How to Avoid Dishonest and Fraudulent Customer Credit Card Chargebacks


Credit card companies are wonderful at protecting consumers against credit card fraud by taking care of disputes whether they are incorrect amounts, a result of credit card fraud or stolen credit cards, as well as merchant errors. These refunds are called chargebacks. Chargebacks are not only disappointing to the merchant, but also they can be dangerous to your online business, putting your merchant account at risk if you receive too many. Fulfilling an online order can be risky, you face the threat of customers that make a purchase, file a phony dispute with their credit card company and keep the merchandise and their money. However, with the recent influx of data breaches at US retailers, merchants need to focus in on gift purchases, and purchases that just seem odd. Below are tips to avoid a dishonest credit card chargeback.

Check the basic information

Be wary of orders that have dramatically different shipping and billing addresses, mainly if the shipping address is in a different country. You’ll probably see different shipping and billing addresses for legitimate orders from time to time, as gift orders are very popular, but watch for address information that simply looks wrong. If your gut tells you that there may be something wrong with the order, call the customer and question the purchase.

Watch for abnormally large orders

In particular, you should be wary orders that have a large quantity of a single item – especially if you sell higher-priced items. For example, it is not likely that a single customer would need 15 digital cameras or 20 smartphones. Essentially, if an order is so large that is looks too good to be true, it probably is.

Require a signature on delivery

Particularly for large transactions, this may be worth the extra expense. By requiring a signature, your customer cannot make the claim that they never received the merchandise, since they would be liable for the package after it is signed for.

Legitimate chargebacks are hard on a business, let alone a chargeback that has resulted from a fraud. By implementing the above tips, you are sure to lessen your changes of suffering a credit card chargeback due to a fraudulent purchase.

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Protecting yourself from a chargeback


You are probably wondering what a charge back is. Well, to put it in easy form, it really is just a refund to a customer. It goes through the channels to make certain that it is a REAL chargeback, and then the money that was paid out to the bank of the buyer, refunds it to the customer’s card.


Merchants only have so many chargebacks every month before the merchant account servicers put them into a TMF file. More or less, it’s a jail for those that don’t take care of their customers. The TMF or Terminated Merchant File, can haunt you for up to five years. It’s best to just take care of the customers and then you don’t lose your merchant account. If you lose it, you lose your business.

Larger businesses

Extra-large businesses like Wal-Mart and Costco, have more bargaining power. Their servicers know that they will have an enormous amount of refunds. It just goes with the territory that they work. You however, may be a lot smaller, and your options are not as great. Each account will have a set amount for their chargebacks, and you need to work diligently with the customer to make certain they are happy with what they have purchased.

In Escrow

All new businesses will be put on a trial period as they begin. They have three to six months, before the money that has been put into an escrow account, is released to them. It all will be returned in a lump sum, but only after the business has made it through without any chargebacks.

When you have one

You have several things you need to do.

• Follow up with the customer as soon as you know you have a chargeback.

• Ask questions to make sure that the customer has not forgotten about the purchase. That happens all the time. Remind them what the purchase was and when.

• See if they signed for the product. Get out the receipt and the signature. Verify with them that they indeed made the purchase.

• Are they dissatisfied with the product? Was it broken? Not working? Then you take care of them. Get them happy and get a new product to them right away.

• If you have determined that they might be after money and it could be a fraud issue, contact your merchant servicer right away. You are covered for this kind of thing, and they will help you take care of it.

Now you have it all

Now that you have covered all your bases, and the customer is taken care of, you didn’t have a chargeback, and all is well and right with the world. You just have to remember, that you have to do this with all the customers. So, if you are more than just a one person business, it would be good to have a customer service representative that takes care of these issues for you all the time. That way, everything and everybody stays happy and satisfied. A little chargeback prevention goes a long ways.

Have a great business!