Chargeback Mitigation Tips

Although there is no way to completely prevent credit card fraud, cardholder Disputes and Credit Card Chargebacks, the following tips can help to lower your risk of costly Disputes and Chargebacks.

Understand Chargebacks vs Refunds

Even though Chargebacks and Refunds both involve the return of funds to a cardholder, they’re quite different.

Typically, customers can ask for a refund directly from your business within the stated refund policy. With a Chargeback, the cardholder contacts their card issuer or bank directly (not the business) to reverse the payment. The most common Chargebacks are related to Fraud – the cardholder claims they did not make or authorize the transactions.

The Chargeback process takes longer and involves a few more stages than a refund. Also, the fees associated with a Chargeback are significantly higher than a refund, and in almost 100% of cases are the responsibility of the Merchant.

 Know the Risk Level of each Transaction Method you use

How a transaction is processed can increase the risk of fraud and potential for Chargebacks. While card-not-present transactions (such as eCommerce or Pay-by-Link) are convenient for buyers, these processing methods also come with increased risk for businesses.

• Least Risk: Card-Present transactions through your POS Terminal
• Moderate Risk: Card-not-Present transactions through your website or a payment link
• Highest Risk: Card-not-Present transactions manually entered by an employee of the business

 Business Process Recommendations

• Verify the buyer’s ID matches with the card provided
• Collect the buyer’s signature
• Require cardholder use of PIN when possible
• Provide clear product name and/or descriptions on sales orders, invoices and/or receipts that accurately reflect the item(s) purchased
• For Card-not-Present transactions, require CVV code from card provided
• Limit manual card entry transactions but require the following when processing a manual entry transaction:
  1. Cardholder First & Last Name
  2. Cardholder complete Billing Address
  3. Card Number, Expiration, CVV
  4. Cardholder Email Address
  5. Cardholder Telephone Number
  6. If in store, verify the buyer’s ID against provided card details
• For large purchases, consider requiring payment in store to validate the buyer’s ID and the card provided
• Confirm what the customer has ordered and if an alternative is needed, obtain customer approval
• Obtain your customer’s written approval for saving a card on file, and provide clear start/end dates for recurring transactions

Publish a clear Return Policy

Provide your customers with access to a detailed Return Policy in your store and through your ecommerce site. Customers will file chargebacks when they don’t know how to return a product or are faced with a challenging or lengthy refund process. 

You can optimize your return policy by:

• Including language for Returns, Cancellations and Refunds
• Publishing a Return Policy FAQ on your website, app, and social media pages
• Provide your business email address and phone number on your website, customer emails and payment invoices/receipts so that the customer can easily contact you
• Offering multiple customer service channels like chat, email, text message and phone

For Deliveries, Be Proactive

• Provide a realistic delivery date, and inform the customer of any delays as soon as possible
• Consider refunding customers proactively if you can't provide the goods/services by the provided delivery date
• Require the customer to sign for the package on delivery

Watch for common eCommerce Red Flags

If you process eCommerce transactions (including Pay-by-Link), be on the lookout for any of these potential Red Flags:

• Unusually large orders, especially when out of character for a known customer
• Shipping address that is different from the provided billing address
• A customer email address that's been used in other fraud attempts (a quick web search can reveal this information)
• Provided customer phone number that doesn't work

If a Red Flag appears, take the time to follow up on the order. A simple internet search and call to the customer could save you the expense of a Chargeback.