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Chargeback Prevention
Whenever your customer pays for a transaction through their credit card they have the option to later dispute this payment if they feel the merchant is at fault. When the chargeback is initiated by the issuing bank the merchant will receive a retrieval request, which they must respond to within the timeframe laid down by Mastercard or Visa regulations. If they fail to do so, or if the issuing bank deems the provided documentation insufficient to remedy the chargeback, the funds will be taken from the merchant and returned back to the cardholder.
There are steps companies can take to lessen the likelihood of customers disputing their transactions, and then to reduce the probability of a chargeback being issued against them. Here are the most common reasons for customer's disputing a transaction.
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Keying Errors
Some chargebacks are indeed the result of a merchant's mistake, most noticeably is the case of keying errors such as duplications (where the transaction is keyed or processed twice). If you receive an error message when transmitting a batch of transactions always call terminal help. While some human error is unavoidable, merchants must ensure they have measures in place to ensure their figures tally up at the end of each day and that all staff are sufficiently trained.
If the card number was keyed wrongly and does not show on the issuing bank's master file, call the customer and confirm their correct details.
Unauthorized Transactions
In the case of cardholder present transactions, the merchant need only supply a copy of the swiped receipt. In many cases the card is in the cardholder's possession and the transaction has been queried in error.
For non face to face transaction (mail order, internet transactions and telephone orders) a merchant should supply as much information as possible, such as what was ordered and the delivery details, as providing sufficient information may assist the cardholder in recognising the unrecognised charge and withdrawing the dispute.
To help prevent fraudulent transactions, when a customer places an order request the three digits printed on the signature panel of the reverse of the card (CVV2/CVC2 number) and make use of the Address Verication System (AVS).
Goods Not Received
To avoid disputes relating to non-receipt of merchandise, do not process the transaction until the good have been sent. If there is going to be a delay in the order being dispatched or the item is out of stock, contact your customer immediately and offer to process a refund if necessary.
To reply to the retrieval request, if the merchandise has been sent, explain why you believe the card holder's claim is invalid and provide supporting documentation. In most instances, signed proof of receipt will be required to remedy the chargeback.
Faulty/Defective Merchandise
Before submitting a claim through the card issuer, the customer must contact the merchant direct to resolve the matter. A dispute should only be processed if this then fails to yield results. Detailed records should be kept of all customer contact, as you may need to recount your version of events in response to a retrieval request.
To prevent disputes, ensure all customers are made aware of return policies and procedures. Items should be well packaged to prevent damage. In the event of merchandise arriving faulty or damaged merchants should, in most instances, accept liability and either replace the goods or process a credit.
Next page - Preventing Chargebacks
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