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September 2, 2015

Credit Card Processing 101: How to Protect Your Company from Charge-Backs

charge backsCharge-backs are a common credit card processing issue. Because charge-back fees accumulate fast, they can be very damaging, especially for small businesses. Fortunately, there are viable options for protecting your company from these unwanted expenses.

What are Charge-Backs?

A charge-back occurs when a credit card user contacts the issuer to dispute a charge and the dispute is deemed valid. As a result, the purchase dollar amount is reversed from the merchant’s account. Common disputes consist of ordered merchandise not received, false/poor representation of a product/service, substandard quality, incorrect billing, or unauthorized charge.

As the business owner, you get charged not only the purchase amount but are also hit with a credit card processor fee that can be as high as $100. Clearly, a large number of charge-backs will negatively impact your business. Credit card charge-backs have become a major issue and while you will still need to be vigilant, there are options for minimizing them and protecting your company.

Top Solutions

  • Follow Protocol – Each credit card processor has unique protocols regarding how credit cards are accepted. For in-person purchases, verify the card’s expiration date and enter the three-digit security code. For online purchases, additional information such as digital signature, social media profiles, IP address, and second password are suggested. 
  • Payment Descriptor – Descriptors are your merchant’s name, exact product description, and other pertinent information that appears on the cardholder’s statement connecting the purchase to your company. If these are unclear, the cardholder may not recognize the purchase and thereby file a dispute.
  • Strong Customer Service – Good customer service is critical for resolving charge-backs. Using notifications from the credit card processor, you can quickly identify a customer’s dispute. As a result, the problem can be handled in a timely manner, allowing you to retain a good customer.
  • Indications of Fraud – Take the time to learn indicators of fraud such as suspicious name, incorrect security code, mismatched billing and shipping addresses, and so on.
  • Proper Training – Your employees need proper trained to identify fraud and prevent charge-backs pertaining to both in-person and online credit card transactions
  • Good Record Keeping – At a minimum, maintain accurate records of transaction dates, purchase amounts, and information pertaining to authorization so if you need to fight a credit card charge-back you can.
  • Pick your Battles – Consider each charge-back before taking action. For instance, if a long-time customer files a dispute or if your company has a high number of charge-backs, it may be better to accept the charge-back as to not lose a loyal customer or face problems with the merchant account provider, respectively.

If you need help with credit card processing, which will benefit your company but also provide additional protection, Chosen Payments offers many innovative solutions.

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