Reducing Credit Card Charge Backs

 

Simple Steps to Reduce Chargeback Risk

Trading via the internet does expose Merchants to risk of Payment Fraud

Merchants are always liable for chargeback claims. It may not be possible to prevent all chargebacks, however a number of measures and procedures should be put into place to reduce the risk.

Most Merchant Facility providors (Banks) employ a team of chargeback analysts to review chargeback notifications and dispute a proposed chargeback, but ONLY where merchant can provide evidence.

Basic Level (highly recommended minimum standards)

  • Obtain as much detail about about your customer as possible e.g their order contact details and payment details, delivery address and contact phone numbers
  • Confirm identification of the card holder prior to processing their order
  • If you are shipping goods, obtain the signature of the card holder on delivery to add to your audit trail so as to evidence the card holder has actually received your goods
  • Advise customer of your terms of trade, refund policy and your contact details for customer service
  • Put into place acceptance policies i.e - deliver only to the card holders address, confirmation phone call to customer, re-confirmation email responses from customer, don't accept orders from customers using free email services like hotmail etc etc

Medium Level

  • In addition to the above basic level
  • Ensure the advertised price and currency is the amount stated on the card holders credit card statement
  • Keep customer informed of order receipt and payment applied to their order, ensure your business name is mentioned in all correspondence with the customer.
  • Seek the card holder to sign their purchase order before shipping order.

 

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What is a chargeback?

A chargeback is a reversal of a sales transaction by the customer's credit card issuer. Chargebacks most often occur when a cardholder disputes a transaction and you, the merchant, cannot provide adequate proof that the transaction made to a cardholder's account is valid. A chargeback can also result from processing errors, authorisation issues, and/or any other transaction irregularities.

After the 'Clear Copy Request' process, if the cardholder still says it wasn't them and the merchant has no proof of delivery or authorization in writing, then Visa, MasterCard, Diners and American Express will charge back the dollar amount of the transaction to the merchant.

Under the Merchant Agreements with Visa/MasterCard/Amex the card issuer does not guarantee "non-face to face" credit card transactions, even though the original transaction was approved.

They only guarantee the transaction if the merchant saw the card and has a signature from a receipt. These are the rules but merchant services providers will fight for the merchant in these cases and despite the fact all Internet transactions are non-face to face, the banks are willing to review each on a case-by-case basis.