Merchant Accounts: Chargebacks and Fraud

by Ginger Marin

Whether doing business on the Internet or in a brick and mortar store, most merchants accept credit cards.  Here’s an overview of the pitfalls and how the credit card companies protect against fraud.

A chargeback is when a sales transaction is reversed.  This can occur for any number of reasons such as bank errors, customer disputes, credit card expiration, double-charges, fraud.

If your merchant account incurs too many chargebacks (for whatever reason) — there’s a chance that you will lose your account. Once this happens you’ll be placed on the Visa/MasterCard MATCH list for several years. All Merchant Account Providers have access to this list, and if they find your name on it, they’ll usually decline to issue a merchant account to you.

As for fraud, in almost all cases, you’ll be held responsible when a fraudulent credit card is used on your website, and you will be charged for the sale. The best thing that you as a merchant can do is to stay vigilant.

Tips to Help Eliminate Chargebacks & Fraud

Company Data:  On your order confirmation page, make sure you advise the customer of your company  name and the contact information that will appear on their monthly credit card statement.

Email Confirmation: Include the same company details in the email confirmation that your customers receive when an order is placed.

Address Verification: Use address verification during the credit card acceptance process. People who order products using a stolen card number will always ship to an address that’s different from the real cardholder’s.  This is your chance to stop shipment before its too late.

Foreign Country Orders:  A large percentage of fraudulent Internet orders are made from some eastern bloc  countries and developing nations.  Nigeria, Russia and Indonesia are high on the list.

Pay Attention:  If an order seems suspicious, call or email the customer and attempt to verify what you can about them. Pay attention to shipment locations.

Keep Transaction Copies:  Keep copies of all transactions so if you’re ever challenged, you’ll have a  good defense.

Shipment Confirmation:  If you ship a product, it’s wise to have a mailing confirmation receipt which will confirm to the bank that you did indeed ship the items that the customer ordered.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s