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.
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.