Member Benefits

Increase your profits by avoiding chargebacks

by First Horizon Merchant Service

The best way to reduce the cost, time and effort associated with handling credit card chargebacks is to prevent them right at the point of sale. Most chargebacks result from failure to provide a legible copy of the transaction receipt within the specified time frame. The receipt is your proof of the sale and is vital to your protection against credit card losses. Review receipts regularly, and keep them safe from loss.

Ongoing employee training along with strict adherence to processing procedures set out by Visa & MasterCard is critical to your profitability. To help ensure that chargebacks are kept to a minimum in your business, share this information with your employees. It will help teach them about the most common reasons chargebacks occur and how to avoid them.

Transaction receipts must contain at least four elements of information: the transaction amount, the authorization code, the card number (partially truncated) and the cardholder’s signature. Additional information captured on the receipt is helpful, such as the date of transaction, but is inconsequential in protecting against chargebacks. Of course, always ensure that your receipts properly reflect the correct DBA (doing business as) name of your business. The following are some of the common reasons for a chargeback.

Retrieval requests — improper handling of sales records
Failure to respond to a retrieval request is certainly the most frequent cause of chargebacks. Fortunately, this is often the easiest to prevent. Keep copies of your transaction receipts in a safe place, and respond to any and all “Retrieval” or “Media” requests by sending copies of sales drafts promptly!

Your Merchant Agreement should clearly state the time within which transaction receipts must be deposited. If you hold records beyond that time limit, you are inviting a chargeback.

Duplicate transactions
To avoid billing cardholders more than once for the same transaction, reconcile your batches daily and ensure that your register totals match the credit card receipts for the day. If you do receive a legitimate duplicate processing chargeback, do not issue a direct credit to the cardholder. The credit will automatically be applied.

Cardholder denies making transaction
Make sure all “card-present” transactions are electronically authorized. The transaction receipts must include both the cardholder’s signature and the card account number. If you need to manually enter the account number, be sure to make an imprint of the card, and have the cardholder sign the imprinted transaction receipt.

The chargeback rate on “card-not-present” or key entered transactions is higher because the security features on cards cannot be seen at the time of sale if the card is truly not present. If you have address verification services and CVV2/CVC2 verification available to you, these may help minimize your risk. Always attempt to obtain this information on key entered transactions when prompted by the point of sale device.

Account numbers do not match
After swiping a card, check to ensure that the embossed account number on the card matches the account number which prints out on the receipt. For “card-not-present” transactions, utilizing AVS and CVV2/CVC2 verification can again help to reduce your risk.

Credit or refund not processed properly
The only correct way to refund a credit card sale is to issue a credit to the account on which the original sale was made. It is in violation of Visa and MasterCard regulations to refund cash on a credit card sale. If possible display your credit/refund policy on your transaction receipts directly above the cardholder’s signature.

Failure to obtain proper authorization
Always obtain authorization (electronic or voice) on all transactions, and ensure the approval code is accurately contained on the transaction receipt. This is of particular importance on mail orders, phone orders, and Internet transactions.

Card was used before or after valid date
The expiration date is another important feature to check when processing a “card-present” transaction. On “card-not- present” transactions an authorization will not be provided if the card’s expiration date is not valid. This underscores the importance of obtaining an authorization for “card-not-present” transactions.

Cardholder disputes the quality of merchandise/services
Be sure that your customers are aware of your Return Policy at the time of purchase. Remain consistent to the policy. Display it at the point-of-sale and print it on your transaction receipts, directly above the cardholder’s signature. This practice does not prevent chargebacks, but will assist in providing detail if a dispute occurs.

Chargebacks can be minimized by adhering to Visa & MasterCard transaction procedures at the time of sale. Call Kimberly Layton with any questions or for more information on the Merchant Services Program at 1-866-638-8614.

Reprinted from Floor Care Professional, October 2007