What are Chargeback
A chargeback is a reversion, in whole or in part, of the dollar value (financial obligation) represented by a given transaction by the card Issuer against the merchant's instituion or Acquiring bank (CUB). Generally, the Acquirer institution shifts the liability to the merchant. Due to the fact exceptions can be costly, it is important Visa/MasterCard Merchants understand what chargebacks are, why they occur, what they should do when they receive one, and how to prevent them. As a Visa/MasterCard Merchant, you are your own best defense against most exception situations.
Tips: Avoiding Chargeback
Most chargeback situations occur at the point of transaction and at the time a transaction is completed. Most of these situations can be easily prevented with minimal training. Merchant sales associates who accept payment cards at the point of sale or take orders for transactions where the card is not present might find these tips useful to prevent potential chargebacks:
Retain the card until the transaction is completed:
Keep the card until you complete the transaction so you can quickly inspect and verify basic security features and compare signatures. If you swipe the card through the terminal magnetic stripe reader, imprint the card and immediately return the card to the customer, you will not be able to compare the signatures on the card and receipt to make sure they match.
Pay particular attention if the card is not signed:
If the card is not signed, ask the cardholder to sign it and, wherever permitted by law, ask for an official identification such as a driver's license, passport or other document that is authorized in the country. After the cardholder signs the card signature panel, compare the signature on the card to the signature on the official identification. If the cardholder refuses to show you an identification but does sign the card, accept the card*. If the cardholder refuses to sign the card, simply reject it.
Do not accept an expired card:
If the date shown under "Valid Thru" or "Good Thru" precedes the transaction date, the card is expired. This is the reason why you need to provide the expiration date on the card when requesting authorization. If you cannot get the authorization, the transaction might be charged back due to "Expired Card" or "No Authorization." It is important to underline that every card is valid until the last day of the month indicated on the expiration date. For example, a card that reads "Valid Thru 04/04" or "Good Thru 04/04" is valid until April 30th, 2004 and is expired on May 1st, 2004. When you look at the dates, remember the first two digits are the month (from 01 to 12) and the last two digits are the year (03 for 2003, 04 for 2004, and so on). Keep in mind that some cards also have an effective or "Valid From" date, which indicates when the customer can start using the card. It is extremely important that you do not confuse this date with the "Good Thru" or "Valid Thru" date, which is the expiration date.
Do not continue if the authorization was declined:
Do not complete the transaction if the authorization request was denied. Do not repeat the request after you receive a negative or "Decline" response.
Get an imprint of the card for card present transactions:
If your point of sale terminal is equipped with a magnetic stripe reader, swipe the card through the reader for each face-to-face transaction. If the terminal is not working, or is unable to read the magnetic stripe on the card, key in the account information and obtain an imprint of the data on the transaction receipt using a manual imprinter. Even though the transaction is authorized and the cardholder signs the receipt, if the account number embossed on the card and the expiration date are not printed on the receipt, the transaction might be charged back due to "Missing Imprint" if the cardholder later denies participating in the transaction.
Ask cardholder to sign or enter PIN:
The cardholder's signature or PIN is required for all card present transactions. If the cardholder's signature is not obtained or the PIN is not entered, the transaction might be charged back due to "Missing Signature" if the cardholder later denies authorizing or participating in the transaction.
Compare signatures to make sure they match:
Compare the cardholder's signature on the transaction receipt to the signature on the signature panel on the reverse of the card before returning the card to the customer. Signatures that clearly do not match indicate possible fraud.
Make sure all information is legible:
Make sure the transaction information on the receipt is complete, accurate and legible, before you complete the transaction. An illegible receipt or a receipt that cannot be legibly reproduced or copied might be returned because it cannot be processed properly. The growing use of electronic scanners to transmit transaction receipts creates the need to reproduce an image that is perfectly legible.
Do not forget to retain the white copy of the transaction receipt:
Retain the white copy of the receipt and give the cardholder the color or carbon copy. Color paper cannot be copied as clearly as white paper and often results in illegible copies.
Register the transaction only once:
Make sure each transaction registers only once in the point-of-sale terminal and that it is only deposited once. If the transaction registers more than once or the merchant's copy of the receipt is deposited more than once or the same transaction is deposited with more than one Financial Institution, this might trigger chargebacks due to "Duplicate Processing."
Properly void all duplicate and incorrect transaction receipts:
Make sure you completely void duplicate and incorrect receipts.
Deposit transaction receipts as soon as possible:
It is always advantageous for your establishment to deposit transactions as soon as possible. If you do not follow this practice, this may trigger chargebacks due to "Late Presentment."
Deposit credit transactions on time:
Deposit credit slips with your Financial Institution preferably the same day the credit transaction is generated. If credit slips are not processed quickly, this may trigger a chargeback due to "Credit Not Processed."
Fulfill copy requests promptly:
If your establishment keeps transaction receipts, fulfill the copy request promptly. Send a legible copy of the requested receipt to your Financial Institution. If you do not fulfill the request completely or within the specified time limit, this will nearly always generate a chargeback due to "Requested Copy Not Sent".
Send or deliver the merchandise before you deposit the transaction:
Do not deposit the transaction with your Financial Institution until you send or deliver the ordered merchandise. If the customer detects a transaction in his/her monthly statement before receiving the merchandise, this might trigger a chargeback due to "Non-Receipt of Merchandise" that could have been very easily prevented.