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This comprehensive and detailed guideline will help you understand what are chargebacks and retrievals. You will learn how you can avoid chargebacks from your customers and how to prevent credit card frauds.

What is a chargeback?

There are a number of different reasons why you may have received a chargeback, however the chargeback process is always initiated in the same way.

The chargeback is initiated by the card issuer who has inquired or disputed a credit card transaction. It is then passed to the acquiring bank, to decide and solve that matter with you the merchant.

Whether we can defend the chargeback or not depends on whether the credit card transaction in question breached any of the rules set by VISA, MasterCard, Amex or Discover. If the transaction breached the rules set, then the amount of the transaction may be charged back to your business and debited from your account. However, if the transaction was in line with the rules set, we may be able to defend the chargeback.

What caused the chargeback?

1. You have made an error, such as accepted an expired card.
2. The cardholder or the Card Issuing Bank is disputing the transaction. For example the cardholder was not present at the point of sale and there is a possibility of a credit card fraud.
3. The client is not satisfied with the service rendered or the product he/she received and they want their money back.

Each chargeback has time limits and specific rules and regulations within which we have to work to. These are set by Visa, MasterCard, JCB , American Express & Discover and greatly influence the actions we can take when dealing with chargebacks and retrievals.

When you receive the chargeback letter there will be a heading and a description of the type of chargeback you have received. You need to act immediately upon receiving the letter and need to provide all documents necessary to resolve the dispute. Failure to do so will automatically result in a chargeback to your business and will be debited from your account.

What is a retrieval request?

You have received a retrieval request from our chargeback department because a Bank card issuer has disputed a transaction that you have entered in to with one of their cardholders. At this particular time, we are not given a specific reason why the information has been requested. The card issuer has instructed us to obtain information regarding a specific transaction and under the VISA, MasterCard, American Express, & Discover regulations we are obliged to comply.

The retrieval request letter that we send out to you is designed to ensure that you provide all the information that the card issuer requires to resolve the dispute.

A retrieval request is not a chargeback, which means we have not debited any money from your account. However, a retrieval request can turn into chargeback if the information received from the merchant is insufficient.

How To Prevent a Retrieval From Turning Into Chargeback

The guidelines below are designed to help you protect your business against retrievals by satisfying the card issuer with the information they require.

1. When supplying information for a retrieval request make sure that the signed receipt, invoice or imprinted voucher is clear and legible. If any of the information on the invoice, slip or voucher is unclear, the card issuer has the right to chargeback.
2. Make sure the expiration date on the card is supplied, as again not including all the information the card issuer requires can lead to a chargeback.
3. We must receive your reply and all additional information by the date specified in the request letter, because we must complete all work by the time limits set by VISA, MasterCard, Discover, or American Express regulations. If the card issuer does not receive the requested information within the time limits set they the card issuing bank can issue a chargeback, even if all the information is received after that date.
4. Always reply in writing as we require written confirmation regarding the retrieval request.
5. Provide us with a contact name and a telephone number for us to contact you in case we require additional information.

Always Keep Your Receipts

If you cannot supply a copy of a transaction slip, when requested to do so by a card issuer, you will almost certainly receive a chargeback and funds will be debited from your account.

You must keep the original merchant transaction copies

1. For a minimum of six months (this is because a dispute can arise up to six months after the transaction).
2. Copies should then be kept for a further 12 months.
3. The total time for storage of transaction copies is now 18 months.

Copies of the transactions must be legible

A chargeback may occur if you have sent an illegible copy of the transaction

1. Always provide a clear and legible copy, with all the relevant information showing on the transaction slip. Never send the original voucher to us as we may not be able to return it to you.
2. Check that the following details on the transaction copy are clearly readable

You must retain copies of transactions for your own reference

Keep a copy of the transaction slip/receipt if you are handing the original over to a third part (i.e. Police).

How To Avoid Chargebacks From Customers

Swipe Transaction

Many of the chargebacks received by merchants can be easily avoided if the correct procedures and precautions are taken at the point of sale. Below are some guidelines to help your business against unnecessary chargebacks when the cardholder is present for the transaction at the point of sale.

1. When the card has been swiped through the credit card terminal, check the card number on the printed receipt and see that it matches the number on the card.
2. For Visa and MasterCard credit cards check that the first four digits of the card number appear on the card under the embossed number.
3. Check the date and the expiration date on the card.
4. If the card does not swipe through the terminal you MUST take a manual imprint of the credit card to prove that the card was present at the time of the transaction.
5. Always check that the signature on the receipt matches that on the back of the card.
6. You have the right to ask for another form of identification to verify identity of the person making a purchase.
7. If the value of the sale is over your allowed transaction limit, always seek authorization and contact the risk department for approval. Although authorization does not guarantee payment, obtaining an authorization code for each transaction you process over your allowed transaction limit, an reduce the risk of receiving a chargeback.

Phone Orders

Telephone order transactions attract a higher risk of chargebacks because the card and cardholder are not present at the time the credit card transaction takes place. These transactions are known as Cardholder Not Present and the chargebacks that may arise are more difficult to defend. Whenever you undertake a telephone order transaction, there is no guarantee of payment, even if authorization was obtained. If the cardholder should dispute the transaction at a later date or any discrepancies arise, the card issuer may resort to a chargeback.

These simple precautions may help to protect your business from the risk of chargebacks when taking telephone order transactions.

1. Ask the customer to repeat their card number, then read that number back to them to ensure every digit is absolutely correct.
2. If your instinct tells you something "isn't quite right", please make further security checks.
3. Offer to confirm a telephone call by ringing the customer back, and then check the details of the customer's number with Directory Enquiries before you do so.
4. Never release goods to a third party- such as a taxi driver or messenger allegedly sent by the cardholder.
5. Always arrange delivery of the goods yourself, using either recorded/registered post or a reputable carrier, and obtain a signed and dated delivery note from the Post Office or Carrier. Encourage your carrier to contact you if they are unhappy about delivery.
6. If your customer suddenly decides to collect the goods, cancel the original transaction, and then proceed with the new transaction as a normal over the counter sale.

When taking telephone order transactions make sure that you collect the following details:

When storing your transaction records, set up a system that gives you easy access to information that may be required at a later date.

Mail & Phone Orders

Telephone order transactions attract a higher risk of chargebacks because the card and cardholder are not present at the time the credit card transaction takes place. These transactions are known as Cardholder Not Present and the chargebacks that may arise are more difficult to defend. Whenever you undertake a telephone order transaction, there is no guarantee of payment, even if authorization was obtained. If the cardholder should dispute the transaction at a later date or any discrepancies arise, the card issuer may resort to a chargeback.

These simple precautions may help to protect your business from the risk of chargebacks when taking mail and phone order transactions.

1. Phone orders: Ask the customer to repeat their card number, then read that number back to them.
2. Offer to confirm a telephone call by ringing the customer back
3. Fax them an invoice or order form so that you have a signature.
4. Make sure you clearly shows your REFUND POLICY.
5. Always arrange delivery of the goods using either recorded/registered post or a reputable carrier, and obtain a signed and dated delivery note from the Post Office, FedEx, UPS etc.
6. Make sure that the address and zip code match when you process the credit card.
7. Mail Orders: Call customers to confirm the card number and expiry date. This is to check that all the details given are correct.
8. Fax them an invoice or order form so that you have a signature on file.
9. Make sure you clearly shows your REFUND POLICY.
10. Always arrange delivery of the goods using either recorded/registered post or a reputable carrier, and obtain a signed and dated delivery note from the Post Office, FedEx, UPS etc.
11. Make sure that the address and zip code match when you process the credit card.

Your phone/mail order form must also contain the following details:

Internet Orders

Here are a few checks that you can use to help you assess whether the customer is who they say they are:

Bounced emails

If you attempt to email the customer and the email is returned ask yourself why? Did he/she simply miss-spell the email address, or is it perhaps a wrong email address?

Billing address, Postcode validation

PayQuickly provides an Address Verification Service (AVS) designed to help protect against frauds those businesses taking mail or telephone orders, or conducting credit card transactions over the Internet. Information obtained from the cardholder during the transaction is sent to the card issuer for electronic verification. The AVS service works by checking the card 'security code', together with numbers in the cardholder's postcode, and up to the first five numbers of the cardholder's full statement address.

Telephone Number

Ask your customers to provide a contact telephone number and do not hesitate to contact him/her to verify the order.

Some purchases simply do not "feel right". Listed below are some instances that should prompt you to enquire further before you send the goods out.

1. Beware of high value or multiple sales from a previously unknown customer. Look out for the same customer name, card number or address being used on a repeated basis.
2. Be aware of the risk level for your products: Some examples of product classes which are prone to fraud are: jewelry, electronic goods, PC hardware, software and ticket items.

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