Chargebacks are a merchant’s worst nightmare; they’re expensive, time-consuming and inevitable. So what can you do?
It’s important to understand that there are various types of chargebacks, and knowing what type of chargebacks you’re getting will help to properly dispute them.
- True fraud chargebacks are initiated against fraudulent or improper charges that the customer should not be held responsible for. Oftentimes this is due to a customer’s card being used without their consent.
- Friendly fraud chargebacks are initiated by the customer against legitimate charges. It’s important to reach out and discuss with the customer why they initiated the chargeback and attempt to resolve the issue.
- Merchant error chargebacks are initiated against payments that were processed incorrectly. Mistakes happen, and these can be easily corrected and documented.
Collecting signatures on receipts and work orders is the best protection against chargebacks. In fact, without a signature on the receipt most disputes can be considered an automatic loss. A signature verifies that the customer knew they were being charged and approved the charge. Keep records of transactions run as well as all supporting documents such as delivery confirmation, receipts, work orders, and correspondence.
Online transactions can be at increased risk of chargeback due to their card-not-present nature. An easy way to help protect against this is to require the customer to input additional information before processing a remote transaction. Requiring the CVV on the card, the billing address and zip helps to verify the cardholder is the one issuing the transaction. In fact, most shopping cart systems already prompt for this information by default; check your software settings to see what options you have for multilayer validation.
Looking for the red flags of fraudulent transactions can reduce the risk of chargebacks. Common signs online are expedited shipping to an address that differs from the billing address, different cards paying for shipments to the same address, multiple failed attempts to enter payment information or repeated declined transactions. In person, look out for a customer who is rushing the transaction, refusing to show ID, or purchasing expensive and seemingly random items. Trust your instincts and don’t be afraid to request additional information or refuse the sale.
Use this to your advantage! If you receive a lot of friendly fraud chargebacks, look for a pattern; chances are, there are similar complaints or a common individual assisting these guests. Modify your approach to customers in order to reduce these issues.
Having a clearly stated refund and return policy is key to fight against chargebacks, especially for online transactions. Having an FAQ on your website is one simple method to assist customers in understanding your policy, as well as having an easy way to communicate and even providing free return shipping.
Don’t make promises that can’t be kept. Ensure that shipping timeframes are reasonable, product quality is as advertised, and that your employees understand what the business can and can’t do for their customers as well as how to properly respond.
Ensure your employees understand the pricing structure for your business and how your POS and credit card terminal works. Building a habit of checking the amount entered before accepting payments, having customers review the charges, and understanding how the equipment works can greatly reduce the chance of an incorrect charge.
Make it easy for your customers to understand your pricing structure. Having product prices posted clearly in your store, offering brochures for services, and listing all items in a shopping cart individually can help avoid confusion about transaction totals.Credit Card Processing, Security