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Preventing Chargebacks

Each card type you accept has its own set of card regulations. It is important to understand that credit card payments are not guaranteed. Disputes or inquires arising from card transactions result in retrievals and possible merchant chargebacks. It is also important to remember that customers need not initiate inquires to the validity of card transactions. The issuing bankcard companies use a variety of fraud checks against their customer accounts to ensure proper use. For this reason, merchants are required to maintain accurate and complete records of customer bankcard transactions. Length of time varies, but it is advisable for merchants to have transactions readily available for 180 days before storing these away permanently. A chargeback means that the amount of the original charge that was deposited into your business checking account is taken back out. The best way for merchants to protect themselves is to obtain "card present", swiped transactions with electronic authorizations and cardholder verified matching signatures. If the card swipe is unreadable due to a damaged card or terminal, then an imprint of the card proving it was present is required.

Credit card transactions are divided into two categories: "Card present" (face-to-face transaction with card and cardholder present) and "card not present" (neither card or cardholder are present) transactions. Because many fraud detection and prevention devices built into the cards are not utilized in "card not present" environments, merchants need to exercise good risk control when accepting these cards.

Preventing Chargebacks
The following is an overview of chargeback types:

1. Error Chargebacks
» Incorrect account number (ex. Most common keying error on offline & credit)
» Illegible copy
» Expired card
» Duplicate processing

2. Dispute Chargeback
» Services not rendered
» Cancelled recurring
» Defective merchandise
» Credit not processed

3. Post Transaction Chargeback
» Transaction not deposited within time frame allowed
» Non-receipt of copy

4. Fraud Chargeback
» Multiple transaction, same card, same amount, same merchant (ex. Failed to void)
» Card not present
» No imprint
» No signature

5. Authorization Related Chargeback
» No authorization