Tips for Winning Credit Card Chargebacks
Chargebacks are a common occurrence for any merchant that accepts card payments. But you may be surprised to learn that many chargebacks are caused by what’s known as “friendly fraud.”
Despite its name, “friendly fraud” isn’t fraud. It’s actually just customer confusion. When a customer reviews their credit card statement, they will likely dispute any charge that looks unfamiliar. For instance, if the name that shows up on their credit card statement differs from your business’ publicly known name, this can create complications for you.
Of course, chargebacks are also caused by real fraud, so it’s important to stay vigilant and keep your small business compliant with the latest payment guidelines. By staying consistent in your acceptance practices, you can appeal (and win) chargebacks a bit more easily.
Let’s go over how chargebacks work and some tips on how to keep your money when they happen.
What is a chargeback?
A chargeback is a form of consumer protection that allows customers to dispute illegitimate charges. It’s an inherent benefit of using credit and debit cards for consumers. If the cardholder chooses to file a dispute against you (the merchant), due to concerns of fraud, the card provider or bank will investigate the case to determine the transaction’s legitimacy.
As a merchant, if a customer decides to file a dispute against you, you will need to provide enough evidence to prove that the transaction was legitimate. If the issuing bank or card provider determines that the transaction was fraudulent, the amount of the purchase will be taken from your account – or “charged back” – and returned to the customer, and you may have to pay an additional fee, depending on the bank or provider.
Can I fight a chargeback?
Yes! Responding to chargebacks is a normal part of the process. During the investigation period, you have the opportunity to provide evidence of the transaction to show that you did your part to ensure its legitimacy. To ease this burden, it’s important that you follow all payment security guidelines (like PCI DSS compliance) and use secure payment gateways to ensure payment protection both online and in-person.
Tips for winning chargebacks:
1) Maintain accurate records.
When it comes to chargebacks, as mentioned earlier, it’s up to you to provide enough evidence to prove that the transaction was legitimate. That’s why it is extremely important to maintain accurate and detailed records. If the transaction was done in person, you should be able to show how the card-present transaction was processed. For online purchases, you can use confirmation emails, automated invoices, and follow-up emails with the relevant tracking details.
2) Reach out to the customer to resolve issues.
Because many chargebacks stem from unsatisfactory service, upping your customer service game could save you a lot of hassle. Be sure to provide adequate channels for customer feedback, like email, phone, social media and more. The more communication you have with your customers, the better you’ll be able to defend yourself against friendly (and even not-so-friendly) fraud.
3) Understand the reason for the chargeback.
Each chargeback comes with a reason code that gives you a better idea of why the transaction is being disputed. While the codes don’t tell the full story, you’ll at least be able to see if the dispute is suspected fraud versus something more benign.
It is important to note that each card network (MasterCard®, VISA®, Discover®, American Express®, etc.) has its own reason code system, so reviewing the card type is a critical piece of the process.
4) Act fast.
You have a limited time to take action when a chargeback is reported, so it’s important to check your chargeback report every day. Make sure you know the deadlines, understand the reason code, properly document your case, and have a rebuttal letter ready to go. It may be helpful to prepare a template with all the general information ahead of time. That way, you can fill in the specifics when it’s time to respond.