For small businesses that accept credit card payments, chargebacks are an unfortunate issue that can happen. Chargebacks occur when a customer disputes charges from their account and contacts their credit card issuer. If the credit card issuer considers the dispute a valid claim, the merchant is penalized and is debited for the charge that was previously cleared. In addition, the merchant may have to pay a chargeback fee from the processor. 

 

There are a variety of reasons why chargeback disputes may be considered. Here are some of the top reasons customers may dispute charges:

 

  • Customer was incorrectly billed
  • Customer didn’t recognize the specific charge(s) on their statement
  • Customer never received the item they ordered
  • Customer felt the item or service was not representative of what was offered
  • Customer suspects it was a fraudulent charge 

To help protect your business, here is a list of the top 4 ways merchants can reduce their chances of credit card chargebacks: 

 

1. Identify Signs of Fraud
It is vital for merchants to pay attention for any warning signs of fraud. Learn to spot suspicious details that arise, such as if billing and shipping information vary for a purchase or if a credit card security code are incorrect. Identifying skeptical signs before a purchase is complete can prevent a chargeback from ever happening in the first place. Likewise, merchants should make sure that their payment gateway and terminals have the most up-to-date levels of security. Partnering with a reputable payment processor can provide solutions for merchants to combat fraud. 

 

2. Train Your Employees
Small business owners need to make sure and train their employees to not only identify potential instances of fraud, but to also teach them how to process both card-not-present and card-present transactions. Some training tips for chargeback and fraud prevention procedures include verifying signatures for card-present transactions, looking for skeptical transactions, and acquiring signatures on sales orders and contracts when necessary. 

 

3. Preserve Your Records
Make sure your business keeps accurate records that include customers’ authorization information, the dates and amounts of credit card transactions, and any signed documentation from contracts or receipts. This information will be extremely helpful in case your business is ever hit with a chargeback. 

 

Although these records will not necessarily help against a fraudulent purchase, the paperwork mentioned could assist against a customer who is purposely trying to take advantage of the chargeback system or against a customer who possibly forgot about buying a purchase. 

 

4. Work with a Processor to Address Chargebacks 
All credit card processors have their own procedures for accepting credit cards. For all transactionsdone in-store, make sure to check the name of the cardholder and match it with a driver’s license, check that the expiration date has not passed, and be sure to enter in the security code(s) on the front or back of the credit card. 

 

For any transactions that need to be processed with card-not-present purchases, such as online or over the phone, small businesses may need to get permission from their credit card processor in order to process them. Capturing the customers IP address, accessing a digital signature, and identity confirmation through services such as MasterCard SecureCode or Verified by Visa are all security measures that may be in place in order for the transaction to be approved. 

 

Chargebacks can be a pricey occurrence for small businesses that accept credit cards. However, merchants can help reduce their chances of experiencing a chargeback. By identifying signs of fraud, training employees effectively, keeping accurate records, and following processor protocol small businesses can minimize a chargeback from occurring and achieve transaction accuracy.