How to Handle Credit Card Disputes and Chargebacks in the Current Environment

The best defense against a chargeback is to avoid it to begin with. Here are some tips to prevent credit card chargebacks and disputes:

1. Communicate with your customers: Right now, there is spike in disputes for recurring charges, such as club memberships. If your club is shut down due to the pandemic, you should create a plan to handle the situation, and communicate that plan to your customers in order to proactively minimize these disputes. Clearly describe your services to avoid confusion; detail your return, cancellation and refund policies; and set expectations in the level of service their offer. Make sure to follow recommended proper disclosure of the terms and conditions. Transparency is paramount in preventing credit card disputes for recurring services.
2. Card Not Present Transactions: Per card brand rules, if the transaction took place in a card-absent environment (no card being present), it is mandated that the full return and refund policies should be located on your eCommerce website or application, and should include one of the following to prevent credit card chargebacks:
   • In the sequence of pages before final checkout: Add a button, checkbox or electronic signature that requires the customer to ‘acknowledge’ and ‘accept’ your terms.
   • On the checkout screen near the ‘Submit’ button: For card-present or face-to-face sale, full return and refund policies should be located on the Transaction Receipt (all copies, near the Cardholder signature area or in an area easily seen by the Cardholder). If the disclosure is on the back of a Transaction receipt or in a separate contract, it must be accompanied by a space for the Cardholder’s signature or initials. This should be directly on the checkout screen, as opposed to a link to a separate page. If the customer has any questions, make sure to respond to them quickly and efficiently to avoid confusion on their end (consider adding a chat feature on your site).
3. Person-to-Person (P2P) Transactions: Abide by ‘Card Processing Protocols’ by following ‘the basics’ to further prevent credit card chargebacks:
   • If a swiped or dipped card transaction is denied at the point of sale terminal, DO NOT try and run the transaction a second time. Multiple entries can trigger a chargeback.
   • When obtaining an authorization and you have initially received a ‘Decline’ or ‘Do Not Honor’ response, do not settle the sale. Rather, ask for an alternate payment or another card that will obtain an approved authorization from the issuing bank instead of forcing a sale that did not receive a valid approval from the bank.
   • Confirm the expiration dates on all credit and debit card transactions.
   • Get the customer’s signature on a magstripe-only transaction. The signature phase-out recently announced by the card brands applies only to EMV® (chip card) transactions. However, please note that PIN verified transactions do not serve as proof receipt of purchased goods/services and proof of proper disclosure of the merchant’s specific terms and conditions (e.g. ‘NO RETURN POLICY’, ‘ALL SALES ARE FINAL’). We, therefore, suggest merchants have the receipts/invoice signed by the cardholder at all times to prevent credit card disputes that could have been avoided.
   • Always swipe physical cards when possible and obtain CVV/CVC codes. Manually entering cards is riskier, and can result in higher interchange rates from the issuing bank.
   • Use or enroll with a 3D security program, specifically Verified by Visa and MasterCard® Secure Code if possible.
   • Follow the highest form of security on accepting payments by reading a card’s chip function and accepting it through PIN when possible.
4. Additional Tips to Prevent Credit Card Chargebacks:
   • If you need to enter a card number manually for a telephone order, do not make the entry from an integrated PIN Pad device or standalone terminal unless that device has a mail/phone order option on the display. Rather, use of the virtual terminal or the ‘send a payment request’ feature in OpenEdge View.
   • When processing payments manually, ensure the address (or ZIP) and CVV/CVC codes are entered with the request. If you receive a ‘failure’ response, the best practice is to void the payment, and re-verify all data with the cardholder before reprocessing the transaction. This extra step can help prevent credit card disputes from the card company or bank.
   • To avoid duplicate transactions, completely void any incorrect transactions before reprocessing another sale.
   • If a recurring transaction was canceled, always ask for an alternate payment from the customer instead of billing them on the same card.
   • For addendum disputes, always ask the cardholder for authorization, specifically for their signature on the invoice detailing the breakdown of the charge before billing their card for delayed and amended charges. This may include damage fees, smoking charges, parking fees, toll fees, etc.
   • When a cardholder buys merchandise from a merchant, the merchant must not refer the cardholder to the manufacturer in lieu of attempting to resolve the problem. Since the merchant sold the merchandise to the cardholder, they are the ‘merchant of record’, and responsible for addressing the credit card dispute.
   • Pencil rubbing of a card or photocopy of a card is not considered proof of a valid Imprint.
   • If you are going to be shipping a product – try to ensure that the cardholder address and the delivery address are the same. And always make sure there is a signature with proof of delivery by the cardholder.
   • Make sure that there is an offsetting sale transaction before issuing a credit transaction.