One of the most common questions I hear from business owners who are NOT my clients, is how to handle chargeback disputes.
For those of you who have never experienced this problem, it’s when a customer asks their credit card company to overturn a charge.
As a business owner, this typically means that you lost the merchandise you sold, along with the money from the sale. Quite simply, the purchase price gets taken out of your account. And often without a notice or warning from your credit card processing company.
Now that’s a problem.
So what can you do to stop this from happening to you?
How to avoid a chargeback
Well, here’s a short list of tips to safeguard your merchant account, and your hard-earned money.
To begin with, never accept a credit card payment through email. You might think this is an obvious tip, but believe it or not, some merchants have actually processed payments when receiving credit card info through non-secure channels.
And that’s a serious problem.
You have to understand that the only people likely to send credit card info through email are the very same people who don’t care if the credit card info is stolen. And that’s because, more likely than not, it’s NOT their card in the first place
As you can well imagine, the main reason for a chargeback request is fraud (real or imagined). So if something doesn’t feel right to you, or seems out of the ordinary, be on the lookout.
The second tip to protect yourself from chargebacks involves keeping good records. What do I mean by “good records?”
Well, as an example, maybe you have a long time client, or maybe you have a “virtual practice” and most of your customers or clients simply call in their credit card info in for you to process. So you take down their number and either key in transactions on a credit card terminal, or use a virtual terminal.
In either case, if a chargeback dispute arose, you’d have to prove that the charge was valid. And that means having their signature on file.
So how can you protect yourself?
Quite simply, by having and using a credit card authorization form.
If you don’t have a shopping cart to accept payments directly from your website, try having a PDF document that is easily downloadable. Or you could simply email or fax a blank copy to your prospective customer or client prior and have them fill it out and return to you prior to accepting their payment.
But we’re not finished yet.
Once your customer’s credit card info in entered into your system and the transaction clears, you’ll want to white out (or completely darken) the first 12 numbers of their credit card number. Then make a copy, keep the copy on file for at least 3 years, and shred the original document.
Why go to all the trouble?
The reason is simple.
You need to safeguard your customer’s information at all times. You need their signature on file to protect yourself from chargeback, but you need to remain compliant with PCI standards of security.
So go the extra step to retain a copy of your customer’s signature on file in the event of a chargeback, but delete all but the last 4 numbers of their credit card info to protect your customer’s information.
I hope you found this information helpful. Please feel free to share your comments below.
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