Small Businesses Can Avoid Chargebacks with These Valuable Tips


If you’re a small business who accepts credit card payments, there’s a strong possibility you may have experienced a chargeback in the past. Chargebacks take place when a cardholder disputes a charge in hopes to receive a refund from their card issuer. If the card issuer finds that the dispute is justified, then the merchant is held responsible for the charge that previously was approved and potential fees. While some chargebacks disputes may be warranted, such as a defective or lost item, some cardholders will cheat the system and purposely try to get their money back, even if they received the item correctly and on-time.

As a result, small businesses that are hit with multiple chargebacks could experience substantial losses to their revenue. To help you as a small business prevent potential chargebacks, we’ve compiled some valuable tips:

Become EMV Compliant

At this point, most merchants have become EMV-compliant and have met the new regulations of the liability shift. If you’re a small business and still have not upgraded your payment equipment, then now is the time to make the change. Small businesses can greatly reduce their chances of experiencing a chargeback with EMV-compliant solutions.

Process Card-Present Card Correctly

It is also important to educate/train your employees on the correct ways to accept card-present transactions. If your payment solutions are EMV-capable, be sure that consumers are properly inserting their chip cards within the terminal and are not swiping. If for some reason the chip card is not processing, do not swipe or override the card and instead, ask for another type of payment.

Process Card-Not-Present Cards Correctly

If your small business accepts card-not-present cards for online orders, make sure and implement the Address Verification System (AVS) on your checkout site to verify the consumer’s address, capture the IP address of each transaction, and require that the CVV code be entered in upon completing a sale.

Store Past Transaction Records

In case you have to refer back to a past transaction, you should keep accurate records of all past records. Such examples include any signed documentation such as contracts or receipts, amounts and the dates of past credit card transactions, a customer’s authorization information. This paperwork will greatly help you as a small business in the instance of a chargeback so that you are able to prove information on a prior transaction that occurred against consumer’s who are deliberately trying to receive an unjustified refund.

Clearly State Your Refund Policy

Place detailed signage at your register of your refund/return policy as well as on all transaction receipts and your website. This will not only help inform your customers of how long they have to file for a refund, but also protect you as a small business and allow you to reject returns/refunds outside of the policy date.

 Partner With a Payments Processor

Working with a reputable payment processor will also help you avoid chargebacks. Their knowledge and expertise within the payments industry can help guide you from potential mistakes or errors, and if for some chance you do experience a chargeback, they will be able to work with you to get the dispute resolved.

Chargebacks can be a costly instance for small business owners to endure. Thankfully, by following the above recommendations, small business owners can potentially decrease the likelihood of a chargeback from occurring.

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