Avoiding Chargebacks

Chargebacks are most often caused by improper credit card payment processing procedures and can be prevented with adequate training and the application of certain rules. Every merchant processing account will function better with the implementation of a set of best practices into the organization's sales process. Following are some suggestions that will help you prevent chargebacks.

• Declined Authorization. You should not complete a card payment transaction, nor repeat the authorization request after receiving a decline, ask for another form of payment.


• Transaction Amount. Transaction amounts should always be the same as the amount of the bill. Whenever a tip is expected, it should not be estimated and added to the bill.


• Referrals. If an authorization request results in a "Call" message, you should not accept the transaction until you have called your authorization center. The operator may ask to speak with the cardholder. If the transaction is approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another payment method.


• Expired Card. Do not accept a card that is past its expiration date unless you obtain an authorization approval for the transaction.


• Card Imprint for Key-Entered Card-Present Transactions. If you have to key-enter a debit or credit card payment transaction to complete a card-present sale, you should make an imprint of the front of the card on the sales receipt, using a manual imprinter. Even if the transaction is authorized and the cardholder signs the receipt, the transaction may be charged back to you if the receipt does not have an imprint of the embossed account number and expiration date.


• Cardholder Signature. In order for a transaction to be qualified as card-present and processed at the most favorable rate, the merchant has to have obtained the cardholder's signature. Failure to do so could result in a chargeback if the cardholder later denies authorizing the transaction. When accepting a card payment, you should always check the signature panel of the card and compare the signature there to the one on the receipt. If in doubt, ask for an additional identification (driver's license) or make a "Code 10" call.


• Digitized Cardholder Signature. Some cards have a digitized cardholder signature on the front of the card, in addition to the hand-written one on the signature panel on the back. The digitized signature is not sufficient and you should always check the signature panel and follow the steps in the previous paragraph.


• Fraudulent Card-Present Transaction. You should never accept a transaction when the cardholder is present and has the card account number but the card itself is not available. The risk of a fraud is too great and the transaction may eventually be charged back to you.


• Legibility. Make sure that the information on the transaction receipt is legible before completing the sale. An illegible receipt may be returned because it cannot be processed properly, thus causing a chargeback.