Merchant Account Services

The Chargeback Challenge

The Ultimate guide to avoiding and handling chargebacks.


Author: Jim Conners ()

Rating: 10.0

Pages: 1|2|3

Chargeback Prevention

The best way to deal with any chargeback is to prevent it happening in the first place. The following suggestions are very generic and can be used by most businesses to decrease their chargeback potential.

  • Use a clear DBA (Doing Business As) name that customers will recognize. Vague corporate names that do not accurately describe what your company might do or sell will only confuse customers when they review their billing statements. An unrecognized DBA name on billing statements is one of the most common causes of chargebacks.
  • Put your phone number on your customers' statements. If they do not recognize your DBA, they can call you to find out who you are and why you charged them.
  • Always respond to a chargeback as quickly as possible. A limited amount of time is available to resolve a chargeback. If you miss the window of opportunity to respond, you forfeit your ability to fight the chargeback. If your processing bank has any more questions or requests, your quick response will ensure that they have enough time to get the relevant information from you.
  • Never accept an expired credit card.
  • Obtain authorization for the full amount of the sale. Declined transactions should not be accepted or split into smaller amounts.
  • Some disputes are not the result of unauthorized credit card use. Rather, they start because the customer disputes the quality of the goods or services purchased. The best way to avoid this type of chargeback is to work closely with the customer to establish a mutually satisfactory solution.
  • Balance each batch to the host or to your tickets; this will help prevent duplicate charges.
  • Call or fax any large or suspicious orders to ensure the order is legit. If you are unable to reach the customer, you might have intentionally been given incorrect contact information.
  • Verify the customer's address. It is possible to verify the customer's name, address and phone number with the card-issuing bank. By calling the Voice Authorization Center for address verification, you can verify the address and also provide proof that you verified the address.
  • Always get signed proof of delivery. Be able to provide a shipping tracer log that shows that the customer received the shipped goods.
  • Charge the customer's account at the time the goods are shipped. If you know there will be a delay in delivery, wait to process your customer's credit card.
  • Be suspicious of high-ticket sales requested to be sent next-day air or if a runner will be in to pick up the purchase at a later time.
  • Use the fraud services offered by the processing bank including AVS (Address Verification) and CVV2.
  • Have your return/refund policy clearly stated on your Website. Make it a requirement that customers read the policy before their order can be processed.
  • Provide accurate descriptions and images of your products on your Website.
  • Be very cautious of any foreign orders. Generally, orders from Asia, the Middle East, and most parts of Africa are considered high-risk.
  • Be wary of orders with domestic billing addresses and foreign shipping addresses. They are usually fraudulent.
  • Be wary of orders for which the customer is willing to pay more for faster delivery.


It's no secret that online merchants are at a disadvantage when it comes to chargebacks. With no credit card to swipe or receipt to sign, verification of a sale is voodoo at best.

There are new tools available, and more on the way, that aim to reduce online fraud and therefore reduce opportunities for chargebacks. Two similar technologies, Verified by Visa and SecureCode, provided by Visa and MasterCard respectively, will help to verify a customer's identity at the time of purchase. Unfortunately, at the time of writing, these technologies were not fully supported and have a limited impact on fraud.

In the meantime, what should you do? Exactly what you've always done: make your customers happy by offering them a great product or service, having a customer-centric client satisfaction policy, and providing customers with a positive experience. Just be sure to approach each sale with due diligence and you'll be keeping your hard-earned money, not giving it back.

Reasons For Chargebacks | 1 | 2 | 3

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