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Chargebacks

Although chargebacks cannot be completely avoided, there are steps you can take to help prevent them. The more you know about processing procedures, the less likely you might be to do, or fail to do, something that could result in a chargeback. Refer to the Operating Rules (PDF) for more in depth information regarding chargebacks.

What is a chargeback?

A chargeback occurs when the amount of the original charge that was credited to your business checking account is reversed. The issuing bank charges all or part of the transaction amount back to your acquirer/processor because the issuer believes the transaction violated a Payment Card Networks rule or regulation.

Common reasons for chargebacks

  • The card was deemed to be fraudulent.
  • Cardholder disputes the quality or receipt of merchandise.
  • The product or service was not received.
  • Processing errors were made during the transaction.

Procedures for all businesses

Here are a few tips to help you avoid chargebacks:

  • Make sure that the business name you provided to us that will appear on the cardholder's statement is a name that your customers will recognize. Many chargebacks start when a customer does not recognize a charge on their statement even though it may be a legitimate one.
  • Respond promptly to retrieval requests and dispute notifications. Both customers and card issuing banks may request copies of sales and credit drafts. Once a request is initiated you need to respond by the date provided on the notification.
  • Sales drafts should be accessible to authorized employees for 180 days after the initial transaction date and should be stored long-term in a safe and secure location.
  • Always get an authorization.

Procedures for retail businesses

Make sure you fully comply with the transaction requirements issued annually by Visa®, Mastercard® and Discover®, and American Express®. Most importantly:

  • Have proof the card was present by making sure you dip EMV cards and swipe all magstripe cards through your terminal.
  • If a chip on a card can’t be read by your card reader, swipe the card instead to read the magstripe. If the chip card transaction is read, but declined, it must not be processed.
  • If the credit card is declined when it's swiped through the card reader, do not continue to try and get an authorization. Instead you should request a new form of payment from the cardholder.
  • Get an imprint or validate the CID whenever a card has to be manually keyed into a terminal. Be sure that all of the transaction information shows up on the imprinted copy including the amount, business name and location, and the cardholder’s signature.
  • Verify that the number on the screen matches the embossed number on the credit card.
  • Obtain an authorization number for the full amount of the sale — do not break the sale into several smaller amounts.

Procedures for internet and mail order/telephone order (MOTO) businesses

Take the following precautions that are unique to your business:

  • Use the Address Verification System (AVS) to ensure that your customer is providing you with the correct billing address.
  • If you have an internet or phone order, validate the CID.
  • Provide us with a local or 800 number that we can include on your billing statement. Supplying a telephone number for your customer will help prevent a chargeback from occurring. Your customer can contact you directly with questions and you will have a chance to rectify the situation or be able to issue a refund to the customer before they dispute a charge.
  • When sending merchandise to a customer, use a shipper that will be able to provide proof of delivery to the full billing address should there be a dispute. For very expensive items, request a signature for the merchandise to be released to the buyer.
  • Participate in fraud protection programs to improve the security of payment transactions in the electronic commerce environment over open networks. These programs are designed to increase both cardholder and merchant confidence in internet purchases, as well as to reduce dispute and fraudulent activity related to payment cards. Examples of fraud protection programs are listed below:
    • 3D Secure
    • Mastercard SecureCode
    • Discover ProtectBuy
    • American Express SafeKey

Online chargeback management with dispute manager

The Dispute Manager service allows you to process and manage chargebacks and retrieval requests in an automated, online environment. You can also access a guide to responding to chargebacks in Dispute Manager. By adding Dispute Manager to your account, you are able to receive and respond to chargebacks and retrieval requests in a much more efficient manner, eliminating the delays and costs associated with faxed and mailed paper transactions.

Manage chargebacks online

Sign up for Alerts or Dispute Manager within Business Track®

Existing merchant customers: Call us at 1-800-451-5817, 24 hours a day, 7 days a week. Or contact your account manager.