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Avoiding Merchant Account Chargebacks
Copyright (c) 2006-2010 Scott Burke
A chargeback is a transaction that an Issuer returns to a
merchant bank and most often, to the merchant - as a financial
liability. In essence, it reverses a sales transaction, as
follows:
The card issuer subtracts the transaction dollar amount
from the cardholder's Visa account. The cardholder receives
a credit and is no longer financially responsible for the
dollar amount of the transaction.
The card issuer debits the merchant bank for the dollar
amount of the transaction.
The merchant bank will, most often, deduct the transaction
dollar amount from the merchant's account.
The merchant loses the dollar amount of the transaction.
For merchants, chargebacks can be costly.
You can lose both the dollar amount of the transaction
being charged back and the related merchandise.
You also incur your own internal costs for processing
the chargeback.
Why Chargebacks Occur
The most common reasons for chargebacks include:
Customer disputes
Fraud
Processing errors
Authorization issues
Nonfulfillment of copy requests (only if fraud or illegible)
Although you probably cannot avoid chargebacks completely, you
can take steps to reduce or prevent them. Many chargebacks result
from easily avoidable mistakes, so the more you know about proper
transaction-processing procedures, the less likely you will be to
inadvertently do, or fail to do, something the might result in a
chargeback.
Of course, chargebacks are not always the result of something
merchants did or did not do. Errors are also made by merchant
banks, card issuers, and cardholders.
Your Responsibility
From the administrative point of view, the main interaction in a
chargeback is between an Issuer and a merchant bank. The Issuer
sends the chargeback to the merchant bank, which may or may not
need to involve the merchant who submitted the original
transaction. This processing cycle does not relieve merchants
from direct responsibility for taking action to remedy and
prevent chargebacks. In most cases, the full extent of your
financial and administrative liability for chargebacks is spelled
out in your merchant agreement.
Customer Dispute Chargebacks
Customer disputes are one of the most common reasons for
chargebacks. A customer may dispute a transaction because:
A credit has not been processed when the customer expected
it would be.
Merchandise ordered was never received.
A service was not performed as expected.
The customer did not make the purchase; it was fraudulent.
Because these chargebacks may indicate customer dissatisfaction -
and the potential for lost sales in the future - addressing their
underlying causes should be an integral part of your customer
service policies.
If a cardholder with a valid dispute contacts you directly, act
promptly to resolve the situation. Issue a credit, as
appropriate, and send a note or e-mail message to let the
cardholder know he or she will be receiving a credit.
Chargeback Remedies
Even when you do receive a chargeback, you may be able to resolve
it without losing the sale. Simply provide your merchant bank
with additional information about the transaction or the actions
you have taken related to it. For example, you might receive a
chargeback because the cardholder is claiming that credit has not
been given for returned merchandise. You may be able to resolve
the issue by providing proof that you submitted the credit on a
specific date. Send this information to your merchant bank in a
timely manner.
The key in this and similar situations is always to send your
merchant bank as much information as possible to help it remedy
the chargeback. With appropriate information, your merchant bank
may be able to resubmit, or "represent", the item to the Issuer
for payment.
Timeliness is also essential when attempting to remedy a
chargeback. Each step in the chargeback cycle has a defined time
limit during which action can be taken. If you or your merchant
bank does not respond during the time specified on the request -
which may vary depending on your merchant bank - you will not be
able to remedy the chargeback.
Although many chargebacks are resolved without the merchant
losing the sale, some cannot be remedied. In such cases,
accepting the chargeback may save you the time and expense of
needlessly contesting it.
Representment Rights for Card-Not-Present Merchants
Card-not-present merchants should be familiar with the chargeback
representment rights associated with the use of AVS, CVV2, and
the option to provide compelling information. Specifically, your
merchant bank can represent a charged-back transaction if:
You received an AVS positive match in the authorization
message and if the billing and shipping addresses are the
same. You will need to submit proof of the shipping address
and delivery.
You submitted an AVS query during authorization and received
a "U" response from a U.S. Issuer. This response means the
Issuer is unavailable or does not support AVS.
You submitted a CVV2 verification request during authorization
and received a "U" response from a U.S. Issuer. This response
means the Issuer does not support CVV2.
You can provide documentation that you:
Spoke to the cardholder and he or she now acknowledges the
validity of the transaction, OR received a letter from the
cardholder that he or she now acknowledges the validity of
the transaction.
If you believe you have AVS, CVV2, or compelling information
representment rights on a charged - back transaction, work with
your merchant bank to ensure that all supporting evidence for
the representment is submitted.
Avoiding Chargebacks
Most chargebacks can be attributed to improper transaction-
processing procedures and can be prevented with appropriate
training and attention to detail. The following best practices
will help you minimize chargebacks.
Point of Sale
Declined Authorization. Do not complete a transaction if
the authorization request was declined. Do not repeat the
authorization request after receiving a decline; ask for
another form of payment.
Transaction Amount. Do not estimate transaction amounts.
For example, restaurant merchants should authorize
transactions only for the known amount on the check;
they should not add on a tip.
Referrals. If you receive a "Call" message in response
to an authorization request, do not accept the transaction
until you have called your authorization center. In such
instances, be prepared to answer questions. 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 Visa
card.
Expired Card. Do not accept a card after its "Good Thru"
or "Valid Thru" date unless you obtain an authorization
approval for the transaction.
Card Imprint for Key-Entered Card-Present Transactions.
If, for any reason, you must key-enter a transaction to
complete a card-present sale, 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. The cardholder's signature is
required for all card-present transactions. Failure to
obtain the cardholder's signature could result in a
chargeback if the cardholder later denies authorizing
or participating in the transaction. When checking the
signature, always compare the first letter and spelling
of the surname on the sales receipt with the signature
on the card. If they are not the same, ask for additional
identification or make a Code 10 call.
Digitized Cardholder Signature. Some Visa cards have a
digitized cardholder signature on the front of the card,
in addition to the hand-written signature on the signature
panel on the back. However, checking the digitized
signature is not sufficient for completing a transaction.
Sales staff must always compare the customer's signature
on the sales receipt with the hand-written signature in
the signature panel.
Fraudulent Card-Present Transaction. If the cardholder is
present and has the account number but not the card, do
not accept the transaction. Even with an authorization
approval, the transaction can be charged back to you if
it turns out to be fraudulent.
Legibility. Ensure that the transaction information on
the sales receipt is complete, accurate, and legible
before completing the sale. 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 sales receipts makes it
imperative that the item being scanned be very legible.
"No Chargeback" Sales Receipts. Independent entrepreneurs
have been selling sales-receipt stock bearing a statement
near the signature area that the cardholder waives the
right to charge the transaction back to the merchant.
These receipts are being marketed to merchants with the
claim that they can protect businesses against chargebacks;
in fact, they do not. "No chargeback" sales receipts
undermine the integrity of the Visa payment system and
are prohibited.
Sales-Receipt Processing
One Entry for Each Transaction. Ensure that transactions
are entered into point-of-sale terminals only once and
are deposited only once. You may get a chargeback for
duplicate transactions if you:
Enter the same transaction into a terminal more than once
Deposit both the merchant copy and bank copy of a sales
receipt with your merchant bank.
Deposit the same transaction with more than one merchant
bank.
Voiding Incorrect or Duplicate Sales Receipts. Ensure
that incorrect or duplicate sales receipts are voided
and that transactions are processed only once.
Depositing Sales Receipts. 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.
Timely Deposit of Credit Transactions. Deposit credit
receipts with your merchant bank as quickly as possible,
preferably the same day the credit transaction is
generated.
Ship Merchandise Before Depositing Transaction. For
card-not-present transactions, do not deposit sales
receipts with your merchant bank until you have shipped
the related merchandise. If customers see a transaction
on their monthly Visa statement before they receive the
merchandise, they may contact their Issuer to dispute
the billing. Similarly, if delivery is delayed on a
card-present transaction, do not deposit the sales
receipt until the merchandise has been shipped.
Requests for Cancellation of Recurring Transactions.
If a customer requests cancellation of a transaction
that is billed periodically (monthly, quarterly, or
annually), 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 cancelled and state the effective
date of the cancellation.
Customer Service
Delayed Delivery. If the merchandise or service to be provided to
the cardholder will be delayed, advise the cardholder in writing
of the delay and the new expected delivery or service date.
Item Out of Stock. If the cardholder has ordered merchandise that
is out of stock or no longer available, advise the cardholder in
writing. If the merchandise is out of stock, let the cardholder
know when it will be delivered. If the item is no longer
available, offer the option of either purchasing a similar item
or canceling the transaction. Do not substitute another item
unless the customer agrees to accept it.
Disclosing Refund, Return, or Service Cancellation Policies. If
your business has policies regarding merchandise returns,
refunds, or service cancellation, these policies must be
disclosed to the cardholder at the time of the transaction. Your
policies should be pre-printed on your sales receipts; if not,
write or stamp your refund or return policy information on the
sales receipt near the customer signature line before the
customer signs (be sure the information is clearly legible on all
copies of the sales receipt). Failure to disclose your refund and
return policies at the time of a transaction could result in a
dispute should the customer return the merchandise.
Return, refund, and cancellation policy for Internet merchants.
This policy must be clearly posted to inform cardholders of their
rights and responsibilities (e.g., if the merchant has a limited
or no refund policy, this must be clearly disclosed to cardholder
on your Website before the purchase decision is made to prevent
misunderstandings and disputes).
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Scott Burke, President of MAXX Business Solutions is committed to making the merchant experience a pleasure and one that will build long-lasting business relationships. MAXX works as a trusted partner in merchant account credit card processing and strives to provide merchants with the best support, the best rates, and the best service in the industry. http://www.cmscreditcards.com
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How to Prosper Beyond Virtual Real Estate
Written by: Kamau Austin |
Distributed: 2006-10-17 |
Word Count: 1263 |
Page Views: 883
| Votes: 7 |
Rating: 3.86
We explore virtual real estate (VRE) sites as sites primarily
embedded with Google Adsense(tm) or Yahoo Publisher's Network (YPN)
ads.
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Last Distribution Date:
2008-01-22 10:00:00
Word Count: 1987
Total Views: 538
Views This Month: 20
Views Last Month: 13
Article Rating: 2.75 of 5
Votes Cast: 4
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Author Overall Rating: 2.64 of 5
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