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Chargeback Tips | How to limit them

Posted by Alex Neir on Wed, September 12, 2012 @ 01:28 PM
Chargback Tips
A chargeback is an element of accepting credit cards that cannot be eliminated. The ability of card holders to chargeback a transaction is a function of the security the credit card associations and credit card issuing banks developed to make consumers feel safe and secure with the use of credit cards.

A chargeback occurs when a customer calls their issuing bank to dispute a charge that appeared on their statement. Common reasons for customers to begin the chargeback process include, but are not limited to the following:

  • Unrecognized transaction on customer's statement
  • Fraud occurred
  • The quality of the service or merchandise that was received did not match what was promised
  • Incorrect amount charged
  • Transaction was not authorized
  • Consumer never received the service or merchandise promised

Based on this list, chargebacks cannot be eliminated. There are always circumstances that result in a chargeback but following a few simple tips can drastically reduce their frequency.

First, always ensure that the name that the customer recognizes is the name that appears for the transaction on the consumer’s bank statement. This is typically the DBA (Doing Business As) name that was used when creating the merchant account. If your business is Carl’s Super Store but the DBA that was used is Freedom Electronics there will be an increase in chargebacks as the customer will not recognize the name.

If you are contacted by an issuing bank with notice of a chargeback, make sure you respond within 12 business days. The issuing bank will usually request a sales draft to check the signature against what the bank has on file. It is recommended that the business retain sales drafts or credit cards receipts for up to 18 months.

Retail Merchants

If you are a retail merchant (have a retail store) make sure you always swipe the credit card through the terminal and get a signature on the receipt. If you must key the transaction in, make sure you get an imprint of the credit card and have the customer sign the imprint.

Internet or MOTO Merchants

If you are an internet merchant or mail order, telephone order merchant make sure you are using AVS (Address Verification Service). This service compares the address information provided by the customer with the information the bank has on file.

Make sure your processor includes your customer service number with your business name to be displayed on customer’s bank statement.

If you are selling expensive service or merchandise make sure you have an authorization contract signed by the customer. It is also a good idea to request a copy of the customer’s driver’s license to verify the signature on the authorization matches their driver’s license. This will eliminate the instances where the customer intentionally signs the authorization incorrectly so that it will not match the bank signature.

For more help with chargeback compliance and chargeback defense please contact our friendly staff at (800)917-8026.

Tags: Chargeback Compliance, Charge Back Tips, Chargebacks

Chargeback Compliance | Part 2 of 2

Posted by Alex Neir on Fri, October 21, 2011 @ 08:10 AM

Chargeback Compliance:

If the customer or issuing bank alleges that the merchant has violated Visa and MasterCard Operating Rules then it is considered “Out of Compliance” and the merchant will not be protected by the chargeback process. The issuing bank must certify that a financial loss did or will occur as a result of the rule(s) violation. Each side has an opportunity to present their case to the Visa and MasterCard Analyst assigned to the case. Compliance cases are filed within 90 days (Visa) and 180 days (MasterCard) from the transaction date. The date of a Retrieval Request ( the date of violation) is 90 days for Visa and 45 days for MasterCard from the date the issuing bank received notice from its cardholder of a violation (Date of Discovery)

Examples of Chargeback Compliance violations include:

  • Failing to properly disclose “limited refund” or “return policies” to the cardholder at the time of the transaction.
  • Preparing two or more transaction receipts to avoid authorization for a single transaction.
  • Quality of service received from a travel and entertainment merchant.

Chargeback Compliance Filing Procedures, Fees and Penalties:

If you, the merchant, face a Compliance Violation claim, then you will be required to complete a Visa and MasterCard Compliance form and provide a description of the grievance, and submit copies of all supporting documentation. The issuing bank is required to provide the merchant with a Pre-Compliance letter, 30 days prior to filing, in attempt to settle the matter. As with a standard Arbitration, there is a Filing fee of $150.00, a Review fee of $250.00 paid by the losing party. Further, a $100.00 fine may be assessed for each technical violation found against the opposing party.

Criteria used for Chargeback Compliance Violation Decisions:

The arbitrator will consider the following when determining financial liability ~

  • Was there a rule violation and a resulting financial loss
  • Was the cardholder’s complaint reasonable
  • Should the disputed amount be allocated between the two parties

When facing a Chargeback, Arbitration or Compliance claim keep in mind…

When a merchant is facing a Chargeback claim, Arbitration request or Compliance Violation charge, the most important thing to remember is to respond quickly and accurately with sufficient supporting documentation to defend your business. Failure to respond by the stated deadlines is an automatic forfeiture of the transaction which means you will lose the full transaction amount and could be subject to fines.


For more information on chargeback compliance please call (800)917-8026.

Tags: Chargeback Compliance, Credit Card Fraud, Chargeback Defense, Chargebacks