Merchant Guide: 10 Essential Tips for Preventing Chargebacks

March 14, 2018

A chargeback – also called a reversal – is the return of credit card funds that were used to make a purchase to the cardholder. A chargeback occurs when a customer makes a refund request through their credit card’s issuing bank.

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Most chargeback situations arise at the time the transaction is completed. Possible reasons for chargebacks include:

  • Unauthorized use of a credit card (stolen card)
  • Product or service not being received
  • Customer dissatisfaction with a product or service
  • “Friendly fraud” or the result of a consumers filing an illegitimate chargeback

Every business wants to keep their chargeback expenses to a minimum. Here are our top tips on doing so.

  1. When a cardholder disputes a transaction, the issuing bank may request the merchant to provide copies of receipts and other paperwork related to the sale. Always respond to these requests.
  2. Do not a complete a transaction if the authorization request was declined. Do not repeat authorization for payments that are declined.
  3. Make sure your billing descriptor is accurate. Often a customer will initiate a chargeback because the business name on the statement is unfamiliar and doesn’t match your DBA.
  4. Clearly communicate your contact information, as well as return, refund, cancellation and shipping policies.
  5. If a customer is ordering online, promptly send a receipt via email.
  6. Settle and deposit your sales receipts with your merchant bank in a timely manner.
  7. If a customer request cancellation of a recurring transaction, such as a membership or service, always respond to the request and cancel the transaction as specified by the customer.
  8. Be accurate and clear about your product and service to prevent any customer misunderstandings.
  9. Ship merchandise before depositing and transaction.

If a product or service is going to be delayed, advise the cardholder the option of a different product or service or canceling the transaction all together.


The Basics of Chargebacks

December 21, 2017

No business owner likes to talk about them, but they happen to everyone — chargebacks. Simply put, a “chargeback” provides an issuer with a way to return a disputed transaction.

Copy requests and chargebacks

When a cardholder disputes a transaction, the issuer may request the cardholder to provide a written explanation of the problem and the acquirer (merchant bank) to provide a copy of the related sales transaction receipt. This is called a copy request (or retrieval request), and if you receive one, it’s very important to provide the information being requested.

After receiving this documentation, the next step is to determine whether a chargeback situation exists. In the case of chargeback the dollar value (financial liability) of a transaction is reversed. For merchants, this can be particularly costly, as you may lose both the dollar amount of the transaction and the related merchandise.

What triggers a chargeback?

Chargebacks arise for many reasons, including customer disputes, authorization issues and unfulfilled copy requests. Many chargebacks arise from easily avoidable mistakes and omissions — so the more you know about proper procedures, the better. Of course, chargebacks are not always the result of something merchants did or did not do; sometimes errors are made by acquirers, card issuers and cardholders.

Chargeback cycle

Most chargebacks begin when a cardholder reports a problem to their card issuer. Here’s a quick look of the lifecycle of a chargeback in a customer-initiated dispute situation.

Lifecycle of a ChargebackOMEGA Processing’s customer service will reach out to our merchants when we receive notice of a pending chargeback to help resolve the issue.


Responding to Chargebacks

January 9, 2014

A recent study showed that only merchants respond to only 54 percent of all chargebacks, and that nearly 50 percent of chargebacks go unanswered. This leads merchants to lose millions in revenue. Here are some tips on how to prepared if and when you’re faced with a chargeback situation.

Some chargebacks can be resolved easily without the merchant having to lose the sale. This can be done by simply providing additional information about the transaction or about specific actions taken regarding the transaction. The key here is to always supply as much information as possible to your merchant bank to help them remedy the chargeback.

Consider these guidelines to ensure you have a system in place.

• Know your representment rights to avoid unnecessary losses for your business.

• Act promptly when customers with valid disputes deserve credits.

• When cardholders contact you directly to resolve a dispute, issue the credit on a timely basis to avoid unnecessary disputes and their associated chargeback processing costs.

• Let cardholders know immediately of the impending credit.

• Respond to a chargeback as quickly as possible.

• Address all of the cardholder’s pertinent claims.

• Be sure to supply “compelling” information to prove the true cardholder participated in the transaction, received the goods or services, and benefited from the transaction.

Examples of compelling information

• Correspondence between the cardholder and merchant that proves the merchant spoke to the cardholder or received a letter stating that they acknowledge the validity of the transaction.

• Evidence that the merchant swiped or imprinted the card, received an authorization approval, and the cardholder’s signature.


The Bible of VISA speaks: Most chargebacks occur at point of transaction, and can be eliminated with training

January 9, 2012

Hats off to the global financial kingpin that is Visa Inc. – and here’s some good advice on the testy subject of chargebacks.

Spanning 200 countries as a global payments company, Visa connects consumers, businesses and financial institutions. That’s one magnificent little piece of plastic in your hands.

Bottom line is: most chargebacks occur because of issues that arise at the point of transaction. And most can be remedied with training.

To Wit:

1. Do not complete a transaction if the authorization request was declined;

2. If you receive a ‘Call’ message in response to an authorization request, call your authorization center;

3. If an embossed Visa card is presented for payment, make an imprint for all card-present transactions;

4. If an unembossed Visa is presented for payment, and you have a POS terminal with a magnetic-stripe reader, swipe the unembossed card through the reader for all card-present transactions;

5. Get the cardholder signature!

6. Make only one imprint of the card for each transaction;

7. Ensure that transactions are entered into POS terminals only once, and deposited only once;

8. Ensure that incorrect sales receipts are voided, and that transactions are processed only once;

9. If your establishment has policies regarding merchandise returns, refunds or service cancellation, disclose these policies to the cardholder at the time of transaction;

10. Deposit sales receipts with your merchant bank as quickly as possible, preferably within 1 to 5 days of the transaction date;

11. Deposit credit receipts with your merchant bank as quickly as possible, preferably the same day as the credit transaction is generated;

12. If a customer requests cancellation of a recurring transaction which is billed periodically, always respond to the request and cancel the transaction immediately, or as specified by the customer;

13. Keep customers informed on the status of their transactions;

14. If the merchandise or service to be provided will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date;

15. If the merchandise ordered by the cardholder is out of stock, and delivery will be delayed or the item is no longer available, advise the cardholder in writing, and offer the cardholder the option of purchasing a similar item, or canceling the transaction;

16. Ship merchandise before depositing transaction.

Thanks, Visa!