Avoiding Chargebacks

The definition of a chargeback is when a cardholder disputes a charge posted to their credit card account. Chargebacks can occur for various reasons, such as when a purchase was not authorized by the cardholder (fraud), or when goods or services are not provided as expected.

You should be able to avoid the vast majority of chargebacks by providing good customer service and ensuring that your products and services are advertised, and delivered, as promised.

For those chargebacks related to fraud, there are simple steps every business can take to help avoid any problems. It is up to every merchant account holder to be diligent in accepting charges, and to educate their staff about the precautions to take.

In environments where the business is accepting and swiping cards at the time of the transaction, there are several simple steps which can be taken:

  •  Always compare the signature on the receipt with the signature on the back of the card.
  •  Always examine the card to ensure it is not altered or suspicious looking.
  •  Request identification such as a license or some other picture ID.

In situations where the business is taking credit card without the customer present (over the phone or Internet, for example), the chance of fraud-based chargebacks is much greater. It is very important for these businesses to put systems in place to help determine legitimate charge activity.

  •  If appropriate, call customers to confirm their order if the billing and shipping or contact addresses do not match.
  •  Ask for the code number on the back of the card (or front with American Express®) to confirm that the card is in the customer’s possession.
  •  If you receive questionable orders, call to confirm the order with the cardholder.

If you have reason to believe that a card is fraudulent or otherwise questionable, always call the card issuing company for a voice authorization.