Protect Your Business From Chargeback Fraud With These Easy Steps

Chargeback fraud is an extremely popular form of credit card fraud and it can be particularly difficult to combat. A chargeback is essentially a reversal of funds being transferred, and they occur when customers contact their credit card companies to dispute charges. They were initially created to protect consumers, and so the burden of truth lies with the merchant.

Chargebacks can become a costly and time-consuming part of business, and any retailer that accepts credit card payments is susceptible to chargeback fraud. However, there are ways to prevent it. Here’s what you need to know to keep your profits safe from chargeback fraudsters.

1. Always verify customer information for online purchases

One common way that chargeback fraud occurs is when a customer claims that they ordered an item online, and never received it. Merchants should always confirm that the “bill to” and “ship to” addresses match. Thieves have also been known to ship products to freight companies, who then ship the merchandise overseas. Chargebacks 911 suggests that merchants should be wary of shipping items directly to port cities, and that they should Google addresses before shipping.

2. Use delivery confirmation when shipping merchandise

Plenty of chargeback fraud occurs when a customer claims that they never received the product they ordered… even if they did receive their shipment. Shipping companies like UPS and FedEx offer a delivery confirmation service, and so does the U.S. Postal Service. Using these services can be well worth the nominal fees.

You can also require that customers sign for their items upon delivery. This won’t work well for less expensive merchandise where customers may view having to sign upon delivery as more of a hassle than it’s worth, but it is a great precautionary measure for more expensive items.

3. Maintain good credit card transaction records

Since the burden of proof is on the merchant when it comes to chargeback fraud, maintaining extensive records is another vital step toward protecting your business. Keep records of credit card transaction dates, including the dollar amount for each transaction and authorization information. Signed documents, like receipts, are also helpful for purchases that were made in-store.

Even companies that do business online can require customers to sign and return a contract that clearly outlines the goods or services to be provided. The credit card may not be present, but you’ll still have a document that clearly details the merchant-customer relationship, which can protect you in case of a fraudulent chargeback.

4. Avoiding chargebacks in card-present transactions

A large chunk of chargeback fraud occurs via eCommerce, but it can occur in person, too. Merchant Maverick makes the following suggestions for preventing chargeback fraud when a customer is making a purchase in-person:

  • Check card expiration dates
  • Always have the customer sign their receipt and compare the signature to the signature on the back of their card
  • Let customers know how a charge will appear on their credit card statement—they may not recognize your business name
  • Save receipts and make sure that the receipts you give to customers are clear, legible, and contain information about your returns policy
  • If a transaction is denied when you swipe the card don’t try to re-swipe
  • If you have to manually enter the credit card information, always make an imprint of the embossed card numbers
  • When calling for authorization, write down the authorization code, credit representative’s name, transaction amount and other important information
  • Use the Address Verification system (AVS) and collect CVC2 and CVV2 verification numbers (these are the 3 or 4-digit security codes on the front or back of the card, depending on the issuer)

Unfortunately, there’s no way to completely eradicate chargeback fraud but by keeping careful records and following certain protocols for online and in-person purchases, you can help to protect your profits from fraudulent chargeback claims.