PrintA "chargeback" is the end result when a credit card customer successfully disputes a transaction that appears on their credit card bill. Customer disputes typically arise from dissatisfaction with the quality of merchandise or services received, merchandise or services not received, or a questionable transaction.
A dispute creates a "retrieval" — the process of gathering transaction proof. When a cardholder disputes a charge, the merchant's account is debited for the funds in question while the transaction is investigated. An unfavorable outcome for the merchant results in a chargeback.
Needless to say, this is a time-consuming and potentially costly process for small businesses. Fortunately, you can take a number of actions to prevent — or at least minimize — chargebacks. The first step is to ensure that you fully comply with the transaction requirements issued annually by the major credit cards. Typically, these require you to:
- Obtain an authorization
- Have proof the card was present by swiping the card or by imprinting it on the transaction receipt
- Solicit a signature from the cardholder and compare the signature to the back of the card
- Indicate phone orders when applicable as proof of the customer's call
In addition, follow these helpful hints to further reduce chargebacks:
- Get an imprint whenever a card is manually keyed into a terminale.
- Be sure that all of the transaction information shows up on the imprinted copy — including the amount, merchant name and location, and the cardholder's signature.
- Verify that the number on the screen matches the embossed number on the credit card.
- Compare the cardholder's signature on the sales draft with the signature on the back of the card.
- Check additional identification if necessary.
- If the card is unsigned, request an additional piece of photo ID that has a signature, and have the cardholder sign the card. Otherwise, don't accept the card.
- Obtain an authorization number for the full amount of the sale. Do not break the sale into several smaller amounts.
- Check the expiration date on the card.
If you have an online business that accepts credit-card transactions over the Internet, you will need to take a few different precautions:
- Provide your merchant bank with an 800 number to include on your billing statement. This increases the chances that a dissatisfied customer will call you to rectify the situation before they attempt a chargeback.
- Verify large transactions (more than $100) and send a fax-back or mail-back form to your customers that requires them to fill in their name and contact information, credit card number, card expiration date, and their signature.
- Make sure that the name on your Web site and billing statement match. For example, if your Web site is named computers.com, don't use only your corporate name (ABC Inc.) on your billing statement. A customer may not recognize your name and refute the charges.
