Preventing Chargebacks – Simple, Actionable Steps to Take Today
Visa defines chargebacks as the reversal of the dollar value of a particular transaction by the card issuer to the acquirer, and usually, by the merchant bank to the merchant. For the merchant business, chargebacks can be costly. You stand to lose both the dollar amount of the transaction being charged back and the related merchandise. You also usually then incur extra fees from your merchant bank. In other words, the more you can avoid incurring chargebacks, the better.
Chargebacks are a threat to every business. If you accept credit card payments, you are vulnerable. Therefore this is especially true for a retail business. While many chargebacks are a result of credit card fraud, merchants can pay the price for having too many chargebacks on their merchant credit card accounts. Not only can you lose money – and potentially lots of it – you can also lose your ability to accept credit cards, so protecting yourself is vital. Implement the instructions that your credit card processing company provides you with.
Always ask for the CVC2 and CCV2 numbers or 3-digit code on the back of each Visa and MasterCard, and on the front of American Express cards.
Asking for that ‘three digit code’ is an excellent way to help prevent chargebacks incurred due to credit card fraud. Often a thief may have obtained the credit card information online – those data breaches you keep reading about do result in lists of credit card information being bought and sold online – and while they will have most of what they need to make a purchase online it is rare that they have the CVC2 and CCV2 numbers, as merchants, by law, are not allowed to store them in a database, even if they store everything else (name, address, card number).
Confirm the cardholders address using an Address Verification System (AVS)
Hackers are clever folks, and yes, some of them have figured out how to deal with the missing three digit number issue. In addition, if a person is attempting to use a card they have in their physical possession, they can quite easily see that code anyway. If they have physically stolen the card it is less likely they will know the address. Therefore, requesting an address verification is another effective way to reduce the potential for fraudulent transactions.
Customer Chargeback Issues
Of course, not every chargeback is due to fraud. Some chargebacks occur because the customer is simply confused about their order. Customers need to be able to easily recognize their purchases. If they see a charge they do not recognize on their bill, the customer may simply call their credit card company and reverse the charge. Companies that have merchant accounts in one name and DBA stores in another should always ensure that the familiar company name that will actually be shown on the customer’s credit card statement to help ensure that they recognize it.
Another alternative way to help prevent chargebacks is to offer the customer the chance to pay with PayPal, Apple Pay or another similar virtual service. In the case of PayPal, they offer excellent security and fraud protection for both consumers and merchants, including buyer address confirmation. Lots of accounts, especially those for smaller businesses, also include a comprehensive seller protection program.
Finally, if you are at all suspicious about an order, make a phone call and connect with the customer before you fulfill it. If it is a genuine customer they almost never mind and actually often appreciate that you value the safety of their finances.