Merchant Card Service - Resources - Avoiding Chargebacks

Ten ways to reduce the hassle and expense of chargebacks

What is a chargeback?

A chargeback are transaction disputed by the cardholder or issuing bank. There are many reasons for chargebacks, but the most common are returned merchandise, terminated services, disputes on services, errors from your staff keying in wrong amount or fraud .

Chargebacks are increasing and is a cost and part of accepting credit cards. However, you and your staff can minimize if not eliminate chargebacks at the time of sale by working to achieve maximum customer satisfaction and accuracy on each transaction.

1. Control the risk for mail, phone and internet transactions

Card Not Present transactions such as Mail Order/Telephone Order (MO/TO) and Internet transactions are more susceptible to chargebacks. Here are some ways you can reduce the threat of chargebacks for fraudulent or unauthorized transactions:

• Negative Database - By maintaining a database of problem customers, you can identify high-risk transactions, block specific credit card numbers and disallow these purchases.
• Multiple Orders - By limiting the number of transactions per hour, day, or week from a specific card holder, you may reduce impending fraud.
• Address Verification Service (AVS ) - AVS is a fraud reduction service that allows you to verify a cardholder's address prior to completing the sale. The AVS system indicates if there is a full, partial or no match response on the address of the card holder by comparing the address in the card issuer's database.
• Know Your Customers - You may avoid chargebacks simply by getting to know our customers. For example , you can capture the customer's telephone number, if you're uncomfortable with the transaction then call back to verify the order information.
• Customer Service Phone Number - Make sure your customer service phone number is printed on the receipt and on your site. This makes it easier for customers to resolve disputes by phone rather than through the chargeback process.
• CVV2/CVC2 - Both Visa and MasterCard have this security feature printed on the back of their cards, which you can verify as an additional security check.

2. Get a manual imprint and signature , if in doubt

If you are unable to swipe a card through your point-of-sale terminal,

It is imperative to take a manual imprint of the card. The manual sales slip should contain the credit card number, customer's signature, transaction date, authorization code, purchase amount - failure to obtain the above items can result in the following chargebacks considered as a Fraudulent transaction by one of the following:

• no cardholder authorization
• no imprint obtained
• signature not obtained

You should verify that the signature and name on the card matches the signature on the sales receipt and or their driver's license - if in doubt and for ID to match against .

3. Respond Promptly to Requests for Transaction Receipts

If confronted with a retrieval request from the card holders issuing bank to provide a copy of the transaction receipt on behalf of the cardholder. Respond to a retrieval as soon as possible; an untimely or unfulfilled request may result in one of the following chargebacks:

• Non-receipt of requested item
• Requested copy illegible

Note: Failure to respond to a retrieval request will result in an irreversible chargeback. The recommended response method is by fax or track able means.

To reduce retrieval request for chargebacks:

• Keep a Record of Your Sales Drafts and or Receipts - Retrieval requests specify the credit card number, transaction date and purchase amount and possible the cardholder's name and address for MOTO sales. Sales drafts should be filed in with date or credit card number that matches's the credit card information.
• Manual imprinters are a must , have one handy at all times.
• Be Sure Sales Drafts are Legible - A hard-to-read sales draft or receipt may produce an illegible copy that cannot be properly processed. Always check the ink cartridge or ribbon on your printer and use a Card Reader Cleaner regularly.
• This will Help with cards not being able to be read properly during swiping of the card.
• Make Your Transactions Easy to Identify - If a cardholder does not recognize a transaction on their billing statement, they may question or dispute the transaction. If a receipt is printed or transmitted at time of purchase the confirmation and or receipt should have the merchant's name and address identifying the business name that will appear on the cardholder's statement , this may eliminate many of these retrieval requests.
• Put Your Customer Service Number on the Cardholder Statement - You can have your business phone number appear on the cardholder statement in the city/state field. This information allows the customer to contact you directly to inquire about the transaction. Please contact Chase Customer Service at: 877.335.4272 if you do not have this already or need assistance in setting up this feature on credit card machine or would like to change what is currently stated.

4. Credit/Refunds

To prevent chargeback's from a Credit / Return Not Processed , promptly process refunds to your customers. Your customer should always be made aware of a cancellation or refund policy in writing. Be sure to have your refund / cancellation policy clearly printed on the transaction receipt in close proximity to the signature line. If you use a website to sell services/merchandise, your refund and or cancellation policy should be on visible on your site. During check-out a screen with an "I agree" button that the customer Agrees to your 'Terms and Conditions' must be clicked and data captured prior to completing the transaction is beneficial. If you do not give refunds or offer in-store-credit only, this information should be included on your transaction receipt .

Note: Refunds must be made using the same credit card as the original sale. Never refund a card purchase by cash or check.

5. Duplicate Transactions

To Avoid duplicate transactions that will result in chargeback's you should:

• Process one transaction at a time through your point-of-sale terminal or payment gateway.
• Balance your deposits at the end of the each day.
• Create a separate invoice describing each purchase if the customer makes more than one purchase in a day or makes purchases with a duplicate amount.
• Check your batch totals at the end of every shift or business day to ensure that your customers were not charged twice.
• If you discover that a customer was charged twice in error, you should immediately credit the cardholder's account.
  • If above is done prior to closing your batch, Void the incorrect transaction.

6. Recurring Transactions

To avoid Transaction that are chargebacks from recurring billing, you should take immediate action when a customer asks to cancel a recurring transaction.

Note: Transactions which are billed periodically (monthly, quarterly, annually), should always be responded to immediately for a request for cancellation. Cancel the transaction right away or as specified by the customer. Your customer service department should, advise the customer in writing that the service, subscription, or membership has been cancelled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to a chargeback.

7. Merchandise or Service Not Received by Cardholder

If a cardholder does not receive merchandise or services, a Non-receipt of Merchandise chargeback may occur. Goods and services must be delivered before charging the customer . To avoid this type of chargeback, you must obtain signed proof of delivery for all merchandise or services that are not immediately delivered at the point of sale, some helpful hints:

• Installment Transaction - Disclose the terms of installment transactions in writing, including shipping, handling charges and taxes. Inform your customer if currency conversion rates will cause installment amounts to fluctuate. Card Association regulations prohibit merchants from including finance charges in the installments.
• Installment Intervals - The first installment transaction must not be processed before the shipment of goods. Use the 20-calendar-day (or more) rule, or the monthly anniversary of the shipping date (must be the same date each month) to process installments.
• Delayed Delivery - You can process delayed delivery transactions before delivery of the goods or service if the sale is described as "delayed delivery" on the transaction receipt. You may not process a deposit or a balance due transaction receipt before the delivery of the goods or service.
• Prepayment - You may process a prepayment transaction if you advise your customer that he or she will be billed immediately. You may also process a full prepayment for customer-ordered merchandise (manufactured to the customer's specifications).

Note: Do not substitute another item unless the customer agrees to accept it. By giving the customer written notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible chargeback.

8. Authorization Procedures

A "decline" code indicates that the card issuer does not approve the transaction. Do not continue to attempt further authorizations on the card by reducing the amount requested or repeating the request. When you receive a decline code, you should return the card to the customer and ask for another form of payment.

If you are suspicious of a card transaction, contact your voice authorization center and request a "code 10" authorization. The operator will ask you a series questions without alerting the cardholder.

Note: Be prepared to answer these questions. The operator may ask to speak with the cardholder. If approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another type of payment.

9. Cardholder Disputes Quality of Merchandise / Service

It is difficult to overcome a dispute from a customer who challenges the quality of your merchandise or service. Such disputes can result in the following chargebacks:

• Merchandise / Service not as described
• Cardholder dispute - not elsewhere classified
• Defective merchandise

If a customer disputes a transaction, try to resolve the issue directly with the customer and document your efforts that the customer is completely satisfied. Always keep correct records of each transaction because if a retrieval requested arrives in the mail, you will need to provide documentation in your response to the cardholders issuing banks dispute.

Make sure proper shipping procedures for packaging is used to ship goods. Make sure your customer has a clear understanding of your companies return policy for merchandise not suitable or wanted for purpose bought.

Display your return policy at the point of sale and is printed on the sales invoice or slip in close proximity to the signature line. Maintain a consistent return policy and if changes are made make clear indications or such and notate that transaction prior to change will be honored.

10. Account Numbers Don't Match

Upon swiping the card, make sure the embossed card number and the displayed account number match. Print the full account number on all phone and mail orders. Ask phone customers to read back the card number to ensure accuracy. Non-matching transactions can result in the following chargebacks:

• Account number not on file
• Non-matching account number

In conclusion:

Don't settle any transaction until you have shipped the related merchandise. If the customer sees a transaction on their monthly statement before they receive the merchandise, it could lead to a preventable chargeback.

Shipping merchandise before settling the transaction is Good business!