If you accept credit cards, there's a chance customers will dispute charges that appear on their bill. When that happens, the credit card issuer will take back any payment made to you while the investigation is underway. If the credit card company decides against you, the amount will be permanently charged back.
Customers commonly dispute charges when they have been victims of fraud, meaning someone else obtained their credit card and placed an order with it. To limit this risk, you should take steps to verify that the person making the charges is authorized to do so.
But buyers also dispute charges when they are not satisfied with the goods or services received, or simply don't recognize the charge when they view their bill.
To limit the risk of chargebacks, you should:
- Verify all credit card transactions.
- Ask for photo identification.
- Have a clear return policy.
Make sure each charge is authorizedIf you accept cards at a brick-and-mortar location, compare the signature on the back to the signed sales receipt and check to make sure the card hasn't expired. Get an authorization number before completing the sale. Electronic verification systems, based on information in the card's magnetic strip, allow you to confirm the card's validity at the time of purchase. If you accept cards online or over the telephone, use an address verification service.
Make sure customers know who you areIf a buyer purchased an item under one business name, and something else entirely appears on the statement (a parent company, for example), a chargeback could follow. People are often confused about charges when information on the statement does not match what they remember.
Spell out your return policyIf you have a clear return policy, customers will be more likely to deal with you on returns rather than complain to their credit card companies.
- Don't accept expired cards.
- Don't charge customers until you have delivered goods.
- Keep proof of delivery.
- Respond promptly to inquiries by credit card companies.