ANY kind of dispute with a customer is something you want to avoid, and this is especially true when it comes to chargebacks. This blog series is designed to help you better understand chargebacks and provides some steps you can take to prevent them from happening.
Editor’s Note: In order to provide more detail on this topic, the information is being provided in a series of three posts. This is the third and final post in the series.
This post will focus on how merchants can help prevent chargebacks.
How Do I Prevent a Chargeback?
The best defense against a chargeback is to avoid it to begin with. How? Here are some tips:
- Communicate with your customers. Many chargebacks can be avoided through open, direct communication. Clearly describe your service to customers to avoid confusion. Make sure you are detailed in explaining your return, cancellation and refund policies or what the customer can expect in terms of service after the sale. Also, be sure to follow recommended proper disclosure of the terms and conditions. Per card brand rules, if the transaction took place in a card-absent environment, it is mandated that the full return and refund policies should be located on your website or application and should include one of the following:
- In the sequence of pages before final checkout, a "click to accept" or another acknowledgment button, checkbox, or location for an Electronic Signature.
- On the checkout screen near the "Submit" button (but not solely a link to a separate page). For card-present or face-to-face sale, full return and refund policies should be located on Transaction Receipt (all copies, near the Cardholder signature area or in an area easily seen by the Cardholder). If the disclosure is on the back of a Transaction receipt or in a separate contract, it must be accompanied by a space for the Cardholder's signature or initials. Also, make sure to respond to customers’ inquiries quickly and efficiently to avoid confusion on their end.
- Abide by Card Processing Protocols as following the basics will prevent many chargeback opportunities:
- If a swiped or dipped card transaction is denied, DO NOT try and run the transaction a second time. Multiple entries can trigger a chargeback.
- When obtaining an authorization and you have initially received a ‘Decline’ or ‘Do Not Honor’ response, do not settle the sale. Rather, ask for an alternate payment or another card that will obtain an approved authorization from the issuing bank instead of forcing a sale that did not receive a valid approval from the bank.
- Confirm the expiration dates on all credit and debit card transactions
- Get the customer’s signature on a magstripe-only transaction. The signature phase-out recently announced by the card brands applies only to EMV® (chip card) transactions. However, please note that PIN verified transactions do not serve as proof receipt of purchased goods/services and proof of proper disclosure of the merchant’s specific terms and conditions (e.g. ‘NO RETURN POLICY’, ‘ALL SALES ARE FINAL’). We, therefore, suggest merchants have the receipts/invoice signed by the cardholder at all times.
- Always swipe physical cards when possible and obtain CVV/CVC codes
- Use or enroll with a 3D security program, specifically Verified by Visa and MasterCard Secure Code if possible
- Follow the highest form of security on accepting payments by reading a card’s chip function and accepting it through PIN when possible
- To avoid duplicate transactions, completely void any incorrect transactions before reprocessing another sale
- If a recurring transaction was canceled, always ask for an alternate payment from the customer instead of billing them on the same card
- For addendum disputes, always ask for the cardholder’s authorization - specifically for the cardholder’s signature on the invoice detailing the breakdown of the charge before billing their card for delayed and amended charges. This could include, but not limited to, damage fees, smoking charges, parking fees, toll fees, etc.
- When a cardholder buys merchandise from a merchant, the merchant must not refer the cardholder to the manufacturer in lieu of attempting to resolve the problem. Since the merchant sold the merchandise to the cardholder, they are the “merchant of record”, and responsible for addressing the dispute.
- Pencil rubbing of a card or photocopy of a card is not considered proof of a valid Imprint
- Make sure that there is an offsetting sale transaction before issuing a credit transaction
Although sometimes unavoidable, chargebacks can be significantly reduced by following these basic tips and maintaining strict compliance with card processing rules and requirements.