How to manually reduce chargebacks and fraud?

A chargeback is defined as a forced reversal of a credit card transaction. This most commonly happens when a person enters someone else’s credit card number to order your product or when a cardholder has an intention to scam a merchant. Because of the prevalence of identity theft and other similar internet scams, customers can now dispute the charge at their banks and the bank will then contact the credit card company (Visa, MasterCard, AmEx, etc) to reverse the transaction. The reversal process has become so much easier because of the ID theft solutions advertised by credit card companies which gives customers right to “dispute any charge for any reason at all, or no reason for that matter”.

For a merchant, this is a serious disadvantage since you will have to give back the original fee plus the transaction cost, the penalty fee not to mention the fact that you’ve lost your product. Of course you can still battle against the credit card company but this will cost you even more time and money.

But these aren’t the worst things that could happen. If you are getting a lot of chargeback’s and refunds, your merchant account can get suspended, or in extreme cases, you will not be able to apply for a merchant account offered by other providers!

These are the reasons why you need to find ways to reduce your chargebacks. No matter how highly you regard your customers, you still need to ensure that you are protected from dishonest ones! Here are 9 tips that can help you prevent credit card chargebacks:

1. Use CVV verification and 3D Secure (Verified by Visa / MasterCard SecureCode) for all online orders. These two systems should always be used for online orders because together, they can reduce the chance of a merchant of accepting a fraudulent transaction, with 3D you also get the benefit of liability shift.
2. Investigate large orders requesting for overnight delivery before shipping them out. Call the customer to verify their information. Don’t ship the product until you’ve spoken to the credit card holder, have verified their address and personal information.
3. If you notice that a card has been declined several times, make it a point to verify the order before shipping it out.
4. Describe your refund and return policies on your website very clearly. This might not prevent a chargeback but it can help you fight against it. Ensure that your return and refund policy is clearly stated, this way you make it more difficult for a customer to win a chargeback.
5. Provide good descriptions and images of the products on your site. This way, you can help your customers order the right product.
6. If your business name is not the same as what appears in your credit card transaction statements, make sure your customers are informed of this.
7. Be cautious of orders originating from foreign countries, especially Nigeria and Indonesia. Many credit card fraud incidents originate from these countries. Don’t turn down their order, but you can offer money order payment option before you ship the product out.
8. Be cautious of domestic orders with foreign shipping address. It is a good practice to ship only to the cardholder’s address. Also, investigate the transaction before you release any products for shipment.
9. Do not process an order where a customer is willing to pay more in order to expedite the order process. This is the most common tell tale sign for a fraudulent transaction.