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The Small Business Owner’s Guide To Preventing Chargebacks (& 12 Tips For Fighting Chargebacks)

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Frank Kehl

Frank Kehl

Frank Kehl has been writing about merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law. After a long and enjoyable career of traveling around the world as an Air Force navigator, he’s comfortably settled down in the wine country town of Paso Robles in California’s scenic Central Coast region. He enjoys reading, photography, hiking, and numerous other outdoor pursuits.
Frank Kehl

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25 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Dom

    The only way to fight back against fraud charge-backs is to only offer Zelle. That’s what we did and it was best decision our business ever made. Product demand is strong enough that we don’t need to offer credit card as payment option. Our life is exponentially better now. We still deliver an amazing product and great customer service but we refuse that play that silly game of charge backs because buyer wanted something free.

      Melissa

      I am curious as to why we merchants are penalized regardless. We have to pay the chargeback fee even when we “win”. Who decided that?! The “losing” party should be charged the fee – could eliminate some fraudulent chargeback attempts by unreasonable customers. Who could start the ball rolling to get this policy change in motion?

        This comment refers to an earlier version of this post and may be outdated.

        Jessica Dinsmore

        Hi Melissa,

        Chargeback fees are something that you have to pay to your provider to compensate them for the time & money they have to spend investigating the chargeback and representing you. It’s like hiring a lawyer – you have to pay them whether you win or lose your case. CDGcommerce is the only provider we are currently aware of that will refund your chargeback fee if you prevail. Providers really don’t have any mechanism for going after a customer for chargeback investigation costs, short of filing a legal action against them. Unless the underlying transaction was for a really large sum of money, this is not going to be economically practical.

          This comment refers to an earlier version of this post and may be outdated.

          Chuck

          Every chargeback I’ve received has been a fraudulent attempt by the consumer. I provide a service where at the end of the documentation is a signature stating that the job was done to completion.

          I’ve always have proof of services via contract and a long drawn out explanation.

          I’ve actually had physical proof, texts messages citing why the consumer is upset. I’ve had underlined policies and procedures highlighted to let the other party know that the consumer is going about their complaint the wrong way.

          I’ve done everything possible that would be a slam dunk in a mediation setting or court of law and I still get the report back that I’ve lost. This has changed since 2014. I use to be able to send a simple scan of an invoice with signatures.

          I think that it’s negligence one one parties part to read my rebuttals because they come highly loaded with facts and visual proof. Sometimes I win, but the times in which I lose, you can tell that no one bothered to read my explanation.

          This is where I’m seeking some type of legal help or something. The credit card issuer’s identity remains hidden and protected.

            This comment refers to an earlier version of this post and may be outdated.

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            Francia Enriquez-Boyd

            How do I, as a merchant go about fighting a chargeback that is already deemed not eligible for representment because at time of purchase, an EMV chip card was presented at a non-chip capable terminal? What other recourse do I have to recoup the cost of the goods purchased? Please advise.

            Sincerely,

            Fran

              This comment refers to an earlier version of this post and may be outdated.

              Emily Hale

              Hi Fran,

              Thanks for your question. The EMV liability shift means that merchants are liable for a fraudulent transaction if they process an EMV card with an old, magstripe-only terminal. However, chargebacks aren’t necessarily all fraudulent. Without further information as to why your customer filed the chargeback, we can’t say if there’s anything else you can do in this situation. Nonetheless, we strongly encourage you to upgrade to an EMV terminal ASAP to prevent this from happening again. Take a look at Do You Really Need An EMV Chip Card Terminal? for information on why this is so important.

              Hope this helps you out, and best of luck!

                This comment refers to an earlier version of this post and may be outdated.

                Sylvia

                Is it possible to transfer the liability to the merchant provider software if they didn’t use proper security measures, therefore, allowing the fraud transaction to go thru?

                  This comment refers to an earlier version of this post and may be outdated.

                  Emily Hale

                  Hi Sylvia,

                  The answer to your question is no, unfortunately. If you’re dealing with a large number of chargebacks as a result of fraud you, might want to look at implementing additional security features on your website, even if it means having to look for a new payment processor. If you’re taking in-person sales, using a chip card reader vs. a card swipe is also an important choice. Ultimately, no system is flawless and merchants also have to accept the potential for fraud as part of the cost of doing business. We hope some of the tips in this post can help you do just that!

                    This comment refers to an earlier version of this post and may be outdated.

                    Krys

                    Hi. I work for a large SaaS (online subscription) company. We currently do not respond to any disputes/chargebacks that we receive because I think the company sees the amount as insignificant compared to its over all revenue. However, we were flagged by Visa for an early warning because of the number of chargeback counts. Will responding to disputes with compelling evidence strike out that chargeback count if its in our favor or the count remains? Do you think it will do the business good if it just continues to not respond to any of the disputes/chargebacks it gets? Thanks

                      This comment refers to an earlier version of this post and may be outdated.

                      Emily Hale

                      Hi Krys,

                      We definitely recommend responding to all chargebacks, but not necessarily fighting every one “tooth and nail,” as the article explains. Responding is in your best interest, and we would discourage ignoring them. Hope this helps, and best of luck!

                        This comment refers to an earlier version of this post and may be outdated.

                        Brandon Thomas

                        Can a chargeback be initiated after 160 days

                          This comment refers to an earlier version of this post and may be outdated.

                          Emily Hale

                          Hi Brandon,

                          The short answer is no, however, every card network has their own separate rules. In general the maximum allowable time for a consumer to file a chargeback is 120 days (less in some circumstances). The merchant then has 30 days (or less, again depending on the circumstances) to file a response to the chargeback. That being said, that doesn’t mean a customer might not try it anyway, and potentially be considered due to a special circumstance. Hope that helps!

                            This comment refers to an earlier version of this post and may be outdated.

                            Wilson Carter

                            Great article, I learned a lot. I just wanted to to clarify something. If I have an e-commerce store that sells out of its inventory due to unprecedented demand but want to keep selling. If I put a disclaimer on the website, product page and in the confirmation email that we are out of inventory would that protect the company from getting chargebacks? Thank you!

                              This comment refers to an earlier version of this post and may be outdated.

                              Jessica Dinsmore

                              Hi Wilson,

                              We don’t know much about this topic, but our limited understanding is that an out of inventory disclaimer would not prevent customers from filing a chargeback if they got tired of waiting for an item to come back into inventory. It might discourage them from filing one, but it would probably also discourage them from placing an order in the first place. Setting up some sort of waitlist may be a better option. Best of luck!

                                This comment refers to an earlier version of this post and may be outdated.

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                                Peter Thomas

                                This happened to me. A $3,000 chargeback. The merchant services company stated they did the second presentation, since it was an ecommerce transaction through their own portal, I don’t even have the guys credit card number, etc. The merchant services company has been very reluctant to help me or talk to me. Huge company out of San Francisco. So, I am screwed out of $3,000.

                                  This comment refers to an earlier version of this post and may be outdated.

                                  Kecci

                                  This is a great article thank you. I have a situation where we have travel retreats and a specific leader in their filed (ie: yoga) runs the tour. In the conditions it clearly states that in the unlikely event the leader cannot attend she/he has the right to replace themselves. It is also states that under no circumstances is chargeback permissable against the merchant taking payments on behalf of the leader and her/his business.
                                  If the participant signs and accepts that, is this enough to override if a client still trys to claim a chargeback? The tour is still running but with another leader.

                                    This comment refers to an earlier version of this post and may be outdated.

                                    Jessica Dinsmore

                                    Hi Kecci,
                                    Unfortunately, merchants cannot force their customers to give up their right to file a chargeback. In this case, if a customer is being forced to sign away their right to file a chargeback as a condition of being allowed to participate, it’s very unlikely that the bank investigating the chargeback will decide in the merchant’s favor by upholding this agreement.

                                      This comment refers to an earlier version of this post and may be outdated.

                                      Tressa

                                      I have a customer that bought a high-end item in person. Three months later he is not satisfied. I offered a full refund on return of the item. He said he would return it. A week later he has issued a credit card chargeback. He has not returned the merchandise. If he gets the money back with no return I feel as if he stole it. I don’t know any reason other than wanting something for nothing as to why one would issue a chargeback when the merchant has no problem refunding the money. If anyone has any advise I would be interested. Thank you for your time. Sincerely,

                                        This comment refers to an earlier version of this post and may be outdated.

                                        Rod

                                        Great article. As a merchant services provider I would like to point out how important it is to only accept EMV Chip credit cards in your business. Any customer who swipes their credit card at your business can call their bank immediately and dispute the charge and win, whether they placed the order or not. If you cannot Chip the card, then take cash only.

                                          This comment refers to an earlier version of this post and may be outdated.

                                          Small Business

                                          We own a small business and have been processing credit for 6 years. We switched processor 7 months ago and all seemed fine. This month we had a consumer call and say the payment they made never went through on their card. We checked and our machine was holding all transactions and not sending the batches in to be processed. We should have noticed but did not. This had been occurring for 4 months. We submitted our batch and 47 transactions in amount of over 5,000 are “late presentation”. Do you have any advise? Our processor said we will be charged a fee per transaction and the credit card bank can choose not to pay. Do you know if they choose not to pay if we can contact our consumers to see if they make payment? Thanks for your help.

                                            This comment refers to an earlier version of this post and may be outdated.

                                            Rookie

                                            I recently provided services and accepted an unsigned credit card. I do have a valid government ID documented, swiped card with authorization, and even a copy of the ID. Can these be used in lieu of a signed card. It seems from the merchant agreement that I am not supposed to accept unsigned cards. Please advise.

                                              This comment refers to an earlier version of this post and may be outdated.

                                              Tom DeSimone

                                              While you are supposed to only accept signed cards (and compare the customer signature on the receipt to the one on the card), the reality is that most merchants do not do this. It’s a protocol that is designed to prevent fraud, but no one is going to check to make sure you are doing it. If they supplied government ID, that would be a sufficient alternative in my opinion. And the fact that you documented the ID will protect you if a chargeback does occur.

                                              Hope this helps,
                                              Tom

                                                This comment refers to an earlier version of this post and may be outdated.

                                                Rookie

                                                Well, the issuer has stated that this transaction was non-compliant because I accepted an invalid credit card. The merchant agreement clearly stipulates that I must check all the card security features, and the fact that I did not verify if the card was actually signed (the amount exceeded the non signature requirement) is a clear breach of the merchant agreement.

                                                  This comment refers to an earlier version of this post and may be outdated.

                                                  Patrick

                                                  Great article. Question. I am a merchant that has signed agreements with my customer to put them on monthly auto-debit programs for the products I sell. When a customer monthly amount is declined for insufficient funds, I am able to do a force charge, where I am still able to receive the funds owed. Does this follow all the correct rules?

                                                    This comment refers to an earlier version of this post and may be outdated.

                                                    Tom DeSimone

                                                    Hi Patrick,

                                                    I’m not aware of any way to clear a payment if the money is not in the customer’s account, except at their bank’s discretion. Maybe you are referring to a resubmission (“re-presentment”) of the transaction? This can sometimes be done in the case of NSF, although there are limitations to the number of times a transaction can be resubmitted after it bounces, I believe. There are also time limitations with this. And it will only go through later if funds are made available.

                                                    But what you are describing does not violate any rules as far as I know.

                                                    -TD

                                                      This comment refers to an earlier version of this post and may be outdated.

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