Fraud Protection: Chargeback Prevention

What is a chargeback?

You may run into a situation where a customer feels you've wrongly charged them. For example, your may not clearly identify your business, so the customer doesn't recognize the charge. At times like this, your customer may file for a chargeback--a reversal of the transaction. When you process a chargeback, the credit card issuing bank will withdraw funds from your merchant account and return it to the customer. Not only do you have to refund the money, but you also have to pay an additional chargeback fee.

How can I prevent chargebacks?

Preventing chargebacks is easy. Here are some simple ways to help you reduce your chargebacks.

• First thing's first--deliver your goods as promised!
• Customize your billing descriptor so customers will easily remember their purchase.
• Provide a toll-free telephone number within the billing descriptor so customers can call and verify the charge on their statement.
• Verify billing addresses using the Address Verification Service (AVS), and decline all transactions that provide invalid addresses.
• Decline transactions that provide an invalid Card Security Code (CSC).
• For Pre-Authorization/Capture transactions, carefully screen your customers' purchases and cancel transactions that you believe are fraudulent.
• Require customers to authorize their purchases by emailing or faxing them a receipt.
• Use a trackable shipping service so you can verify that your customers received their goods as promised.
• Do not ship to PO Box addresses.
• When in doubt, call the customer to verify their purchase order.

As an e-commerce merchant, online credit card processing is a must--and having a high chargeback rate can lower your chances of getting approved for a merchant account. With the money you can potentially lose, it's important to do all you can to prevent chargebacks.