A chargeback is a return of funds used to make a purchase by credit card. A chargeback can occur if a customer disputes a purchase, claiming it was fraudulent or something went wrong with the service. When a customer disputes a purchase, their credit card company reverses the charge, crediting back the funds to them and debiting your business’s account.
Learn more about the chargeback process.
Collect customer information upfront
Communicate clearly and frequently
Document the details
Disputes often originate when there is no clear agreement or policy to reference. Have customers sign clearly written contracts to provide clarity for both parties on what is expected and agreed upon. Contracts help to prevent misunderstandings and strengthen business relationships.
Consider implementing the following:
- Customer agreements
- Signed contracts
- Terms of service
- Refund, returned and/or cancellation policies
- Credit card authorization forms
Collect customer information up front
In the event of a payment dispute, your customer’s bank will need to verify that they participated in the transaction, and that it was legitimate. Before you process any credit card transactions, know who your customer is by obtaining the following information for your records:
- Full name
- Billing address
- Shipping address, if different than the billing address
- Phone number
- Photo identification
Communicate clearly and frequently
Maintain clear, ongoing, and open communication with your customers, as they are more likely to discuss their concerns with you instead of going straight to their bank to initiate a chargeback. Consider reaching out to your customers to:
- Provide a status update on the project
- Notify them of any delays
- Make sure they are satisfied with the final service or product
Stay organized
Chargebacks can typically be initiated by cardholders for up to one year after the transaction took place, depending on the type of claim and the credit card company’s rules.
- Maintain all relevant documents and communication for at least one year. This includes formal documentation like contracts and authorization forms, and communications like emails and text messages.
- Keep documentation easily accessible. If there’s a lot of paperwork, create a file for each client.
- If you communicate with clients over the phone, send follow-up emails detailing what you discussed, particularly if the conversation involved any promises, commitments, or changes to a sale.
Be on the alert for fraud
Fraud is one of the most common reasons a cardholder may initiate a chargeback, and it can be very difficult to dispute since most fraudulent payments are made with stolen credit cards. Protect yourself from fraudulent chargebacks by looking for these signs of fraud and other suspicious behavior:
- New customers who contact you remotely via text or email and ask if you accept credit cards.
- Emails from less traceable email domains like outlook.com, ymail.com, and fastmail.com.
- Customers who want to pay more than your standard charge, and ask you to send the additional amount to someone else.
- Customers who ask you to refund a payment using a different method.
- Spelling mistakes and poor grammar.
- Failed payment attempts by a customer who then asks you to process the payments for them.
If you have any concerns or questions about recent transactions through Wave Payments, or interaction with a customer, open Mave, Wave’s automated chatbot, and type chargeback. Mave will help collect any relevant details and direct you to the appropriate support. Learn how to open Mave in Get support with Wave.