How To Prevent Chargebacks

How To Prevent Chargebacks.

Disputes or inquires arising from card transactions result in retrievals and possible merchant chargebacks. A chargeback means that the amount of the original charge that was deposited into your business checking account is taken back out.

Some common chargeback reasons are: fraud, dispute over the quality of merchandise, the cardholder never received the merchandise, or the amount charged to the card was incorrect.

Chargebacks can destroy a business. They can be a time-consuming and potentially costly process for small businesses. Therefore, it is very important for you to take a number of actions in order to prevent or at least minimize chargebacks.

Preventing Chargebacks

Make sure that your processor uses a name that your customers will recognize on their statement. Most chargebacks start when a customer does not recognize a charge on their statement event though it may be a legitimate charge.

Provide your merchant account provider with an 800 number to include on your billing statement. Supplying a toll free number will prevent a chargeback from occurring much of the time, as you the merchant will have a chance to rectify the situation or to issue a refund to the client before they attempt a chargeback dispute.

Respond promptly to Retrieval request. Both customers and issuing banks may request copies of sales and credit drafts. Once a request is initiated a 30-day clock begins. Responding quickly to get your copy of the draft back is very important. Keep all sales drafts readily available for 180 days then store for long term storage in a safe and secure place.

Retail Businesses

Follow transaction requirements
The first step is to make sure you fully comply with the transaction requirements issued annually by the major credit cards. Typically, these require you to:

• Get an authorization
  
  
• Have proof the card was present by swiping the card or by imprinting it on the transaction receipt
  
  
• Get a signature from the cardholder and compare the signature to the back of the card
  
  
• If the transaction is a phone order, indicate that it was a phone order as proof of the customer's call

In addition, follow these helpful hints to further reduce chargebacks:

• Get an imprint whenever a card is manually keyed into a terminal. And be sure that all of the transaction information shows up on the imprinted copy ? including the amount, merchant name and location, and the cardholder's signature.
  
• Verify that the number on the screen matches the embossed number on the credit card.
  
• Compare the cardholder's signature on the sales draft with the signature on the back of the card. Check additional identification if necessary. If the card is unsigned, request an additional piece of photo ID that has a signature, and have the cardholder sign the card. Otherwise, don't accept the card.
  
• Obtain an authorization number for the full amount of the sale.
• Do not break the sale into several smaller amounts.
  
• Check the expiration date on the card.

Mail Order/Online Businesses

If you have a MOTO or online business that accepts credit-card transactions over the Internet, you need to take a few different precautions:

• Make sure you get an address match when you ran a card through an Address Verification System terminal or software. If the address does not match, be sure to call the cardholder back to verify that it is their card.
• Make sure that the prominent name posted on a website or on mail-order and advertising literature be the same business name that appears on the consumer's billing statement.
  
• Provide your merchant account provider with an 800 number to include on your billing statement. This increases the chances that a dissatisfied customer will call you to rectify the situation before they attempt a chargeback.
  
• Verify large transactions (more than $100) by sending a fax-back or mail-back form to your customers that requires them to fill in their name and contact information, credit card number and card expiration date, and most importantly, their signature.
  
• For online businesses, collect the IP address of the fraudulent order. An IP address is a unique number assigned to each computer location on the Internet. Once you have collected the IP address, you can find the owner or the ISP the owner uses.
  

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