In Tandem

When retailer Mark Berkowitz, 49, asked a phone customer for the name and number on his credit card, he knew he was being scammed. "The guy said his name was Patricia," recalls the owner of Derby Appliances Inc. in Edison, New Jersey, which sells appliances and electronics. "If I hadn't questioned it, I would have been liable for the cost."

U.S. retailers get ripped off to the tune of about $1.5 billion per year due to credit card fraud, says Dennis Behrman, a research analyst with Financial Insights, a Framingham, Massachusetts, research firm. Protecting yourself without alienating customers, he says, requires a combination of new technology and good business practices, including:

• Adopting technology:
• Behrman says more retailers are moving to PIN-based terminals, which require customers to input a personal identification number to complete a credit card transaction. On the horizon, some financial services companies are experimenting with biometric identifiers, such as scanning fingerprints to match a card with the user.

• Verifying customers' contact information at the point of purchase:
• "Cross-channel authentication helps catch fraud," Behrman explains, "and gives you an opportunity to provide better service by keeping current information."

• Posting your policies:
• If customers know in advance that their signature will be checked or they'll be asked for a second ID, they're less likely to be miffed when it happens.