Q:  What is a chargeback? How can I prevent them?

The following article provides great ways you can virtually eliminate chargebacks and fraud.  The more chargebacks you get, the more aggressive prevention tactics you'll need to incorporate into your business.

Ten Ways to Prevent Credit Card Chargebacks

Chargeback, the word that merchants fear. A chargeback is what it's called when a transaction is reversed. In other words, rather than adding money to your account it is deducted. Chargebacks can occur for a wide variety of reasons, such as double-charging, credit card expiration, bank error and customer disputes. If you get too many chargebacks against you, there is a possibility that you will loose your merchant account. Once you've lost your merchant account you are placed on the Visa/MasterCard MATCH list for several years which all Merchant Account Providers have access to, and if they find you on the list they won't reissue a merchant account to you.

Here are some tips that can help you reduce chargebacks:

1. On your order confirmation page provide the customer with the name, phone number, e-mail address, etc., of your company so that they will recognize it when it appears on their monthly credit card statement.

2. Include this same company information in the e-mail confirmation that your customers get when an order is placed (they do get one don't they? If not, they should... it's good for keeping records.)

3. Use Address Verification. People ordering products using a stolen card number will never use the real cardholder's billing address, so this is your chance to stop the order before it's too late!

4. Scrutinize orders from foreign countries. A large percentage of fraudulent Internet purchases are made from Indonesia, Russia, and other eastern block or developing countries.

5. If an order seems suspicious, call or email the customer and attempt to verify anything you can about them. Pay attention to strange orders and then follow up.

6. If you ship a product, include the customers invoice. Always keep copies so if you're ever challenged you have some kind of defense.

7. Be wary of accepting orders from people who used a free e-mail address when ordering (i.e. Hotmail, Yahoo, etc.). Tracking people who used a free e-mail address is almost impossible, it's much easier for them to get away then if they used their Internet Service Provider (ISP) e-mail address.

8. Ask for the 3-digit card security code (CVV or CVC) on the reverse side of the credit card.  It'll be the last 3 digits you see in the signature area.

9. If your business delivers products use a carrier that requires a signature on delivery, and allows you to have a copy of the signature. Retain these for your records.

10. Taking the time to post a warning message on your order page to those who may attempt to make a fraudulent order will greatly deter the number of instances of fraud. Be sure to mention that IP (Internet Protocol) addresses are being logged. IP addresses can come in handy when locating people about fraudulent orders.

Company Suggestions

Recommended Resources:

Merchant Accounts to accept credit cards - MerchantSeek.com - Eliminates the hassle of searching the internet for credit card processors by providing a one stop resource for merchants looking for credit card processing information.