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Tips on Preventing and Disputing a Fraudulent Chargeback

Every day people are stealing thousands of dollars from businesses with a click of a button or a simple phone call. This is how it goes down: a fraudster purchases something from a store or website with their credit or debit card, then calls up the card company and disputes the charges. They get their money back, and keep your products and services. It really is as simple as that. Another common form of chargeback fraud is committed when thieves use stolen credit card numbers for online purchases, the merchant gets hit with the chargeback once the cardholder realizes their card info has been stolen and notifies the issuing bank.

This means if you own a business, whether it’s storefront or online, it is imperative that you  learn how to 1) do your best to prevent these incidences and 2) understand your rights and due diligence in fighting these fraudsters.
Cardholders can initiate a chargeback for several reasons- false advertising, dissatisfied with products, excessive delivery times and more. Trying to figure out how to protect a business from all this can be overwhelming so here are some suggestions in preventing and handling fraudulent chargebacks:

Chargeback Prevention

Pay Attention to the Warning signs:

•    When receiving online orders pay attention to orders that have different billing and delivery addresses, there are always exceptions, but keep an eye out and look for strange occurrences.

•    Pay Close attention to international online orders. If a large, fraudulent order is shipped overseas, you are most likely not going to see your merchandise again. Contact customers, pay attention to cardholder names and origin.

•    Multiple attempts at processing credit cards with different expiration dates are very suspicious. It’s likely the person on the other end is simply trying to guess. Big red flag.

•    Several orders made with different credit cards being shipped to the same address are also very suspicious. Huge orders on rush delivery can also be questionable, especially for a new customer.

Be Proactive:

•    The best thing you can do to prevent chargebacks is to use address verification and CVV code security verification where the customer will need the actual card on hand to know the code (3 digit number on back).

•    Offer REMARKABLE customer service. This way, if a customer has a complaint, you will be the first they call and not their card company.

•    Be transparent about all of your ordering, payments, return and shipping policies. Give customers as much information up front as possible so there is no room for dispute after the transaction.

•    Absolutely make sure that your company name is recognizable on their bills, receipts and statements. Don’t operate your merchant account under a name customers won’t recognize.
Many chargebacks happen as a result of confusing names popping up on customer card statements. 

Disputing a Chargeback if it Happens

1) In order to even THINK about disputing a chargeback you have to keep very accurate records. Keep all signed credit card receipts, customer information and purchase history, emails or correspondence and any other information your business collects during the sales process. If you are collecting the right information (address verification, CVV code, or cardholder signature) you should be in very good shape.

2) Consider investing in a Customer Relationship Management (CRM) system which tracks all phone calls, online interactions and inquiries made by the customer. This will help you to gather great data about customer interactions. Remember, your job is to prove the cardholder authorized the transaction, so again, make sure you have the right evidence before you process any transaction.

3) Take it seriously. As soon as you are notified of a chargeback by your processor understand that you need to furnish certain documents, and quickly. If you are hit multiple times in a short period by fraudulent chargebacks, it could put your business in danger of having a suspended merchant account (that means no processing credit cards).


Most importantly, stay informed and up to date on Visa & MasterCard’s policies on chargebacks. Staying educated and informed on best practices can only help you fight if and when you need to.


About the Author

Rachida EssadiqRachida Essadiq, Director of Marketing at NTC Texas is a successful five year marketing veteran, running events and campaigns for large to  small enterprises and non-profits.  She specializes in blogging, social media, branding/ identity and search engine optimization, striving to provide NTC Texas customers and fans with entertaining and valuable educational resources to find success in all areas of their businesses.

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