Avoid The Ten Costliest Chargebacks

Chargebacks are an unfortunate part of accepting credit cards, but merchants can follow a number of guidelines and procedures that increase the efficiency of their business and help reduce the potential for chargebacks.

1. Cardholder Denies Making a CARD NOT PRESENT Transaction

When non-face-to-face, “card not present” transactions take place, you lose the ability to magnetically “swipe” the credit card through a terminal reader and increase the chance for a chargeback. Remember, an authorization and/or approval code only indicates the availability of the cardholder’s credit at the time the authorization is requested. It does not warrant that the person providing the credit card information is the rightful cardholder, nor is it an unconditional guarantee that you as a merchant will not be subject to a chargeback or a debit.
Reason Codes: MC 37, 40 Visa 83

2. Cardholder Denies Making CARD PRESENT Transaction

Make sure all transactions are magnetically swiped or imprinted. The sales slip must include both a cardholder signature and the card account number to be valid. The account number must be obtained directly from an imprint of the card itself, or by electronically reading the magnetic stripe. Manually entering the account number does not protect you from a no-imprint chargeback, even if the sales slip is signed.

Reason Codes: MC 37, 40, 62 Visa 81, 57, 62

3. Cardholder Does Not Recognize Transaction

Make sure that the merchant descriptor is correct so the cardholder will remember that they purchased something from your business. Your store name should appear on the receipt, and be sure to send all documentation (such as invoices, delivery documentation, and a description of what was purchased) to help the cardholder recognize the transaction.

Reason Codes: MC 63 Visa 75

4. Failure to Obtain Proper Authorization

Be sure to authorize all transactions, and accurately record the approval code on the sales slip. If your request for authorization is declined, do not attempt to reauthorize the transaction to the same account number, as subsequent approval may not protect you from a chargeback. Information on proper voice authorization procedures may be needed for “referral” responses.

Reason Codes: MC 07, 08, 12 Visa 70, 71, 72, 73, 78

5. Cardholder Was Billed More Than Once for the Same Transaction

To avoid duplicate processing, reconcile your batches daily and ensure that the register/terminal totals match the credit card receipts for the day. If you do receive a legitimate duplicate processing a chargeback, do not issue a credit to the cardholder, as the credit will automatically be applied.

Reason Codes: MC 34 Visa 82

6. Merchandise Not Received by Cardholder

Sales transactions must not be processed before you deliver the product purchased. Proof of delivery, signed by the cardholder or person designated to receive the merchandise, should be obtained for every transaction for which merchandise is delivered. Such proof may be your only defense if a chargeback occurs.

Reason Code: MC 55 Visa 30

7. Cardholder Cancelled a Recurring Transaction

Make sure that a cardholder is not billed after cancellation has occurred. If a cardholder continues to use the service after the stated cancellation date, provide whatever proof is available to prove that services were used after the cancellation. If the transaction is an installment billing, provide the contract showing the start and ending date, the full amount of the transaction, the number of installments, and the amount of installments to be billed.

Reason Code: MC & Visa 41

8. Service Not Received by Cardholder

Sales transactions should not be processed before services are rendered. Provide any proof that the services were actually provided to, and accepted by, the cardholder. This could include signed invoices for services that were provided. Prove that the merchant was willing and able to provide the services that were contracted.

Reason Codes: MC 59 Visa 30

9. A Credit/Refund Was Not Processed Properly

Credits must be processed correctly and on time. Make customers aware of your credit or refund policy at the time of purchase, and print the policy on your sales slips directly above the cardholder’s signature in accordance with Association policy. Issue credits only to the same account numbers to which the sales were made. Refunds paid in cash or merchandise, or to a different account number, will not protect you from this type of chargeback.

Reason Code: MC 60 Visa 85

10. Cardholder Disputes Quality of Merchandise/Services

Ensure that your customers are aware of your return policy at the time of purchase. Display the policy at the point-of-sale and print it on your sales slips. This practice does not prevent chargebacks, but will assist in providing detail when they occur. When responding to the chargeback, be sure to address all of the cardholder’s concerns.

Reason Codes: MC 53, 54 Visa 53