Like anything in life, accepting credit cards comes with some risk – but with good business practices, you can substantially reduce the chance of receiving a chargeback or be prepared should one occur. Here are a few tips to keep things running smoothly.
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.
Document the details
Disputes often originate when there is no clear agreement or policy to reference. Having your customers sign clearly written contracts provides clarity for both parties on what is expected and agreed upon. They can help to prevent misunderstandings and strengthen the business relationship.
Consider implementing the following:
- Customer agreements
- Signed contracts
- Terms of Service
- Refund, return, and/or cancellation policies
- Credit card authorization forms
Collect customer information up front
Knowing who your customer is (and having their contact information on hand) is invaluable should their payment be disputed: your client’s bank needs to be able to verify that their customer participated in the transaction and that the transaction was legitimate. Before processing any credit card transaction, obtain the following information:
- Full name
- Billing address
- Shipping address, if different than billing address
- Phone number
- Photo identification
Communicate clearly and frequently
Communication is key for your business because it strengthens your relationship with your customer. If you maintain open and clear communication with your customers, 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
Chargebacks can typically be initiated by cardholders for up to one year after the transaction took place, depending on the type of claim claim and the credit card company’s rules. Make sure you keep all relevant documentation for at least one calendar year.
- Keep copies of all documents where you can access them easily. If there’s a lot of paperwork, consider creating a file for each client.
- 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.
- If you frequently communicate with clients over the phone, send follow up emails detailing what was discussed, and save those emails, especially if the conversation involved any promises or 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 very difficult to dispute since most fraudulent payments are made with stolen credit cards. There are ways to prevent fraudulent chargebacks, if you are aware of the red flags.
Protect yourself 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
Do the scenarios above sound familiar? If you use Payments by Wave and have any concerns or questions about a recent Wave payment or interaction with a customer, you can always reach our team using the Help button when you're logged into your account. We can review your account and recent payments with you.