Chargebacks

Most chargeback situations arise at the point of transaction—at the time the transaction is completed—and most can be prevented with a little training.  Point of sale staff (and in some cases, order takers for card-not-present transactions) may find these tips helpful in avoiding potential chargebacks.

1.        Hold on to the Card During Transaction—Keep the card throughout the transaction so that you can quickly check the card’s basic elements and security features and compare signatures.  If you swipe the card and immediately return it to the customer, you will not be able to look at the card or to compare the signature on the card with the signature on the transaction receipt.

2.        Card not Signed—If the card is not signed, ask the cardholder to sign the card and, if permitted by state law, to show you government issued identification such as a driver’s license, passport, or military ID.  Once the cardholder has signed the signature panel on the card, compare this signature to the signature on the identification.  If they are spelled the same, proceed.  If the cardholder refuses to show identification, but signs the card, accept the card.  If the cardholder refuses to sign the signature panel, do not accept the card.

NOTE: “SEE ID” printed on the signature panel is not considered a valid signature.

3.        Expired Card—If the “Good Thru” date is before the transaction date, the card has expired.  You must obtain an authorization approval using the expiration date shown on the card. If you do not get an authorization approval, the transaction could be charged back to you as “expired or no authorization.” Note: A card is valid through the last day of the month shown on the card, e.g., “Good Thru” 04-04 means the card is valid through April 30, 2004, but expires on May 1, 2004.

4.        Declined Authorization—Do not complete a transaction if the authorization request was declined.  Do not repeat the authorization request after receiving a decline.

5.       Card Imprint for Card Present Transactions— If you have a point-of-sale terminal with a magnetic-stripe reader, swipe the card through the reader for every face-to-face transaction.  If the terminal isn’t working or a card’s magnetic stripe cannot be read, key-enter the account information and make an imprint of the embossed information onto the sales receipt using a manual imprinter. Even if the transaction is authorized and the cardholder signs the receipt, if the receipt does not have an imprint of the embossed account number and expiration date, the transaction may be charged back to you for “no imprint” if the cardholder later denies participating in the transaction.

6.       Cardholder Signature—The cardholder’s signature on card-present transaction is required.  Failure to obtain the cardholder’s signature could result in a chargeback for “no signature” if the cardholder denies authorizing or participating in the transaction.

7.       Compare Signatures—Compare the cardholder’s signature on the transaction receipt to the signature on the back of the card before returning the card to the cardholder.  The signatures should appear to b the same and the names should be spelled the same.  Signatures that are clearly not the same may be indicators of potential fraud.

NOTE: Some Visa Cards have a digitized cardholder signature on the front of the card for easier viewing; however, these cards also have a signature panel on the back of the card.  Sales staff must always compare the customer’s signature on the transaction receipt with the hand-written signature in the signature panel on the card.

8.        Legibility--  Ensure that the transaction information on the sales receipt is complete, accurate, and legible before completing the transaction.  An illegible receipt, or a receipt which produces an illegible copy, may be returned because it cannot be processed properly.  The growing use of electronic scanning devices for the electronic transmission of copies of transaction receipts makes it imperative that the item being scanned be very legible.

9.        Change Point-of-Sale Printer Ribbon-- Change point-of-sale printer ribbon routinely.  Faded, barely visible ink on transaction receipts is the #1 cause of illegible receipt copies.

10.     Change Point-of-Sale Printer Paper--- Change point-of-sale printer paper when colored streak first appears.  The colored streak down the center or the edges of printer paper indicates the end of the roll and diminishes the legibility of transaction information.

11.     Keep White Copy of Transaction Receipt--- Keep the white copy of the transaction receipt—give customers the colored copy.  Colored paper does not copy as clearly as white paper and often results in illegible copies.

12.     Carbonless Paper Transaction Receipts--- Handle carbonless paper and carbon/silver-back transaction receipt paper carefully. Silverback paper appears black when copied.  Any pressure on carbonless and carbon-back paper during handling and storage causes black blotches, making copies illegible.

13.     One Imprint per Transaction—Make only one imprint of the card for each transaction.  Making more than one imprint can lead to duplicate deposits and increase the chance for a chargeback.  If you need to redo a transaction receipt because of an error, write “VOID” across the incorrect transaction receipt, inform the cardholder, and tear up the incorrect transaction receipt in view of the customer.

14.    One Entry for Each Transaction--- Ensure that transactions are entered into point-of-sale terminals only once-and deposited only once.  Entering the same transaction into a terminal more than once, or depositing both the merchant copy and the bank copy of the transaction receipt with your merchant bank, or depositing the same transaction with more than one merchant bank can all result in “duplicate transaction” chargebacks.

15.    Duplicate Transaction Receipts and Voiding Incorrect Transaction Receipts---Ensure that incorrect sales receipts are voided and that transactions are processed only once.

16.    Disclosing Refund/Refund/Return/Service Cancellation Policy---If your establishment has policies regarding merchandise returns, refunds, or services cancellation, disclose these policies to the cardholder at the time of the transaction.  Your policy should be pre-printed on your sales receipts; if not, write or stamp your refund/return policy information on the sales receipt near the customer signature line before the customer signs (be sure the policy shows clearly on all copies of the transaction receipt). Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise.

17.    Depositing Transaction Receipts---It is always to your advantage to deposit transactions promptly.  Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date—do not hold on to them.  Failure to deposit in a timely manner can result in chargebacks for “late presentment.”

18.    Timely Deposit of Credit Transactions---Deposit credit receipts with your merchant bank as quickly as possible, preferably the same day as the credit transaction is generated.  Failure to process credits in a timely manner can result in chargebacks for “credit not issued.”

19.    Responding to Copy Requests---If your establishment stores transaction receipts, always respond to a request for a copy of a transaction receipt in a timely manner.  Send a legible copy of the requested receipt or receipt substitute to your merchant bank.  Failure to respond, or failure to respond in the specified time frame, almost always leads to a chargeback for “non-fulfillment of a copy request” for which generally there is no remedy.

20.    Microfilming Transaction Receipts---If your establishment microfilms transaction receipts, make copies from the microfilm at the same size as the original receipt—reduced images result in blurred and illegible copies and could result in “illegible copy” chargebacks.

21.    Company Logo Position on Transaction Receipts---Owners, or their marketing staff, should position the company’s logo or marketing messages on transaction receipts away from transaction information.  Your company name, logo or marketing message printed across the face of the transaction receipts can make copies illegible and cause you to receive “illegible copy” chargebacks.

22.    Requests for Cancellation of Recurring Transactions---If a customer requests cancellation of a transaction which is billed periodically, always respond to the request and cancel the transaction immediately or as specified by the customer.  As a customer service, advise the customer in writing that the service, subscription, or membership has been canceled and state the effective date of the cancellation.  Failure to respond to customer cancellation requests almost always leads to chargebacks.

23.    Ship Merchandise before Depositing Transaction---Don’t deposit transactions with your merchant bank until you have shipped the related merchandise.  If customers see a transaction on their monthly credit card statement before they receive the merchandise, it could lead to a preventable chargeback for “merchandise never received.”

24.    Recognizable Merchant Name---It is very important that your customers be able to recognize transactions made at your establishment on their monthly statements.  When cardholders don’t recognize transactions, they typically call their card issuer to question or dispute the item.  The card issuer may then request a copy of the transaction to aid the customer in identifying it.  Sometimes these questions lead to chargebacks.  To ensure that your establishment’s name is recognizable to your customers, consider taking the following steps.

q       Verify that the name your merchant bank shows for you is the same as the name that you show on the receipts you give your customers. (Generally, the name used for settlement should be the name you use for your business signage.)

q       Double check your establishment name by purchasing an item in each of your outlets on your credit card and check the merchant name and location in your monthly statement---will your customers recognize transactions made at your establishment?