once or twice, then returning it.  This is very common for things like formal dresses and suits because they are generally used for a few occasions, most of which do not involve them getting dirty or messed up.

Solution: To help prevent this from occurring, companies can use price tags that make clothing difficult to wear without removing the tag.  Employees must also closely examine returned objects before accepting them back.


Shoplisting is where a person finds an old receipt or picks up someone else’s receipt and uses it as their own personal shopping list.  They, then, walk around the store picking up items listed on that receipt and try to return the new items to get money back. 

Solution: The only way to stop this other than keeping a close eye on suspicious customers is to set a time limit for returning items.  That way, people cannot use old receipts for as long.

Receipt Fraud

The final return fraud we will talk about is receipt fraud.  This is where people steal or reuse old receipts to return items for profit.  People may use copied, stolen, or reused receipts. 

Solution: Stick to using the SKU’s on receipts.  If the SKU on the receipt does not match up, do not allow employees to accept the return. 

Return fraud is rampant around the holidays, and it can cost your company BIG TIME if you are not proactive in combating it.  It is important to have a strict company return policy to stick to.  Make sure you are protecting your business from fraudsters’ devious schemes.

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