Part of your business’s success is based on the ease at which your customers can make purchases. One of the steps you might take to make this happen is accept credit cards. As much as this will make your customers happy it can result in problems for your business. One potential costly problem in accepting credit cards is a chargeback.
You’re probably asking yourself “What is a chargeback and why should my business be so concerned about it?” In basic terms a chargeback occurs when the amount of an original credit card purchase is reversed due to some issue the customer had regarding that charge. A chargeback can occur for the following reasons:
- Customer disputes the charge
- Charge was fraudulent
- A payment processing error occurred
- There was an issue with the authorization
- The amount charged to the credit card was wrong
- A request for transaction documentation was not received
The process of doing a chargeback is a form of customer protection. It allows for the customer’s credit card company to investigate questionable charges that appear on their credit card statement. As much as this benefits the customer it can do the exact opposite for a small business. The process to remedy a chargeback can be very time consuming and there is no guarantee that it will be reversed. If your business gets too many chargebacks it can be in jeopardy of losing your merchant credit card account.
Although having your business deal with a chargeback is not totally unavoidable there are steps your business can take to limit them. Here are some steps to take to help avoid a chargeback or limit the possibility of the reversal sticking:
- Make sure that the business name that appears on your customer’s credit card statement is one that they will recognize. If you use an abbreviation there might be a chance your customer doesn’t recognize the name and disputes the charge.
- Provide the retrieval request in a timely manner. You have 12 days from the initial request to get a copy of the transaction to the issuing bank.
- Always get an authorization. If the card is present make sure it is swiped through a credit card terminal so full credit card information is obtained.
- If the customer is present have them sign the sales receipt and compare it to the signature on the back of the credit card that was presented. If the credit card is not signed ask for a photo ID that also contains a signature then ask them to sign the card. If they refuse do not accept the credit card for the purchase.
- Always obtain an authorization for the complete amount of the sale.
- If you are unable to obtain a swiped authorization get an imprint of the credit card on the sales slip. Make sure all the information that would normally appear on a sales slip obtained through a credit card terminal is on the imprinted one. This includes obtaining a signature.
- If the purchase is done through a mail or phone order make sure you use the Address Verification System (AVS) to verify the customer is providing the correct billing address.
- Make sure your refund policy is visible to the customer and that refunds are given in a timely manner.
- If the transaction is one that is considered a reoccurring charge (billed monthly, quarterly or annually) respond to a cancellation request as soon as possible. Notify the customer in writing when this is done and include the effective date of the cancellation.
By following the above steps you are taking a proactive approach to help limit the potential of a chargeback occurring. If one should occur, the chances of losing a sale are also limited.
Has your business had to deal with any chargebacks? What was the outcome? Tell us about your experience with chargebacks in the comment section below.
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