Accepting credit and debit cards is an excellent way for merchants to grow their business, but it does come with some additional responsibilities. Cardholders can dispute a transaction up to four months after making the purchase. Such a dispute is called a chargeback. Chargebacks occur when a cardholder disagrees with or does not recognize a credit or debit card purchase. Knowing how to prevent chargebacks can help merchants save time and money.
Here are 3 simple ways to prevent chargebacks:
1. Let customers know what will appear on their credit-card statements.
Sometimes customers don't recognize a charge on their statements and think the transaction is fraudulent. When they issue a chargeback, funds from the sale are removed from the merchant’s ProPay account and a chargeback fee is assessed. It's easy to prevent this problem. Just let customers know in advance how the merchant name or e-mail address will appear on their statements. Usually the merchant’s phone number will appear on their statement also, so the customer can call if they have questions.
2. Gather detailed documentation on every sale.
If a customer does issue a chargeback, the merchant will have the ability to resolve it. If the merchant has detailed documentation of the sale, ProPay will issue a rebuttal in an effort to get the chargeback reversed. The better the documentation, the better the chances of winning the rebuttal. Detailed documentation should include a receipt signed by the cardholder outlining what was purchased along with the name, address and phone number of the customer. Order forms, invoices, and bills of sale are also effective proof of the transaction. Also, it is recommended that merchandise is shipped with a carrier who can provide the customer's signature upon receipt. The return policy should be fully disclosed to the customer. On a signed receipt, it is suggested that the disclosure appear near the signature.
3. Verify the customer's address.
Sometimes sales are not face-to-face, and the customer may ask that the products be shipped to them. With no way of getting a signature or seeing the actual credit or debit card, merchants may not be completely comfortable with a particular customer and may want to know a bit more about them.. A good way for merchants to protect themselves is to verify the customer's address. When a transaction is processed, enter the customer's billing address to verify its accuracy (See Example 1).
You will see the results of what is called AVS (address verification service) on the success screen after your transaction is submitted (Example 2). If the address or part of the address doesn't match, the transaction will still be completed. However, if you are uncomfortable with the results, you may immediately void the transaction. Here is a list of most AVS codes and their definitions and what the code means:
- X: Exact street address match and 9-digit zip code match
- Y: Exact street address match and 5-digit zip code match.
- A: Street address match only (zip code does not match).
- W: 9-digit zip code match only (the street address does not match).
- Z: 5-digit zip code match only (the street address does not match).
- N: No street address or zip code match.
If the address doesn't match, you can simply void the charge, contact your customer to get the correct address, and then re-submit the transaction.
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Card Verification Numbers:
The CVV2 and CID are three- or four-digit numbers located on each card. For Visa®, MasterCard®, and Discover® it's located on the signature strip on the back of the card. For American Express® it's located on the front of the card (see illustration below). You can collect this number and enter it when processing a transaction using ProPay. If the number does not match, you should consider rejecting the transaction.
Visa, MasterCard, and Discover
1. What is the fee for a chargeback?
A non-refundable chargeback fee of $15.00 applies for each chargeback that occurs. The chargeback fee will apply even if the chargeback is re-presented successfully and is reversed.
2. What if I have multiple chargebacks?
Multiple chargebacks or a pattern of chargebacks can be grounds for termination of a merchant account.
3. What should I do if I receive a chargeback?
If a chargeback is received, contact the customer to discuss the reason for the chargeback and to determine how it can be resolved.
Next, contact email@example.com to understand what is required to resolve the situation.
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