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Protect your business against chargebacks

Learn how to protect your business against chargebacks.

A chargeback is when a sale is charged back to your business. This can happen for a variety of reasons, and can cost you a lot of time and money.

In this article, we'll give you tips on how to reduce chargebacks on your business.

Being EMV (Europay MasterCard Visa) compliant is the best protection against chargebacks.

EMV chip cards contain microprocessors which provide stronger transaction security features and other application capabilities. Unlike magnetic stripe cards, the card chip creates a unique transaction code every time it is used for payment. This transaction code can only be used once.

When a chip card is used, the card's authenticity is verified when data is transferred between the chip and the issuing bank, which creates unique transaction data.

Magnetic stripe cards contain unchanging data. When they are swiped, the payment processor matches them to the linked bank account by reading magnetic fields. This makes it easier for fraudsters to copy the information and create counterfeit cards.

For more information on EMV, see EMV Standard and Smart Chip cards.

Make sure that the conditions of the sale are written on all receipts near the customer’s signature. You also want to provide all customers with a copies of their receipts.

It's also a good idea to display your refund and return policy near the register, in a place all your customers can see it. It also doesn't hurt to have cashiers explain your policy to customers at the time of a sale.

Be sure to respond to retrieval request and chargeback letters as soon as possible. Send all documents we request to resolve the issue by the date specified in the letter when you dispute a customer's claim.

Even if the customer is wrong, if you fail to reply, you are usually made liable for the funds.

On the back of all MasterCard and most Visa and Discover credit cards is a three-digit security code located right after the credit card number.

American Express cards have a four-digit security code located on the front of the card just above the cardholder's account number.

According to Visa, collecting these CVC2 and CVV2 verification numbers can reduce chargebacks as well as any pass-through fees that may be charged when a credit card order is conducted.

Most online payment processors support entering security codes when processing credit card orders.

This extra security measure helps protect you against fraud.

AVS checks to make sure that the address entered on an order form is the same as the address to which the card holder's billing statements are mailed. (This can only be used for US addresses.)

People using stolen card numbers typically don't enter the real cardholder's billing address on an order form.

Additionally, be cautious of orders with non-matching billing and shipping addresses.

Tell your customers what name will appear on their statements so they recognize the transaction.

Letting customers know the name that will appear on their credit card statement avoids a lot of confusion.

Be wary of accepting orders from people who use free email addresses when ordering (for example, Hotmail, Yahoo, etc.).

People who use free email are almost impossible to track, so most fraudulent orders are made using such free email addresses.

For delivery orders, or when a card's magnetic stripe is unreadable, make an imprint of the credit card as proof that the card was present.

Keep the imprint with the record of the associated transaction for your protection.

You can use shipping carriers that require signatures for delivery, and who supply you with a copy.

Always retain these copies for your records.

For face-to-face transactions, always request to see the customer's identification.

A large number of fraudulent orders come from places like the Middle East, Asia, Africa, and South America.

Watch out for foreign customers who place orders for large amounts, or for several of the same expensive item, or who insist on next-day shipping.

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