The public is mostly focused on protecting consumers from credit card fraud.  You're taught ways to keep your personal financial information safe and secure, and you're even provided protection from having to pay for fraudulent purchases if your credit cards are stolen.  The problem for sellers is that the credit card companies aren't covering those fraudulent charges out of the goodness of their own hearts.  Instead, they're passing the expense on to the sellers.

When someone pays you with a credit card, you generally get that money credited to your bank account in just a few days.  The card holder then gets their statement showing the charge as much as a month later, and that's when they might notice the unfamiliar charge on their card.  Of course, the first thing they do is notify the credit card company and dispute the charge.  And what happens?  The credit card company immediately deducts that money from your account.  (No few days for processing there!)  If you can't prove that the charge was legitimate, they consider the case closed - they've recovered the money.  The consumer wins; the credit card company wins, and the thief wins.  You, however, are out the cost of the sale - you lose.

So, how can you protect yourself from these losses?

Well, you could try charging the credit card and then waiting for a couple of months to make sure there's no dispute filed.  Well, clearly that isn't a good idea.  No consumer is going to settle for that, and the credit card companies would consider that to be a violation of the terms for accepting credit cards.  Fortunately, there are a few things that actually do help.

When you submit a credit card payment to your bank, you are able to (and frequently now required to) send the card holder's billing address along with the credit card information.  The credit card company will then perform an address verification.  If the address provided doesn't match the card holder's billing address as they have it on file, that will be reported back to you.  But that doesn't necessarily mean that the charge will be declined.  Essentially, they're providing this check as a service to you.  And there is some logic to this.  After all, some people have multiple addresses.  They might accept mail at home, a PO Box, and even at their work.  They simply might not realize that the card their using is sent to a different address.  It's up to you to choose how you want to handle a failed address verification.  You can ignore it, you can confront your customer to explain the discrepancy, or you can refuse to process the payment.

Of course, the address verification isn't the ultimate security check.  If someone is using a stolen credit card online, they need only enter the correct billing address (assuming they know it), and they've bypassed the address verification.

If you want to take the maximum advantage of the billing address verification, you can do two things.  First, do not accept a credit card payment when the address verification fails. It's that simple.  If they can't give you the correct billing address, it's more likely it's not their card.  Second, assuming your shipping a product to the buyer, require that the billing address (now verified) matches the shipping address.  Now you know that not only is the billing address that of the card holder, but you're also pretty certain that your shipping the product to the card holder's address.  If you require a signature for the delivery, you can then prove to the credit card company that the product was shipping to the card holder and that they signed for it - assuming that it was them who signed.

The problem with taking it to the level, however, is that you're barring legitimate sales where the buyer simply wants the product shipped to an address other than that shown on their credit card statement.  Consider that people buy gifts for other people, or they just don't want that big screen TV shipped to their PO Box.

Consider, too, that you can set policies based on the amount of the sale, too.  If someone is spending under $50.00, and you have a lot of sales in that range, you may be willing to accept a higher risk so that you policies don't interfere with a lot more legitimate sales.  After all, why refuse $10,000.00 in profits just so you don't get stuck with one or two $50.00 losses.  On the other hand, you might want to impose stricter policies when the amount of the sale is in the hundreds of dollars, and people spending hundreds of dollars might even appreciate tighter security.  And you don't have to refuse the sale.  You might simply want to make sure that you can call the person and/or perform some other form of manual verification.