Chargebacks occur when a cardholder disputes a charge that a business ran on their card.  While not overly common, they can be costly.  Here are a few things you can do to limit your exposure and give your business the tools to handle disputes as reliably as possible.

What Does the Chargeback Process Look Like?

  1. A purchase occurs. Either in person, in an app, or online.
  2. The cardholder contacts their credit card company and asks them to investigate the charge.
  3. Their credit card company (issuing bank) reaches out to the business’ Merchant Services processor asking them to provide proof of the purchase. Funds are then debited from the business and a temporary credit is provided to the cardholder.
  4. After reviewing proof, the issuing bank must decide whether the purchase was valid
  5. The customer is informed of the decision. If they decide in favor of the cardholder, the funds remain with them. If they decide in favor of the business, funds are credited back appropriately.
  6. In either circumstance, each party has the option to enter an arbitration process to dispute the decision. The result of arbitration is final as far as the chargeback system goes, but either party may take the issue to a court of law if they wish, at their own expense.

Here are a few ways you can prevent chargebacks.

Understand Why Chargebacks Happen

There are four main reasons why chargebacks happen:

  1. Because the customer didn’t (or says they didn’t) receive an item they ordered.
  2. They feel the product or service was substandard or not what it was represented to be.
  3. They were incorrectly billed.
  4. The customer doesn’t recognize the charge on their statement.

Understanding these four reasons can help you create a strategy to minimize chargebacks.

Use a Clear Payment Descriptor

If a customer looks at their bank statement and they see something they don’t recognize, they’re more likely to dispute it. If, for example, you list a different company name than what your customer might recognize, it could raise red flags. Many companies have experienced trouble using an abbreviated name or using their parent company name rather than their DBA.  Your descriptor is set up by your processor when you apply for Merchant Services and can be updated at your request.

Follow Processor Protocols

Every credit card processor has its own protocol when it comes to how you should accept credit cards to best protect your business and your customers. Here are the protocols for the top three processors:



American Express

Get it in Writing

Whenever possible, have your customer sign off on the product or timeline of service.  Even when a physical signature isn’t possible or a card isn’t present, a contract signifying that the customer gives you authorization to charge their card for a certain amount, could reduce the likelihood of chargeback.

Use Good Customer Service to Head it Off

Your credit card processor will notify you of a chargeback.   If you find that a customer is disputing a charge, it’s a good idea to address it head on.

Train Your Employees

Educate your employees on the financial impact chargebacks can have on the business and how they can help avoid them.  Specifically, look for suspicious transactions, verify signatures on transactions when a card is present, and obtain signatures for sales orders when appropriate.

Keep Good Records

When a chargeback notification arrives, the time to respond is usually relatively short.  Having your records organized is helpful to ensure you don’t miss your response window.  Different businesses would have various forms of documentation, but this can be anything from contracts and emails regarding the order to a signed card receipt from your terminal.  If you verify ID, note it was checked on the slip.

Provide Buyers with Contact Information

Take Extra Precautions with Higher Ticket Items

Higher ticketed orders open more risk to your business so it’s important to be sure you know your customer on these types of sales and take additional measures of caution.  Additional safety measures may include purchase signature confirmation, using a shipping service that offers tracking, and using shipping insurance. Shipping to the cardholder’s billing address and requiring signature upon delivery will help protect you in a chargeback. Picking up the phone and contacting your customer before shipping the order can also be helpful to ensure the sale is expected as intended.  For example, if you reach out to the customer but the contact information doesn’t work or, if you get a nonsensical or evasive answer from them, you should proceed with caution. Also, sometimes fraudsters like to overnight packages and sell them quickly before they’re exposed. Waiting a couple days to ship can prevent this sort of fraud as well.

Provide a Clear Return Policy

Customers often dispute if they don’t feel they have any other option. If you’ve made them aware of your return policy and they feel empowered to use it, you could get your merchandise back without needing to do a chargeback.  Having a clear return policy in writing on something the cardholder signs can also help protect your business in a chargeback.  For example, if all sales are final, have that included on your credit card receipt footer.

Provide Realistic Delivery Date or Online Tracking

Some disputes happen when a customer is charged for a product, but they don’t receive it in a reasonable amount of time, leading them to believe they’ve been ripped off. Providing up front communication about the delivery date, and updating your customer if delays occur, can alleviate this miscommunication.

Issue Returns Quickly and Let Customers Know When You’re Out of Stock

If payment is processed but you don’t have the merchandise, quickly reach out to the customer and provide a refund so they’re not stuck in the lurch getting frustrated over something that isn’t coming or is delayed.

Ask for Enough Information in Online Purchases

In today’s fast paced business environment, businesses often don’t capture enough payment information. Not having this payment information could put you at risk. Information that is good to have, depending on the purchase avenue and purchase price, are signature confirmation, photo identification, CVV code, address or zip code, signed purchase order or a signed contract.  Address and zip codes should match the cardholder’s billing information.


While chargebacks are inevitable for many businesses, by putting some of these tips into action, you can make strides toward reducing their total impact and protect yourself from fraud.

If you’re interested in potentially reducing your merchant service costs and working with a team that provides personalized and responsive service, reach out to WECU’s Merchant Services Team.