Best practice to minimize chargebacks

If a chargeback happens, defending a chargeback can be a lengthy, costly process, and your dispute rate with that card network increases. In addition, the bank’s goal is to protect their cardholders from having to pay for something they didn’t authorize or feel was misrepresented or damaged.

Therefore, besides of the process you can do after you receive the chargeback, actually most of the chargebacks can be attributed to improper transaction-processing procedures and can be prevented with appropriate training and attention to detail. We provide the following best practices to prevent chargebacks:

Provide good customer service

• For prepared transactions, always provide merchandise or service within the required time frame. If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
• For out-of-stock items, if the cardholder has ordered merchandise that is out of stock or no longer available, advise the cardholder in writing. If the merchandise is out of stock, let the cardholder know when it will be delivered. If the item is no longer available, offer the option of eith​er purchasing a similar item or canceling the transaction. Do not substitute for another item unless the user is in agreement.
• For card-absent transactions, do not deposit transaction receipts with your acquirer until you have shipped the related merchandise. If users see a transaction on their monthly statement before they receive the merchandise, they may contact their card issuer to dispute the billing. Similarly, if delivery is delayed on a card-present transaction, do not deposit the transaction receipt until the merchandise has been shipped.
• If a user requests cancellation of a transaction that is billed periodically (monthly, quarterly, or annually), cancel the t​ransaction immediately or as specified by the user. As a service to your user, advise the user in writing that the service, subscription, or membership has been canceled and state the effective date of the Cancellation.
• Prepare a complete Standards of Procedure (SOP) for Customer Service to process disputes as early as possible and notify users about it.

Avoid irregular operation

• Do not complete a transaction if the authorization request was declined.
• Do not accept a card after its expiration date.
• In card-present situation, try to swipe the card in proper way. If, for any reason, you must key-enter a transaction to complete a card-present sale, make an imprint of the front of the card on the transaction receipt, using a manual imprinter. Do not capture an impression of the card using a pencil, crayon, or other writing instrument. However, this process does not constitute a valid imprint. You might still face chargeback due to fraud reasons.
• Ensure that the transaction information on the transaction receipt is complete, accurate, and legible before completing the sale. An illegible receipt, or a receipt which produces an illegible copy, may be returned because it cannot be processed properly. The growing use of electronic scanning devices for the electronic transmission of copies of transaction receipts makes it imperative that the item being scanned be very legible.
• If the cardholder is present and has the account number but not the card, do not accept the transaction. Even with an authorization approval, the transaction can be disputed and sent back to you if it turns out to be fraudulent.
• In the card-absent environment, do the proper verification you need to protect you from friendly fraud.

Website display

• Provide your contact information, such as the telephone number of your registered office and e-mail address on your official website so that your users can reach you easily.
• Provide access to the shipping policy and return/refund policy on your official website to ensure your users are fully informed before placing an order.

Other suggestions

• If you are an indirect acquiring partner, you are responsible for managing your sub-merchants in complying with the above requirements.
• You should retain the related transaction information for at least 360 days as supporting materials for dispute defense.
• The quality of goods/service must be maintained.
• You are to maintain the stability of their systems.