Protecting Yourself from a Chargeback

Chargebacks are an inherent risk of accepting credit cards. Having excessive chargebacks can cause a merchant to be banned from accepting credit cards in the future. However, not all chargebacks are caused by fraud attempts. Some chargebacks are the result of misunderstandings and misconceptions when reading transactions on credit card statements. Here are some tips on protecting your business from these unnecessary chargebacks.

What are Chargebacks?

A chargeback occurs when a credit cardholder contacts the issuer to dispute a charge. Upon receiving a cardholder dispute, the purchase transaction is reversed from the merchant’s account and the funds are withdrawn and held by the credit card issuer until such time as the dispute is resolved. Common disputes consist of ordered merchandise not received, false/poor representation of a product/service, substandard quality, incorrect billing, or unauthorized fraudulent charges. As the business owner, you lose the money and are also charged a chargeback fee. 

Protection Tips

  • Follow Protocol – Each credit card processor has unique protocols regarding how credit cards are accepted. For in-person purchases, verify the card’s expiration date and enter the three-digit security code. For online purchases, collecting additional information such as digital signatures, social media profiles, IP addresses, and requiring a second password are suggested. 
  • Payment Descriptor – Descriptors are your merchant’s name, exact product description, and other pertinent information that appears on the cardholder’s statement connecting the purchase to your company. If these are unclear, the cardholder may not recognize your company name or the purchase and thereby file a dispute. If you use a DBA instead of your legal business name, make sure the DBA prints on the customer’s statement so they recognize a name they are familiar with.
  • Strong Customer Service – Good customer service is critical for resolving chargebacks. Using notifications from your credit card processor, you can quickly identify a customer’s dispute. As a result, the problem can be handled in a timely manner, allowing you to reach out to your customer and make an attempt to resolve the issue.
  • Indications of Fraud – Take the time to learn indicators of fraud such as suspicious names, incorrect security codes, mismatched billing and shipping addresses, and so on.
  • Proper Training – Your employees need proper trained to identify fraud and prevent chargebacks pertaining to both in-person and online credit card transactions
  • Good Record Keeping – At a minimum, maintain accurate records of transaction dates, purchase amounts, and information pertaining to authorization so if you need to fight a credit card chargeback you can.
  • Pick your Battles – Consider each chargeback before taking action. For instance, if a long-time customer files a dispute, it might be better to accept the chargeback and call the customer to indicate your acceptance and discuss the issue while potentially retaining a good customer.  Make sure that you respond to the card issuing bank for all chargebacks. Failure to do so makes can imply that you did something wrong or simply don’t care enough to file a response.

For further information on credit card processing or assistance handling a chargeback please visit Chosen Payments at www.chosenpayments.com or contact Jim Luff at jim.luff@chosenpayments.com

Related Posts

Leave a comment