Managing chargebacks

A chargeback is a transaction that's disputed by a cardholder or issuer. There are many reasons for chargebacks, but the most common are returned goods, cancelled services, quality disputes or processing errors and fraud. Chargebacks can be a costly part of accepting credit cards. However, the risk of a chargeback can be managed by making sure the customer is satisfied with their service and purchase, and that payment processes are followed correctly. Below you will find tips and best practice to reduce the hassle and cost of chargebacks.

• Always compare the first four digits of the embossed or printed card with the four digits printed below the embossed or printed card number – this should be recorded on the transaction receipt.
• Make sure that chip and PIN cards Europay, Mastercard and Visa (EMV) are processed on EMV terminals, so that the customer is asked to enter their PIN and verify the transaction.
• If it is a signed for transaction, while checking the signature also compare the name and card number on the transaction receipt to make sure the magnetic strip is not counterfeit.

Failure to process a transaction correctly may result in the following chargebacks:

• Fraudulent transaction – counterfeit card
• Fraudulent transaction – card present environment

If you are unable to swipe a card through an EMV point-of-sale terminal, you must obtain a manual imprint of the card. This manual sales slip must be signed by the customer and show the transaction date, authorisation code, purchase amount, your information (your name, location) and description/itemisation of goods or services. A legible imprint for the transaction in question must also follow with a signature or PIN.

Failure to obtain a complete transaction receipt copy can result in the following chargebacks:

• Fraudulent transaction – no cardholder authorisation
• Fraudulent transaction – no imprint obtained
• Fraudulent transaction – signature not obtained

You should verify that the signature and name on the card matches the signature on the sales receipt and on the manual imprint.

Commonly known as ‘card not present’ transactions; such as mail order (MO), telephone order (TO) and online are at more risk of chargebacks. Here are some ways to reduce the risk of chargebacks for fraudulent or unauthorised transactions:

• Keep a transaction record - by maintaining a record of problematic customers, you can identify high-risk transactions, block specific credit card numbers and disallow future purchases.
• Multiple orders - by limiting the number of transactions per hour, day or week from a specific customer, you may reduce risk of potential fraud.
• Address Verification Service (AVS) – This is an Elavon fraud-reduction service that allows you to verify a cardholder’s address prior to completing the sale (ask your sales representative for more details about this service). The AVS system indicates if there is a full, partial or no match response during address verification by comparing an address in the card issuer’s database. Remember: you should always ask the cardholder for his/her address, as on their monthly statement.
• Know your customers - you may avoid chargebacks simply by getting to know your customers. For example, record the customer’s telephone number, then call back to verify the order.
• Customer service phone number – make sure your customer service phone number is printed on the receipt. This makes it easier for customers to resolve disputes by phone, rather than through the chargeback process.
• CVV2/CVC2 security – both Visa and Mastercard® have this security feature printed on the back of their cards, which you can verify as an additional security check. Contact Customer Service for more details on this feature. On its own, this does not guarantee a chargeback won’t happen, but used together with other prevention processes it is highly effective.
• 3D Secure transactions - if you run an eCommerce business and accept online payments, you can ask your eCommerce provider for a 3D Secure transaction authentication system. Used correctly with a cardholder’s security code, this system will protect your business from most cases of fraud chargebacks.
• Signatures on file – process all transactions separately and obtain cardholder agreement/authorisation for each transaction, even if you know your client and have her/his signature. Remember, signature on file is not an accepted signature if fraud is suspected.

Learn to recognise the card issuer’s Bank Identification Number (BIN) – if a card was not issued in the cardholder’s country of origin, we suggest you to do not accept it. If you would like to confirm the issuing bank country, please contact Elavon’s Call Centre.

Note: In the event that a cardholder disputes a 'card not present' transaction, you will be fully liable as it cannot be fully secured.

A properly identified DCC transaction receipt should contain:

• Transaction amount of the goods or services purchased in your local currency - including currency symbol next to the amount
• Exchange rate, including any commission
• Total price in the transaction currency
• Transaction currency, including currency symbol next to the amount.

A disclaimer that:

• Is easily visible to the cardholder; and
• Specifies that the cardholder has been offered a choice of payment in your local currency, and that the cardholder understands the choice of currency is final.

When performed correctly, DCC provides transparency for cardholders. It allows a cardholder to see the transaction amount in his or her billing currency and your pricing currency.

This way, the cardholder knows exactly how much the goods or services cost. With DCC, there are no surprises. Tthe amount agreed and verified by the cardholder using either a PIN or signature at point of sale is exactly the amount charged on his or her payment card statement.

Failure to obtain a complete copy can result in the following chargebacks:

• Incorrect currency or transaction code
• Domestic transaction processing violation

To avoid cancelled recurring transaction chargebacks you should take immediate action when a customer asks to cancel a recurring transaction. You may use the service which allows them to check a cardholder’s cancellation of recurring transactions. If you need more information please contact Elavon’s Customer Service department (please refer to the back page for contact details). The service which is paid by recurring transactions and the recurring transaction itself should have separate terms of cancellation.

Don’t forget - Prompt action can reduce the risk of repetitive chargebacks by the same customer.

This is called a retrieval and is where the card issuer requests you to provide a copy of the transaction receipt on behalf of the cardholder. There is always a respond by date on a retrieval notification and it’s important that a copy of the receipt is sent no later than this date.

A late or ‘no-response’ may result in the following chargebacks:

• Non-receipt of requested items
• Requested copy illegible

How to reduce the risk of retrieval request chargebacks:

• Keep a record of your sales drafts for at least 18 months. Retrieval requests specify the credit card number, transaction date and purchase amount; they do not include the cardholder’s name. Therefore, sales drafts should be filed by date or credit card number.
• Be sure sales drafts are legible - if it is difficult to read it is likely the copy receipt will be illegible too. Always check the ink cartridge or ribbon on your printer.
• Make your transaction easy to identify - most retrieval queries happen because the customer does not recognise the transaction on their card billing statement. It’s helpful that you make clear to your customers what business name they can expect to see on their statement.
• Add your customer service telephone number to statement narrative- add your phone number to the city/state field and it will show on the customers statement. This means that customers can easily contact you directly with any transaction queries. Contact Elavon Customer Services to set this up.
• Card not present transactions, such as mail order or online - you need to provide all available information regarding the disputed transaction. Such information depends on your Category Code and transaction specification.

Don’t forget - Failure to respond to a retrieval request within the required time frame will result in an irreversible chargeback. The recommended response method is by fax or overnight mail.

To prevent credit not processed chargebacks, quickly process refunds to your customers. Your customer should always be made aware of your cancellation or refund policy in writing. Be sure to have your refund/cancellation policy clearly printed on the transaction receipt.

If the cardholder cancels the order that is the subject of an Advance Deposit Transaction you must complete a Credit Transaction Receipt which includes all of the following:

• Transaction amount
• Cardholder’s name
• Cardholder’s Account Number and expiration date
• Cardholder’s telephone number and mailing address
• Cancellation code you give to the cardholder
• The words “Advance Deposit” on the Credit Transaction Receipt signature line

If you use a website to sell goods and services, your refund and cancellation policy should be on your checkout screen with an “I agree’’ to sell goods and services button that the customer must click on prior to completing the transaction.

If you do not give refunds or offer in store-credit only, this information should be included on your transaction receipt.

Please bear in mind that you should process credits within 15 days from the date goods were returned by cardholder.

After swiping or manually key-entering the card, make sure the embossed card number and the displayed account number match. Print the full account number on all phone and mail orders. Ask phone customers to read back the full card number to ensure accuracy.

Non-matching transactions can result in the following chargebacks:

• Account number not on file
• Non-matching account number on your transaction receipt.

Please bear in mind that you should process credits within 15 days from the date goods were returned by cardholder.

Don’t forget Refunds must be made using the same credit card as the original sale. Never refund a card purchase by cash or cheque.

If a customer does not receive their goods or services, a non receipt of goods chargeback may occur. It is recommended that goods and services are delivered before charging the customer.

To avoid these types of chargebacks, you must obtain signed proof of delivery for all goods or services not immediately received at the point-of-sale. Here are some helpful hints:

• Instalment transactions – share the terms of instalment transactions in writing, including shipping, handling charges and taxes. Inform your customer if currency conversion rates will cause instalment amounts to fluctuate. Card Association regulations prohibit you from including finance charges in the instalment.
• Instalment intervals – the first instalment transaction must not be processed before the shipment of goods. Use the 30-calendar day (or more) rule, or use the exact, monthly recurring shipping date (must be the same day each month) to process instalments.
• Delayed delivery – you can process delayed delivery transactions before delivery of the goods or service if the sale is described as ”delayed delivery’’ on the transaction receipt. You may not process a deposit or a balance transaction receipt before the delivery of the goods or service.
• Prepayment – you may process a prepayment transaction if you advise your customer that he or she will be billed immediately. You may also process a full prepayment for custom order goods (manufactured to the customer’s specifications).
• Delivery date and conditions -if the date of delivery for goods or services is not specified you have 15 calendar days from the transaction date to deliver them. Make sure that the goods, or services were received by the cardholder or authorised person on an agreed date or location.
• No-show – no show can be charged by hotels only for the first night of stay and only after 6pm. Until 6pm the cardholder has time to cancel without any charges made. The words “no-show” must be included on the signature line of the transaction receipt.

Don’t forget: Obtain signed proof of delivery for all goods and services not immediately delivered at the point-of-sale.

• A “decline’’ code indicates that the card issuer does not approve the transaction. Do not continue to attempt authorisation on the card by reducing the amount requested or repeating the request. When you receive a decline code, you should return the card to the customer and ask for another form of payment.
• If you are suspicious of a card transaction, contact your voice authorisation centre and request a “Code 10” authorisation. The operator will ask you a series of yes or no questions. You will then be given information on how to proceed with the transaction.
• If you did not receive authorisation for the full transaction amount do not attempt to obtain authorisation for one or smaller amounts in order to come below your floor limit.
• Authorisations must be obtained on the transaction date unless (i) you are a Hotel, Car Rentals or Cruise Line Company (ii) it was a delayed delivery transaction (iii) it was a Mail or Phone Order transaction (iv) it was an online e-commerce transaction in which case the date of Authorisation and the Transaction Date may differ. 

Don’t forget: Always check the expiry date of the card and never ever process the transaction if a card has expired.

To avoid duplicate transactions that may result in multiple chargebacks you should:

• Process one transaction at a time through your point of sale terminal
• Balance your deposit at the end of the day
• Create a separate invoice describing each purchase if your customer makes more than one purchase in a day, or makes purchases with a duplicate amount
• Check your batch totals at the end of every shift or business day to ensure that your customers were not charged twice
• If you discover that a customer was charged twice in error, you should immediately credit the cardholder’s account.

Failure to do the above may result in the following chargebacks:

• Duplicate processing
• Payment by other means

It is difficult to reverse a dispute from a customer who challenges the quality of your goods or service. Such disputes can result in the following chargebacks:

• Goods or Services not as described
• Cardholders dispute – not elsewhere classified
• Defective goods

•  If a customer disputes a transaction try to resolve the issue directly with the customer and document your efforts to satisfy the customer. Always keep accurate records of each transaction because you may need to provide documentation in your response to a customer’s dispute.
• Ensure proper packaging of shipped goods. Make sure the goods are suitable for the purpose for which they were sold. Make sure your customer has a clear understanding of how to return goods.
• To avoid such chargebacks, ensure that your customers are aware of your returns policy at the time of purchase. Display the policy at the point-of sale and print it on the sales slip. Always apply a consistent returns policy. Please bear in mind that with disputes involving defective, damaged or not as described goods, your refund policy has no bearing on the outcome of the dispute. Additionally a cardholder can dispute the transaction if you refuse to repair the damaged goods.
• Also, you should not accept the return of goods which are not in the original condition (e.g. broken, torn, dirty, missing tags). Such goods should be sent back to the customer. Please store documents to prove that the goods were not defective at the time of purchase/dispatch or delivery and that the service and goods were correctly described at the time of purchase.

We hope this information has explained chargebacks clearly and given you helpful advice on how to avoid them. If you have any questions please refer to the Frequently Asked questions which follow. However, if you still need additional information concerning chargebacks please contact the Chargeback Customer Service (please refer to the back page for contact details).

Authorisation:

You are required to obtain permission from the cardholder prior to charging the card. The onus is on you to prove permission was obtained. However, authorisation does not guarantee payment.

Card Not Present (CNP) Transactions:

You are liable for all keyed/order and telephone transactions (MO/TO) which are also referred to as card not present transactions. Internet transaction liability will vary depending on the transaction authentication for you and the Card Issuer perspective when 3D Secure (Verified by Visa/Mastercard Secure) is utilised.

Documentation:

This refers to the documentary evidence which you must present within the time frames in response to a retrieval and chargeback notification presented to them by their acquirer. If the evidence is not provided as requested, the acquirer will not be able to defend the chargeback.

Fees:

The acquirer has the right to charge the compliance or arbitration fee for each case that is filed with the Association on your behalf. Hotel bookings (no shows): You can charge for one night stay only, the full amount cannot be charged to the cardholder. The onus is on you to prove the Terms and Conditions were accepted by the cardholder.

Refunds:

A refund can only be processed on the card initially presented for payment. The refund must be equal to or less than the value of the original debit sale. Under no circumstances must a cardholder be given a refund by any other means e.g. cash or cheque.

Splitting Transactions:

Processing more than one transaction for a single purchase in order to obtain authorisation is not permitted under the Card Association rules and must not be done under any circumstances (one transaction, one authorisation code).

Note: To ensure chargeback and retrieval cases are addressed promptly, please ensure all requested documentation supplied to the Elavon Chargeback Team is legible and sets out all requested information. You are contractually obliged to retain transaction documentation for a minimum period of 13 months from processing date. 

Top retrieval request reason codes