How To Avoid Chargeback Fraud


Large business alongside small business owners are the most affected by chargebacks challenge. This kind of deceit is the toughest to fight, expensive and often frustrating. Moreover, it is tough to distinguish between legitimate chargebacks and the actual deception for financial gain. Businesses of all sizes suffer from revenue losses, incurring extra cost during this kind of fraud and sometimes strive to recover or forfeit sold products.

Fortunately, there are various methods through which merchants can avoid credit cards chargebacks efficiently by use of the right system. There are many ways to prevent and reduce the risk of credit cards chargebacks fraudulence; this article will discuss some of these ways.

Follow and monitor payment process protocols

There are two modes through which customers pay up purchased products, the card-purchase, and card-not-present purchase transactions. In the first case, where the customer swipes the card in person, merchants should be keen to check the expiration date and remember to enter the security code on the front or back of the card. But for the latter, where purchases are made online or over the phone, merchants must capture additional information from the customer. The kind of information obtained may include IP addresses, digital signature or sometimes social media profiles.

Credit card

Similarly, some card processors may require additional identity confirmation through services like MasterCard Secure Code. These need customers to enter other passwords to authorize credit or debit card online payments. In the case of suspected chargeback fraudulence, merchants should check the transactions and specific codes attached. In some cases, customers are required to provide proof of items delivered once they ship them.

Request customers to sign contracts

Contract signing before conducting any transactions is one of the safest ways of merchants protecting themselves from chargebacks. Whether customers are physically making purchases or shipping products online, entrepreneurs should use various methods to get the contracts signed.

Signed contracts can be sent via fax or email, or sometimes customers may electronically sign them with a fingerprint via smartphones. The crucial point is to get the customer’s authorization in writing.

Train employees on how to promptly deal with customers service issues

Business owners should thoroughly train their employees on ways to deal with both card-present and card-not-present transactions. The training will include teaching them chargeback fraud prevention techniques. Verifying signatures in card-present transactions, obtaining signatures on contracts and looking for suspicious transactions are some of the methods employees use.

Pensive man working on his smartphone and laptop

The other way to avoid chargeback frauds is by dealing with customer services issues promptly when they arise. Some card processors offer chargebacks notifications when customers dispute chargebacks or express dissatisfaction. With these notifications, employees should swiftly respond to the customer’s demands.

Good records keeping with explicit payment descriptor

Records on customer’s credit card, transactions date, amounts as well as authorization information greatly help merchants to avoid being victims fraudulent purchase. Business merchants should use correct and clear payment descriptors.

These identifying details will appear on customer’s credit cards statements upon making purchases. When a different company name is used customers are likely to forget the purchases they made and result in a chargeback.

There are other ways to avoid chargebacks to your business. These include fighting them back when you are sure of a win. Similarly, a team member may be dedicated to the company to help mitigate damages caused by these deceits. As discussed above, chargebacks can lead to financial and potential customers loss when they are not avoided or addressed.