Managing Invalid Chargebacks On Ecommerce Merchant Accounts

Merchant Warehouse |

December 9, 2010

Once you’ve had the pleasure of completing your first transaction and received a payment from your very first customer, you need to continue to conduct your business with those practices that will keep you in good standing. By doing so, you will be able to dodge those all-too-common annoyances like chargebacks (valid and invalid), incorrectly processed receipts, merchandise returns for credit and other customer disputes.

With so many people starting small businesses, some that grow big and others that don’t, it is not always the case that standard business sense and basic organizational procedures are followed. Besides the basics of being generally well organized and prepared for different challenges, there are practices specific to handling merchant accounts that you must learn quickly.

Here are a few suggestions to take into consideration.

You should implement them into the way you process payment card transactions, manage your account and, essentially, run your business. Remember that customers may misunderstand some portion of the sales process – the timing of a delivery, the company name that will appear on their charge statement, etc. – so make sure they know everything they need to know about the purchase they are making. Many chargebacks are easily avoided, others less so, but good communication with customers will benefit you in many ways, including this one.

To reduce the incidence of invalid chargebacks:

Use one sales entry for each completed transaction. Transactions should only be entered once and deposited only once as well. You will most likely receive a chargeback for duplicate transactions

Duplicate payments or sales receipts need to be voided. Inaccurate sales receipts can cause issues. Be sure to void duplicates correctly and process payments only once.

You will want to deposit the sales receipts with you merchant bank at the end of every business day. Never hold on to them. This includes all transactions from all the various payment cards.

Ship products before completing the transactions. For ecommerce and direct marketing transactions, generated in “non-physical” environments, your merchant bank should not receive deposits for any sales until the customer has received his/her merchandise. If customers discover what they consider an unauthorized charge on their credit or debit statement, they will most likely contact the card-issuing bank to dispute it. In similar instances, if delivery is delayed on card-present transactions, deposits should be held until the product has been shipped and then received by the customer. These days, transactions are posted on cardholders’ accounts and can be reviewed in almost real time, so take care.

For cancellations of duplicated transactions should be handled immediately, as specified by the customer. If it has been proven that the payment was duplicated, you must void it at once. Then send the customer a written note that the service, subscription, product shipment or membership has been canceled and state the effective date of the cancellation.

There are certain time frames within which you must contest any chargebacks, so check your agreement or speak with your merchant account provider about this if you are uncertain about the allowed time. Because most providers and banks will not process a second reversal, you must have all your documentation in order and present your case in a clear, coherent manner.

You can avoid chargebacks, invalid and otherwise, by adhering to the guidelines and procedures established by your account provider and bank If you do receive a chargeback you consider erroneous, your should investigate immediately. If you do decide to dispute the chargeback, contact your account provider and/or bank immediately and be prepared to offer the documentation of the incident.

Chargebacks, refunds, returns and other disputes can be minimized by good customer service practices and open, honest communications with customers. Whenever possible, contact customers directly to resolve the disputes and remember, your reputation is on the line with every transaction. Honesty and integrity really are priceless when it comes to business.