Chargebacks, or challenges to the validity of a credit card charge, are much more than a nuisance. You will pay a processing fee for each one, and if you cannot substantiate the original charge (in a process known as a "representment"), you will be liable for reimbursing the amount charged back.
Merchant account chargebacks are an increasingly expensive problem not only because of the fees charged by the processor, but also because of the time and energy that a merchant must invest to try to win a dispute. A thorough chargeback prevention plan can help limit the number of chargebacks that your business receives. Below are some tips and best practices for preventing 3 common types of chargebacks:
- Use a recognizable DBA name:
If your business DBA name is not easily recognizable to a cardholder, when they review their statement they may remember or recognize the charge and issue a chargeback. - Include a phone number on cardholder statements:
Providing a number ensures that cardholders can easily contact you with any questions regarding a charge. - Clearly post policies:
Make sure that your policies regarding returns including sale items and defective or damaged merchandise are clearly visible and easy to understand. - Work with customers to resolve issues:
This sounds like commons sense but, the truth is if you don't communicate with customers to resolve issues, you're forcing them to resort to a chargeback to solve their problem. - Proactively communicate with customers:
Always keep customers informed on the status of their orders. Many customers won't bother to contact you if an order doesn't arrive on time, instead they may issue a chargeback. - Use address verification service (AVS) for not-present transactions:
never process a card-not present transaction without an AVS match. - Swipe all card-present transactions or get a fully legible manual imprint.
It is always the best idea to swipe the magnetic stripe of the card and verify the signature and the card info while present. - Don't re-run a declined transaction:
If a credit card is declined, don't run it again. Instead, ask the customer for another card or form of payment. - Never split transactions:
Always authorize a credit card once for the total amount of the transaction. If you accidentally undercharge, cancel the transaction and run another transaction for the entire payment. - Submit credit card batches daily:
By posting transactions to your customers' accounts quickly while the purchase is still fresh in memory lowers the chance that they won't recognize the charge and issue a chargeback. - Preventing Fraud (for card-present transactions):
Check the security features on the card, compare the name, account number, and signature on the card to those on the transaction receipt. They should match. - Always ask to see a Driver’s License:
Always request to see a driver’s license with every card present transaction. Verify that the person presenting the items is the person shown on the ID, that the name is the same as it is on the credit card and always verify that the signature is the same on both the credit card as the driver’s license. - Obtain and compare signatures - if a customer's signature on the receipt is significantly different than the one on the back of the card (or if the card is not signed at all) the transaction may be fraudulent.
- Verify the number on the credit card machine matches the card - after obtaining an authorization, make sure that the number displayed on the machine matches the number on the card.
The following links to Visa materials provide excellent information regarding proper card acceptance procedures.
