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Best Practices For Avoiding Chargebacks

When your customer disputes a credit card transaction and wins a chargeback against your business, you will lose out on more than just that particular sale. Most likely, you will also have to pay extra fees from your payment processor and even potentially other fines from the card issuers.

Fortunately, there are several steps you can take to dramatically reduce the number of chargebacks disputes that hit your business.

Understand The Most Common Reasons For Chargebacks

The best way to prevent disputed transactions is to first understand why they happen. The most common reasons why chargebacks occur are for the following reasons:

  • Identity theft when someone’s card is fraudulently used to make a purchase.
  • The customer does not receive the product or service they ordered.
  • The customer believes the product or service they received was substandard or misrepresented.
  • The customer’s charge was incorrect in some way or they do not recognize it on their monthly statement.

Follow Your Card Processor's Protocols

Being careful can drastically reduce disputes. For card-present transactions, check the expiration date and input the security code into your system. If you want to also process transactions over the phone or online, you may need to get permission from your merchant services provider, being certain that you understand exactly what information they require.

Make Sure Your Payment Description is Clear

Many disputes happen when a customer does not recognize the name of a business associated with a charge. For that reason, be sure that your payment descriptor reflects a name such as your store name that your customer will easily recognize.

Deal With Chargebacks Promptly

Whether the transaction occurred with a payment taken on a mobile credit card reader, a countertop terminal, or over the phone, your response to a dispute should be fast and proactive. Your payment processing company will most likely notify you as soon as a charge is disputed. Take it upon yourself to contact the customer immediately and do everything you can to resolve the issue with them.

But if the issue cannot be resolved with the customer, work with your merchant services provider to provide the card issuing bank with the proof they require to show that the transaction was valid. Your merchant services provider should have a department or team that is dedicated to helping their merchants fight chargeback disputes.

Watch For Red Flags

Although you cannot always spot fraud, there are certain warning signs that your employees should always be on the lookout for when accepting credit card payments. Incorrect security codes and billing and shipping addresses that don’t match are the most common. When one of these appears on your radar, contact the customer to confirm the sale. Be sure that your employees are also up to speed on these issues by providing thorough training in chargeback prevention strategies.

Keep Clear & Accurate Records

Keep clear and accurate records of all customer transactions, dates, amounts and authorization information. Retain all signed contracts or other documentation that is proof of transactions or billing. These hard copies can come in very handy if a customer is fighting a charge or simply forgets they made a purchase.

No business can totally avoid chargeback disputes. They are an unfortunate part of any business where credit card payments are regularly accepted. However, you can keep them to a minimum with knowledge, planning, documentation and proper training.

To learn more about how you can better protect your business from chargeback disputes, contact us today. We will review your current payment acceptance procedures and advise you on how you can implement better security protocols and fraud prevention techniques.

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