Chargeback Prevention

Each card type you accept has its own set of card regulations. It is important to understand that credit card payments are not guaranteed. Disputes or inquires arising from card transactions result in retrievals and possible merchant chargebacks. It is also important to remember that customers need not initiate inquires to the validity of card transactions.

The issuing bankcard companies use a variety of fraud checks against their customer accounts to ensure proper use. For this reason, merchants are required to maintain accurate and complete records of customer bankcard transactions. Length of time varies, but it is advisable for merchants to have transactions readily available for 180 days before storing these away permanently.

A chargeback means that the amount of the original charge that was deposited into your business checking account is taken back out. The best way for merchants to protect themselves is to obtain "card present", swiped transactions with electronic authorizations and cardholder verified matching signatures. If the card swipe is unreadable due to a damaged card or terminal, then an imprint of the card proving it was present is required.

Credit card transactions are divided into two categories: "Card present" (face-to-face transaction with card and cardholder present) and "card not present" (neither card or cardholder are present) transactions. Because many fraud detection and prevention devices built into the cards are not utilized in "card not present" environments, merchants need to exercise good risk control when accepting these cards.

The following is an overview of chargeback types:

1. Error Chargebacks

  • Incorrect account number (ex. Most common keying error on offline & credit)
  • Illegible copy
  • Expired card
  • Duplicate processing
  • 2. Dispute Chargeback

  • Services not rendered
  • Cancelled recurring
  • Defective merchandise
  • Credit not processed
  • 3. Post Transaction Chargeback

  • Transaction not deposited within time frame allowed
  • Non-receipt of copy
  • 4. Fraud Chargeback

  • Multiple transaction, same card, same amount, same merchant (ex. Failed to void)
  • Card not present
  • No imprint
  • No signature
  • 5. Authorization Related Chargeback

  • No authorization
  • Best Practices for Reducing Chargebacks

    Chargebacks happen for a variety of reasons and can cost merchants a lot of time, money and even their merchant account. Here are a few simple tips to help you reduce the amount chargebacks you receive.

    • Be clear about refund and return policies. Make sure that the conditions of the sale are written on the receipt near the customer’s signature and that they receive a copy of that receipt. Also display your refund and return policy near the register in a place that all your customers will be able to read.
    • Respond to inquiry letters as soon as possible. If you wish to dispute a customers claim all materials needed to resolve the issue should be sent by the date displayed on the enquiry letter. Even if the customer is wrong, if the merchant doesn’t reply to a dispute on time they are usually liable for the funds.
    • Let customers know what name will appear on statements. Many merchants who use 3rd Party Processing companies have run into problems because the company name that appears on cardholder's monthly statements is usually the name of the 3rd party processing company and not the company name of the site the cardholder made their purchase from. This isn't always the case, but it is common.
    • Take an imprint of the credit card. In instances where a cards magnetic stripe is unreadable or for delivery orders, making an imprint of a card is proof that the card was present and should be kept with your records of the transaction.
    • Collect signatures upon delivery. You can use carriers that require signatures for delivery and allow you to also have a copy. Always retain these in your records.
    • Request a copy of identification and credit card. Always see identification for face to face transactions, but you can also request to have a copy of an I.D. and credit card faxed to you. This works best when it is a business to business transaction.
    • Never charge the card until goods are shipped. If the goods are not yet ready, delay charging the card until such time as the goods are ready and sent.

    Call one of our professional Fidelity associates to learn more about preventing chargebacks.

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