Chargeback Management

What is a Chargeback?

A chargeback occurs when a customer contacts a credit card Issuing Bank to initiate a refund for a purchase they made on their credit card. Generally these disputes are the result of a customer being dissatisfied with their purchase, a customer not having authorized the transaction or a customer reporting a fraudulent transaction. An unauthorized transaction could be a result of a duplicate processing, misunderstanding of the price, deposit, return or refund policies between the customer and the merchant.

Preventing and Reducing Chargebacks

The customer may or may not have contacted the merchant about remedying this situation ahead of time. They could even be completely wrong. However, responsibility falls to the seller to ensure that the transaction goes smoothly and the customer is satisfied. A failure somewhere within the fulfillment process, including at the customer service level, can lead to a chargeback.

Preventing Chargebacks

The best way to deal with any chargeback is to prevent it from happening in the first place. The following suggestions may be used by most businesses to help reduce their chargeback potential.

  • Use a clear DBA (Doing Business As) name that customers will recognize. Vague corporate names that do not accurately describe what your company might do or sell will only confuse customers when they review their billing statements. An unrecognized DBA name on billing statements is one of the most common causes of chargebacks.

  • Put your phone number on your customers' statements. If they do not recognize your DBA, they can call you to find out who you are and why you charged them.

  • Always respond to a chargeback as quickly as possible. A limited amount of time (10 business days) is available to resolve a chargeback. If you miss the window of opportunity to respond, you forfeit your ability to fight the chargeback.

  • Never accept an expired credit card.

  • Obtain authorization for the full amount of the sale. Declined transactions should not be accepted or split into smaller amounts.

  • Some disputes are not the result of unauthorized credit card use. Rather, they start because the customer disputes the quality of the goods or services purchased so try to work with your customers to ensure they are satisfied.

  • Verify the customer's address. It is possible to verify the customer's name, address and phone number with the card Issuing Bank.

  • Always get signed proof of delivery.

  • Be suspicious of high-ticket sales requested to be sent next-day air or if a runner will be in to pick up the purchase at a later time.

  • Use the fraud services offered by the Processing Bank including AVS (Address Verification) and CVV2.

  • Have your return/refund policy clearly stated at your retail checkout and on your Website. Make it a requirement that customers read and sign the policy before their order can be processed as you need to be able to prove the customer saw the policy.

  • Be very cautious of any foreign orders. Generally, orders from Asia, the Middle East, and most parts of Africa are considered high-risk.

  • Be wary of orders with domestic billing addresses and foreign shipping addresses. They are usually fraudulent.

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