Learn what a chargeback is and how to prevent them if you use QuickBooks Payments. Here's how to handle a current chargeback.
A chargeback happens when a transaction you processed gets disputed and the money goes back to the payer. Chargebacks can happen for a variety of reasons. They may be the result of a mistake, fraud, or an unhappy customer. A customer may cancel a payment, or their credit card company identifies an issue.
While you can't change past chargebacks, you can reduce the chances of experiencing them in the future. Here are a few best practices to help prevent chargebacks.
How to run credit cards and split transactions
Here are a few general guidelines:
- Do your best to avoid duplicate transactions. You can swipe or dip a card more than once if there was an error. Keep in mind, running it too many times can alert the bank.
- Avoid splitting transactions into smaller transactions. You may open yourself up to a chargeback.
- Don't request a credit card payment to guarantee a check.
- Have your customers sign the receipt close to where your return and cancelation policy appears on the receipt. For more details, see the section below on refund and return policies.
Be EMV (Europay MasterCard Visa) compliant
Being EMV compliant is the best protection against chargebacks for unauthorized transactions.
If an EMV credit card has a chip, dip the card. EMV card chips provide stronger security features than swipes. The chip creates a unique code every time it’s used.
Magnetic stripe cards contain fixed data. When you swipe them, the payment processor matches it to a bank account. This isn't as secure.
Learn more about EMV Standard and Smart Chip cards.
Collect CVC2 and CVV2 verification numbers
Most credit cards have a three-digit security code right after the credit card number. American Express cards usually have a four-digit code on the front of the card. These are known as CVC or CVV codes.
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 is run.
Whenever you can, enter the security code when you process credit card payments. This extra security measure helps protect you against fraud.
Take imprints of credit cards
When a credit card's chip or magnetic stripe isn't readable, get an imprint of the credit card as proof the card was present. Keep the imprint with the record of the sale.
Talk to your customers
Communicate with your customers throughout the sales process.
When you work with customers directly, you can often avoid chargebacks. Make resolving their issues a priority. Tell them about unexpected changes if they occur.
If you feel something is off about a transaction, especially large or odd orders, check in with the customer. You can approach them in a friendly but direct way. Call or email them about the order. Verify the billing and shipping addresses are valid.
Let customers know what name will appear on their bank statements
If your business name doesn't match how it appears on bank statements, let customers know. Tell them what name they should expect so they recognize the transaction. This can avoid a lot of confusion.
Respond to chargeback letters and retrieval requests quickly
If you experience a chargeback or retrieval request, quickly follow up any response requests. Send all documents by the listed deadlines.
Even if you believe the dispute is invalid, if you fail to reply, you can still be liable for the funds.
Be clear about your refund and return policies
Clearly document your refund and return policies. Make your policies easy to find. If you don't accept returns, tell customers before completing sales.
Properly disclose your return or cancelation policy. Proper disclosure is when the cardholder acknowledges the policy by signing or initialing near the policy. A retail merchant should have the policy printed on the sales draft below the signature line, and it should be at least 1/4 inch in size.
For e-commerce merchants, you must have your policy on your website. The customer must accept or agree to the terms and conditions during the checkout process. A link to the terms and conditions that takes the cardholder away from the cart to checkout isn't considered proper disclosure. This provides evidence the customer has read and agreed to your policy.
Ship with care
If you ship products, ship them as quickly as possible, ideally within 24 hours. If possible, give customers a way to track their order online. Consider using carriers who require signatures for delivery. If you deliver or customers pick up products, get signatures for proof.
Card Association rules prohibit you from charging cardholders (your customers) until the product has shipped. Charge credit cards when orders ship, not when they're placed.
Use an Address Verification System (AVS)
AVS checks to make sure the address entered on an order form is the same as the address the cardholder's billing statements are mailed to. This can only be used for US addresses.
Though it's a common practice today, be aware and cautious of orders where the billing and shipping addresses don't match.
Take extra care with orders to foreign countries
International shipping can be tricky. Take care when someone orders large amounts or several of the same expensive items.
Avoid personal transactions
Don't run your personal credit card through your QuickBooks Payment account. Also, don't use it to provide cash to yourself or a friend.
Don't impose purchase fees or limits
Card Association regulations specify that if you accept credit cards, you must accept them for any transaction.
Don't place minimum or maximum limits on transactions. You shouldn't charge customers a fee to offset the cost of accepting credit cards. This is against the law in some states.
For in-person sales, always ask to see the customer's ID. Check the credit card's expiration date. Make sure the name on the card matches the signature on the back.
There are many tools and fraud screening products available. These may help keep you and your customers safe.
Spot warning signs of possible fraud
Be cautious of orders where you’re asked to pay someone else for the customer. For example, do not wire funds to a freight carrier or shipping company if the customer asks you to do so. Once funds are wired, they can't be recovered.
Managing your QuickBooks Payments account
Review your merchant agreement. It outlines the various fees and charges, as well as specific rules and regulations you need to be aware of.
Ensure that you properly close and terminate merchant accounts that you no longer use. Call Merchant Services at 800-558-9558 to close an account.
Use the Merchant Service Center to manage your QuickBooks Payments account. You can also access it from within QuickBooks.
From QuickBooks Online:
- Go to Settings.
- Select Account and Settings.
- Select the Payments tab.
- Select Manage Details. The Merchant Service Center opens in a new browser window or tab.
From QuickBooks Desktop:
- Open the company profile linked to your Merchant Services account.
- Go to the Customers menu and select Credit Card Processing, then select Merchant Service Center. If prompted, sign in to our Merchant Services account.