How to prevent chargebacks: tips for merchants

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What is a chargeback, and what is a retrieval?

A chargeback happens when the cardholder or the card issuer disputes a transaction. Chargebacks can be costly to your business. The most common reasons are cancelled subscriptions, returned merchandise, fraud, and mistakes or keying errors.

A retrieval is a request from the cardholder, or the card issuer on the cardholder’s behalf, for more information or the transaction receipt, usually for a transaction they don’t recognise.

How do I prevent chargebacks?

These habits lower your risk on every kind of payment:

• Keep a legible record of each sales draft
• Make sure transactions are identifiable to the cardholder
  • Cardholders may not recognize your doing business as name on their statement, make sure they are aware of the business name that will appear on their statement for your charge.
• Respond to retrieval requests in a timely manner
• Make sure to clearly outline your return, cancellation and refund policies for customers
  • For ecommerce transaction, have an “I agree” checkbox at the checkout
  • For card present – have these clearly printed on the receipt
• Outline installment / recurring terms and intervals to cardholders
  • Take prompt action when a recurring customer requests to cancel
• Try to resolve issues with cardholders directly and keep a record of any interaction
• Process refunds in a timely manner
  • Process refunds on the same card that was used for the original sale
• If unable to swipe card, obtain a manual imprint with customer’s signature, transaction date, auth code, purchase amount and merchant info.
• Perform due diligence on larger transactions – verify name on card matches ID.
• For delivered goods – obtain signed proof of delivery
• Do not reattempt declined transactions
• Watch for cardholder tampering with terminal during transaction or pulling out and keying in a card number

How do I reduce chargebacks on phone, mail and online orders?

When the card isn’t present, as with MOTO (mail order/telephone order) and ecommerce (internet) payments, chargebacks are more likely. Add these checks:

• Keep a database of problem customers
• Watch out for multiple orders or big orders from 1st time customers
• Process one transaction at a time to avoid accidental duplicates
• Perform end of day balance of your deposits / batch totals to ensure no duplicates or keying errors
• For multiple purchases from same cardholder in a single day, prepare separate invoices describing each purchase
• Set fraud prevention rules / filters to limit number of orders by hour, day, week from a specific customer.
• Perform Address Verification (AVS) to verify if cardholder’s address matches card issuer’s database
• Be sure to require CVV when processing a transaction

What should I do if a card transaction looks suspicious?

Call the voice authorization centre at 866-508-5855 and ask for a “Code 10”. You’ll be asked yes/no questions and told whether to go ahead with the transaction.

What other tools can help?

Cartis Payments offers additional tools to reduce, and even prevent, chargebacks:

• Verifi by Visa and Ethoca Alerts by Mastercard
• 3D Secure 2.0
• In-house chargeback management system for fraud prevention

Common questions

Should I try a declined card again?

No. Reattempting declined transactions raises your chargeback risk.