Tag Archives: fraudulent charges

Eleven-letter Dirty Word: Chargebacks

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If you surveyed everyone in the payment processing world, both merchants and processors, what they wish they could do away with for good, I would venture a guess that 8 out of 10 would say chargebacks. Unfortunately this is not going to happen in the foreseeable future. And the reason for that is simple: the credit card associations and credit card issuing banks have setup the system to ensure that consumers feel secure in using their credit cards.

The causes of chargebacks vary but inevitably boil down to one simple truth: the customer disputes the charge on their account from the merchant. These range from circumstances that are out the control of the business owner to conditions that can easily be remedied. They include, but are not limited to the following:

  • Fraud occurred or is suspected
  • Discrepancy in amount charged
  • Good or service paid for but never received
  • Unauthorized or duplicate transaction
  • Quality of the good or service did not match customer’s expectation
  • Customer does not recognize the transaction or the associated company name

Just based on this short list alone it is evident that chargebacks are inherent within the credit card system. While the majority of industries are compliant, there are certain verticals that have been identified as having higher occurrence of chargeback rates. The card associations tend to deem these “high risk” and many have trouble getting on boarded with most merchant services providers.

Avoiding Chargebacks

Depending on what type of merchant you are, there are simple steps you can take to greatly reduce the risk of having chargebacks. Let’s explore some different scenarios.

Brick and Mortar Merchants

Typically if you are a retail merchant with a physical location your risk of chargebacks is relatively low. The customer is receiving the good or service right at the time of payment and if the merchant has good business processes the customer should be happy with the quality. Also, your staff should be aware that whenever possible to swipe the physical card to ensure the lowest possible rate. Common practice is also to get a signature on the receipt and keep copies on file for 18 months in case of disputes. If you must key in the transaction by hand, be sure to make an imprint of the card with a signature as well.

Internet & Mail/Telephone Order

With the absence of a face-to-face transaction there are a number of added hurdles that need to be cleared in order to ensure a successful transaction. One first step is to make sure that your processor includes your customer service number along with your DBA (doing business as) name to be displayed on the customer’s statement. This will eliminate any confusion as to where the charges are coming from.

Online sellers should take advantage of fraud prevention tools that are available by the processing bank. These include AVS and CVV2. Address Verification System (AVS) compares the billing address with what is on file with the card issuer. Now while AVS does not approve or decline a transaction, a merchant can use the resulting code that is returned to pre-screen the transaction before committing to the sale. Card Verification Value 2 (CVV2) is the three-digit number that is printed on the back side of the card to the right of the signature panel. In a card-not-present environment this is just one more step to help protect the merchant. For more information read the VISA card-not-present tools.

What to do when…

When you find yourself facing a chargeback claim, a compliance allegation, or an arbitration request the biggest thing to keep in mind is to pay attention to the deadlines presented, act quickly, and provide as much supporting documentation as possible. The more documentation you gather over the process of doing business, the more ammunition you will have to support your claim. Also, failure to abide by the timelines for response means the loss of the transaction amount. In addition, the business may also be fined for non-compliance.

Host Merchant Services offers tips on how to protect against Identity Theft

Tips to Prevent Identity Theft

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College students are commonly targeted for identity theft. Because they are such common victims of identity theft, Host Merchant Services recommends taking a few simple steps to protect your identity:

– Secure your mail.

Campus mailboxes are often easily accessed in a dorm or apartment. Have sensitive mail sent to a permanent address such as your parents’ home or invest in a secure post office box.

– Don’t share too much on social networks.

Studies have found that identity fraud can be twice as common for people who have been on social networking sites for five years or more. Javelin research found that those people not using privacy settings on their networks were at a higher risk of exposing crucial information to fraudsters. So to protect yourself, take the time to update and adjust your privacy settings for the various social networking media you utilize.

– Important documents should be securely stored.

All important documents you have should be stored somewhere safe. This includes your Social Security card, passport and bank and credit card statements. Shred all paper documents that contain sensitive financial information and any credit card offers that come in the mail.

– Never loan your credit or debit card to anyone.

If you feel the need to pay for a friend’s meal or a tank of gas, go with them instead. Avoid co-signing for a loan or other financing.

– Make sure your computer software is up-to-date.

Many public Wi-Fi systems can be susceptible to hackers, especially those that are not password-protected. Download updates to your antivirus and spyware software on a regular basis to keep your personal documents and information safe. Never use a shared computer workstation to pay bills or shop online.

– Check your credit and debit card statements frequently.

Look for any suspicious activity or purchases. The sooner you identify potential fraud, the sooner any fraudulent charges can be refunded to you.

– Start with trust.

When shopping on unfamiliar websites, always check for the BBB Accredited Business seal and click to confirm it is legitimate. If there’s no seal, check the company’s BBB Business Review at bbb.org.

– Check your credit report at least once a year.

Experian, Equifax and TransUnion each offer a free credit report once a year. Visit www.annualcreditreport.com to request a report and look for any suspicious activity or inaccuracies.

To check the reliability of a company and find trustworthy businesses, visit bbb.org.