As a small business accepting credit cards, you are already at risk for chargebacks on customer purchases. However, if your business falls under the category of high risk when it comes to credit card processing, you are at an even higher risk for chargebacks. Each chargeback costs your business money in lost revenue and fees, in addition to jeopardizing your merchant account if you conflict with Visa/MasterCard rules and regulations.
What is a Chargeback?
A chargeback is a reversal of a disputed credit card transaction. This can be initiated by the cardholder or the company issuing the credit card. Since April 2011, chargeback rules have limited the ability of merchants to fight back against customer claims.
Common reasons for chargebacks include:
- Unauthorized use of credit card
- Customer dissatisfaction over purchase of goods or services
- Failure to provide services or goods
- Transaction receipt shows card has expired
- Failure to respond or to provide a complete and legible receipt of the transaction
- Duplicate deposits of transaction receipt credit to account
Best Practices to Reduce Chargebacks
You can reduce the possibility of chargebacks by being proactive. This means ensuring that you and your employees understand the best practices when processing credit card payments at point of sale. Best practices include:
- Advise your customers what name will appear on their credit card bill for the transaction
- Provide information at point-of-sale and on receipts regarding your return and refund policy
- Process transactions on the day they occur
- Do not accept expired cards
- Make an imprint of card when using a manual transaction receipt
- Confirm transaction information appears on POS-generated receipt
- Utilize CVV2/CVC2/CID and AVS codes if applicable
- Obtain an authorization code
- Call for voice authorization or additional authorization is you suspect something is suspicious with card presenter
- Do not process transaction if a decline code is received during authorization
- Description of goods and services should appear on transaction receipt
- Do not charge credit card until merchandise has been delivered or services have been completed
- Question transactions involving shipments to addresses other than the billing address of the cardholder
- Have cardholder sign for merchandise when delivered
- Compare signature on transaction receipt to signature on back of the card
- If no signature is present on back of the card, request photo ID
What to Do if You Receive a Chargeback
It is important to respond to all customer inquiries in a timely manner. In the event of a chargeback, you will be notified by your merchant account provider either by fax, email, mail or through online report. You must respond in the time allowed and provide any information that is requested if you choose to challenge the chargeback. This information is then sent to the card issuer for further consideration. In some cases, a second chargeback may be presented. A second chargeback can be costly and at this point, you may want to consider whether to continue the process any further. The final step to the chargeback process is arbitration between the two parties.
Are you processing something thats getting alot of chargebacks? If so, Painless can help get you better rates for your high volume business!