Preventing “Chargebacks:” A Retailer’s Nightmare

If you own a business and have invested in credit card processing services, then surely you have been a victim of chargebacks. Chargebacks are basically when a customer disputes a charge and the credit card company comes after the merchant for the amount of the charge. There are also three main types of chargebacks: customer-related, processing errors, and fraudulent chargebacks.

Chargebacks are sometimes not even the merchant’s fault. There are people out there that make purchases and based on how the sale is handled, look for ways to dispute them. It can be as simple as them sending a friend in to buy something, and if the cashier doesn’t check for ID, the real cardholder can dispute the charge. They can claim they don’t even know that person, and that their card must have been stolen. Now they get their money back, and they have the products you sold them. On top of that, you now have to deal with the total amount of their bill, as well as any charges associated with chargebacks that the credit card processing company has put into place.

There are ways to help prevent chargebacks. While it is near impossible to avoid them completely, training your employees to follow some simple rules will significantly decrease the frequency of their occurrence.

1) ALWAYS check ID – Some customers get very annoyed by this, and although this doesn’t always mean the card doesn’t belong to them, it can certainly raise some red flags. You can always let a customer know that you will hold onto their purchases until they have a proper ID with them, and that it is for their own safety. You may lose a sale here and there, but the cost of a chargeback will be far worse.

2) Compare Signatures – Always match the signature on the card or ID to the signature on the receipt or electronic signature pad.

3) Do not Re-Run the Credit Card – If the credit card is declined on the first try, ask for another form of payment. Do not run the card again, because it may double-charge the customer and put you on the hook for the chargeback with your merchant account services.

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