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21 Simple Steps to Reduce Your Risk of Chargebacks

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21 Simple Steps to Reduce Your Risk of Chargebacks

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Covers the definition of a credit card chargeback, the most common reasons for chargebacks, and how to proactively prevent chargebacks from occurring.

Covers the definition of a credit card chargeback, the most common reasons for chargebacks, and how to proactively prevent chargebacks from occurring.

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21 Simple Steps to Reduce Your Risk of Chargebacks

  1. 1. 21 Simple Steps to Reduce Your Risk of Chargebacks
  2. 2. It can take anywhere from 6 weeks to 6 months to resolve a payment dispute. Did You Know?
  3. 3. You, the merchant, can lose out on the money you’re owed, and face an additional chargeback fee from the processor. Anywhere from $15.00 to $100.00 per chargeback! Did You Know?
  4. 4. Even if the cardholder complaint is proven false, and no returned funds are owed to the customer, you may still face additional processing fees! Did You Know?
  5. 5. If a merchant account receives too many chargebacks, this can be a red flag to credit card companies. Your business could be labelled as fraudulent, which in turn will do damage to your image and the existence of your business. Did You Know?
  6. 6. So, How Do You Prevent Chargebacks?
  7. 7. charge•back (chärj′bak′), n. is the process where the credit card company takes the money from a transaction from the merchant’s account and deposits it back into a consumer’s account following a dispute. The amount is “charged back” to you, the merchant. First, let’s get a firm First, What’s a Chargeback?
  8. 8. Why Does a Chargeback Occur? The customer is disputing a transaction. A customer files a complaint regarding a potential fraudulent transaction on their statement. The issuing bank then makes an investigation into the compliant. If the complaint is proven valid, a chargeback occurs where the funds are returned to the customer.
  9. 9. What Are the Most Common Reasons for a Chargeback?  Customers don’t recognize a charge  A customer claims they cancelled services  The customer claims they didn’t receive the item they ordered  The customer is unhappy with the service or purchase  The customer claims it’s a fraudulent charge — a purchase was made with a stolen card
  10. 10. As a business owner, it makes sense to do all that is in your power to reduce your risk of chargebacks. What follows are 21 simple, proactive measures to prevent chargebacks.
  11. 11. Provide receipts for every single purchase. In today’s fast-paced world, customers are often inattentive to the purchases they make. A receipt serves as a good reminder and decreases the likelihood of a chargeback. 1
  12. 12. Be ultra-clear about refunds, returns and cancellation policies. Have the conditions of the sale written on the receipt. For instance, if you run a fitness club, make sure the cancellation policy is clearly stated on all membership contacts. 2
  13. 13. Include your refund, return and cancellation policy on your website. 3
  14. 14. Have a sign near your register at your point of sale counter where customers can clearly read the policies. 4
  15. 15. Make sure charge descriptions are clear. Use dynamic descriptors. Dynamic descriptors allow a merchant to define what appears on their customer’s credit card statement regarding the purchase. With dynamic descriptors, you can include specifics like the product purchased, business name, business location and contact information. 5 Examples: Static Descriptor: ABC Inc. 8885551212 Dynamic Descriptor: ABC Inc. Annual Membership Renewal 8885551212
  16. 16. Be proactive! Let your customers know what name will appear on their statements. 6
  17. 17. Include a phone number as part of the charge description. Having a phone number as part of the dynamic descriptor will allow for easy communication and resolution should a customer no recognize a charge on their credit card statement. 7
  18. 18. Provide accurate descriptions of products and services. Accurate product descriptions are particularly important for online ecommerce vendors where customers often dispute transactions because the product they received is not as it was described online. 8
  19. 19. Get a signed proof of delivery for products. Make sure you get a signed proof of delivery for your products — especially if you're an online ecommerce vendor that ships products regularly. It's best to use carriers that require signatures for delivery and also give you, the merchant/vendor, a copy of that signature for your records. 9
  20. 20. Communicate with customers about renewals. Ongoing communication will go a long way to reduce chargebacks, as opposed to a new "renewal" charge showing up on a customer's statement and the customer not knowing what the charge is for. 10
  21. 21. Don’t charge your customer’s card until your product has shipped. 11
  22. 22. How to Prevent In-Person Fraudulent Transactions (That Can Result in Chargebacks)
  23. 23. Train your employees to know the signs of fraud and suspicious behavior they may encounter. 12
  24. 24. Ask for identification when handed a credit card. 13
  25. 25. Verify signature by comparing the signature to the back of the card. 14
  26. 26. Check the expiration date and enter the security code on the front or back of the card. 15
  27. 27. Keep good records. In the case where you need to fight a chargeback, keeping good records can help you win a dispute. You want to make sure you have the customer’s credit card transaction dates, amounts and authorization information. Signed documentation helps greatly too. 16
  28. 28. How to Prevent Fraudulent Online Transactions (That Can Result in Chargebacks)
  29. 29. Confirm the phone number and transaction information PRIOR TO delivering a service and shipping a product. 17
  30. 30. Utilize card security code verification. Known as CVVs (Card Verification Values — a 3-digit number on VISA, MasterCard and Discover and a 4-digit number on American Express), these codes help ensure that the person placing the online order has the actual card in hand. 18
  31. 31. 19 Use 3D Secure. This prevention tool acts as another layer to prevent fraudulent activity. Cardholders are required to create an identification number. By employing 3D Secure in your checkout process — and therefore requiring the purchaser enter the code at checkout — you’re ensuring that the actual cardholder is making the purchase.
  32. 32. Become PCI compliant. All companies that process, store or transmit credit card information are required to comply with the Payment Card Industry Data Security Standard (PCI-DSS), which is a set of requirements created to keep payment card data secure. 20
  33. 33. Share these tips with your staff. 21 These tips will only be successful if your staff shares in understanding chargebacks and how to implement these best practices. Share this slide deck with your staff today.
  34. 34. Want more tips on how to prevent fraud and chargebacks? Have questions on how Constellation Payments can assist? Call 888.244.7060 Email sales@csipay.com

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