Minimizing Chargebacks – Tips for Protecting Your Business A chargeback - also known as a debit memo -is the reversal of a credit card sales transaction. Chargebacks occur when a customer successfully disputes a credit card sale through the bank that issued the card. Most chargeback situations can be avoided by implementing a few basic procedures.

Prevention Prevention is the key to minimizing chargebacks. An important starting point for a solid defense is to know the rules – make sure key staff members are familiar with the Visa® and MasterCard® Rules and Regulations provided by your processor. This will help avoid misunderstandings and set the stage for successful fraud and chargeback prevention efforts.

Providing your customers with a clear and concise return/exchange policy is another simple preventative step that any business can implement. Your policy should be prominently displayed, explained to the customer, and if possible, printed on the sales draft. This will help avoid confusion at the point-of-sale and make it difficult for the customer to dispute the policy at a later date. Customers who know your return/exchange policy will generally abide by your rules.

Another factor often overlooked is the importance of maintaining legible sales drafts. All transaction drafts should be kept in a safe and accessible location, just as you would any other financial documentation. If a customer questions a transaction on their card statement, they will typically call their card issuer and request a copy of the sales draft in question. As the merchant, you are required to provide a copy of the original sales draft. In most cases, the cardholder will recognize the transaction from the copy of the sales draft and the issue is resolved. If the original sales draft cannot be read, the transaction may be returned to you as a chargeback for "illegible copy".

Ensuring you maintain a good quality copy of the sales draft can help you avoid unnecessary losses on transactions. Visa recommends the following easy steps:

1. Position your company logo or marketing messages on sales drafts away from transaction information. Images printed behind text may be attractive but they make it impossible to clearly photocopy or scan a sales draft.

2. Check and replace the point-of-sale printer ribbon routinely. Faded and barely visible ink on sales drafts is the number one cause of illegible sales draft copies.

3. Change the point-of-sale printer paper when the colored streak first appears. This streak significantly diminishes the legibility of transaction information.

4. Keep the white copy of a two-part sales draft receipt - give customers the colored copy. Colored paper does not copy as clearly as white paper.

5. Handle carbonless paper and carbon/silver-backed paper carefully. Any pressure on carbonless and carbon-backed paper during handling and storage causes black blotches, making copies illegible.

Recourse If you receive a chargeback notice, you should first contact your processing bank to obtain an accurate account of the dispute. Assemble as much documentation on the sale as you can – the sales draft, return/exchange policy documentation, and a written account of the circumstances surrounding the transaction. You typically have 30 days to provide the documentation of the sale and present your side of the dispute. If you demonstrate solid point-of-sale procedures and adequate documentation that the sale was valid, the occurrence of chargebacks should be minimal.