Understanding the importance of correct payment processing practices can greatly reduce the amount of costly credit card chargebacks that you receive each year. Reducing the amount of credit card chargebacks that you receive through good processing habits will protect your business in more ways than just protecting your money and your customers credit card information.
Credit card chargebacks, according to Visa, may happen when a card issuer requires additional information about a transaction or needs to return a disputed transaction to the acquirer.
A credit card chargeback can be triggered for many reasons:
- Customer disputes
- Processing errors
- Authorization issues
- Non-fulfillment of copy requests
How Do Credit Card Chargebacks Occur?
It’s important to note that many types of credit card chargebacks result from mistakes and omissions. In other words, keep in mind proper procedures for processing credit card transactions in order to help avoid situations that may result in a chargeback. With that said, errors may also sometimes be made by acquirers, card issuers and cardholders.
If a credit card chargeback occurs, a few things happen:
- The card issuer makes a copy request or retrieval request to the merchant’s acquirer if a copy of the sales receipt is needed for a particular transaction.
- A chargeback is the reversal of the dollar value, in whole or part, of a transaction by the card issuer to the acquirer and usually by the merchant bank to the merchant.
- Chargebacks can be costly. You may lose both the dollar amount of the transaction being charged back, and the related merchandise, in addition to your own handling costs to process the chargeback.
Credit Card Processing Best Practices
There are a number of ways to prevent credit card chargebacks from happening. Ensure that you are training your staff to properly process credit card transactions. Be diligent in the processing steps that are taken on your end to provide the proper service to your merchants.
- Do not complete a transaction if the authorization request was declined.
- If you receive a call message in response to an authorization request, call your authorization center.
- Obtain cardholder signatures.
- If a magnetic stripe cannot be read on a card, ask for another form of payment.
- If you key-enter the account information on a card, make an imprint of the embossed information onto the sales receipt using a manual imprinter.
- Make sure that transactions are only processed once. In other words, make only one imprint of the card for each transaction and make sure that transactions are entered into point of sale terminals only one time; make sure incorrect transactions and incorrect sales receipts are voided.
- If purchased merchandise is delayed, out of stock or unavailable, keep in touch with a customer with frequent updates on the status of their order, or offer to cancel it. Ship merchandise before depositing the transaction.
Follow these good practices, and reduce your number of credit card chargebacks that affect your bottom line each year.