Beat Chargebacks Before They Beat You

Contents:
-Introduction
-What is a Chargeback?
-What is the Chargeback Process?
-The Costs of Chargebacks to Merchants
The Immediate Costs of Chargebacks
Merchant Account Fees and Problems
Chargeback Inevitability
-Preventing Chargebacks Prior to Sale
Offer a Quality Product
Offer a Clear Product Description
Offer an Anti-Fraud Statement
Obtain a Good Merchant Account
Create a System for Handling Chargebacks
Maintain Records Properly
Provide a Telephone Number
Scrutinize Sales
Beware of Free Email Accounts
Beware of Some International Orders
Beware of Unusual Orders
Follow-up on Scrutinized Orders
-Preventing Chargebacks at the Point of Sale
Tell Customers Who will do the Billing
Provide a Good Receipt
Collect CVV2 Codes
Collect Customer Telephone Numbers
Use an AVS System
-Preventing Chargebacks After the Sale
Provide Status Updates
Handle Customer Interactions with Chargebacks in Mind
Act quickly
Refund when Necessary
-Other Chargeback Solutions
SET and Similar Offerings
Signature Collection Services
Chargeback Advocates
-Other Causes of Chargebacks
Information Requests
Cardholder Disputes Placing Order
Transaction was Processed Repeatedly
Failure to Render Services
Refund not Processed
Invalid Account Number
Transaction not Processed Timely
-Simple Billing Error
-Conclusion
Introduction
John Acme is an online merchant. Through his websites he sells widgets to the
public. With a merchant account and a credit card processor, John is able to
offer potential customers an easy way by which they can order his widgets. His
business is new, but he is seeing a regular profit that allows him to meet his living
expenses.
One day, John opens his mail and finds a letter labeled “Retrieval Notice” from
the provider of his merchant account. The notice references a specific
transaction and requests a copy of the sales documentation. Acme finds this
odd, as the transaction had seemed to go off without a hitch when it was
processed weeks before.
John Acme may not yet realize it, but he is looking at a potentially costly
situation. He has already sent the widgets to his buyer and has already accepted
the payment he received. His response to the retrieval notice will determine
whether or not he will be allowed to “keep” the sale at all. If he fails to provide
the proper documentation, he may receive a chargeback. The money he earned
will be deducted from his merchant account and he may very well never see the
widgets he already shipped again.
If John is able to provide important information, he may be able to prevail.
However, the proverbial deck is stacked against him. Merchants are assumed to
be “in the wrong” whenever a customer requests a chargeback. If John’s efforts
fall short of what is required, he will lose the chargeback argument and find
himself charged additional fees on top of losing the sale.
What does John need to show the merchant account provider in order to protect
himself? What kinds of information are valuable in these circumstances? What
kind of things can online merchants like John do in order to prevent situations like
this from happening again and again?
This report attempts to provide answers to these questions. Chargebacks are a
potentially devastating force for any online merchant and must be treated
seriously. Chargebacks and the fraud that is often their precursor are regular
events in the world of online sales and they pose a huge risk to merchants of all
types.
What is a Chargeback?
A chargeback occurs when the holder of a credit card contacts the card issuer to
dispute a billing entry. In response to the customer claim, the card issuer
contacts the merchant’s credit card processor and disputes the sale. The
proceeds from the original sale are subtracted from the merchant’s account. In
essence, a chargeback is a customer-driven refund conducted without the
consent of the merchant.
What is the Chargeback Process?
A chargeback generally begins with a customer complaint. When a customer
lodges a complaint about a transaction with the card’s issuing bank, the
cardholder’s bank will generally send what is called a “retrieval request” to the
merchant’s credit card processing service. The retrieval request represents the
initiation of a chargeback. The processing company will then forward the request
to the seller’s merchant service account provider. When a retrieval request is
made, the merchant has the opportunity to prove that the transaction was
legitimate and that delivery of goods or services was provided appropriately...