Prevent Card-Present and Card-Not-Present Chargebacks


Managing both eCommerce and Card-Present Chargebacks

There are many factors that contribute to profit losses—chargebacks are just one of the trouble makers. But what makes chargebacks different from other things that cut into profit margins? The fact that they are preventable.

Since preventing chargebacks is much easier than fighting against them, we’d better give you some actionable tips to put into practice!

Preventing Card-Present Chargebacks

If you have a brick-and-mortar business, your risk of chargebacks isn’t as great as that associated with ecommerce sales. But, there are still several things to consider.

If you don’t process card-present transactions (the cardholder actually hands over the plastic), feel free to skip to the card-not-present section.

1. Avoid Key-Entered Transactions

By swiping a card, you can take advantage of the anti-fraud tools built into the magnetic strip. If you forgo this process, you increase the odds of accepting a fraudulent transaction (which will result in a chargeback).

When possible, use the card reader to process transactions. Here are some tips for keeping it in working order:

  • Don’t let employees eat or drink near the card reader. Debris can make the reader malfunction.
  • Make sure your employees are using it correctly. In one fluid motion, swipe the card in the correct direction only one time.

If you can’t read the magnetic strip (because the machine is malfunctioning or the strip is unreadable), you’ll need to make a key-entered transaction. In these cases, be sure to make an imprint of the card.

2. Always Check the Signature

Whether you are swiping the card or making an imprint after a key-entered transaction, always get a signature. And make sure the signature matches the back of the card.

3. Be Wary of Counterfeit Transactions

A counterfeit transaction usually involves a credit card that has been manipulated in some way by a fraudster. To prevent counterfeit transactions…

  • Make sure the pre-printed digits on the front of the card match the first four embossed numbers.
  • Carefully monitor self-checkout kiosks. A fraudster will likely see these as the prime opportunity to commit a counterfeit transaction. Tell your employees to carefully inspect every card during the checkout process.

4. Know How to Make a Code 10 Authorisation Request

If you come across a questionable situation, make a Code 10 call.

The best indicators of potentially fraudulent activity include:

  • A “pick up card” or “lost or stolen card” message after swiping the card
  • A customer acting suspiciously
  • A card with security features that have been meddled with

By telling the potential fraudster you need to call for an authorisation request, you can proceed safely without alerting the customer to your actions.

Tips for Both eCommerce AND Brick-and-Mortar Merchants

Some chargeback prevention tips are overlapping. Here are some suggestions that will benefit everyone.

5. Make Sure Customers Understand your Return Policy

Brick-and-mortar companies must abide by certain requirements set forth by the credit card association. For example, they must display their policy near the register and on the sales receipt.

Online businesses have more leeway—but that isn’t necessarily a good thing.

All businesses need to properly communicate their return policy with their customers. The ultimate goal of chargeback prevention is to get the disgruntled customer to request a refund from you—not the bank.

An expertly written, easy-to-understand return policy is a great chargeback prevention tool. Share your return policy in the checkout process, in the order confirmation email, and on the delivery receipt.

6. Share your Contact Information

If you want unsatisfied customers to contact you instead of the bank, they’ll need your contact information. Since customers expect everyone to have a website these days, use yours to share important information.

Make sure your contact page has your…

  • email address
  • physical address
  • phone number
  • social media accounts

7. Provide Outstanding Customer Service

It doesn’t matter where you make your sales, all customers want the same thing—outstanding customer service.

Here are some great tips that will help prevent chargebacks:

  • Answer the phone promptly. A disgruntled customer could file a retaliatory chargeback if you don’t address his needs in a timely fashion.
  • Along the same lines, reply to emails right away. Send an autoreply letting customers know when to expect a personal response.
  • Discontinue all auto-renew, subscription or recurring payments as soon as the customer makes the request. Any additional charges could result in chargebacks.

Preventing Card-Not-Present Chargebacks

Offering sales online can greatly enhance your earning potential; but chargebacks can steal all those profits if you aren’t careful.

8. Don’t Charge Until You Ship

If an item is backordered or won’t be shipped right away, wait to charge the card. That gives the customer a chance to cancel the transaction if they want to. Customers shouldn’t have to pay for products or services they can’t use.

9. Check Product Descriptions

Make sure your product descriptions are accurate and descriptive. Your online explanation is the only information the customer will have. If the item they receive doesn’t live up to their expectations, you can expect a chargeback.

Be thorough yet concise and accurate. Also, include plenty of images.

10. Be on the Lookout for Fraud

Unauthorised transactions (or fraud) almost always result in chargebacks. Therefore, you need to prevent these fraudulent purchases from being made.

Check our list of indicators of friendly fraud. If you come across one of these red flags, don’t process the order. Follow up with the cardholder first.

11. Use Available Tools

There are lots of tools available to help make credit card transactions safer. Use them!

Your merchant processor can help you…

  • Change your billing identifier. This is the description shown on customers’ credit card statements. If your business is listed as something they won’t recognise, they might file a chargeback out of confusion.
  • Create blacklists. If you do come across a fraudster, block him from doing business with you again. You can ban people based on their name, IP address, or country.
  • Create a whitelist. A whitelist is the opposite of a blacklist. Block everyone except for a select few.

You’ll also want to consider things like…

  • Card security codes
  • MasterCard SecureCode
  • Verified by Visa
  • Address Verification System

Chargeback management is complex—but totally doable. By putting in a little extra effort beforehand, you can help ensure your profits aren’t reduced by chargebacks.

Do you have any chargeback prevention tactics you’re willing to share?