Preventing & Fixing Chargebacks In Your Photography Business
Credit and debit cards. They are easier for everyone…right?
Sure they offer a whole bunch of convenient perks, but they also come with a whole bunch of new things you have to consider not only as a business owner, but also as a consumer. For example, have you heard of a ‘chargeback’? Chances are you haven’t unless you have had first hand experience with one, possibly as a victim of identity theft or maybe you had one happen to you as a merchant.
So, what is a chargeback for those of you luck enough to not have come face-to-face with one?
A chargeback is when the financial institution transferring funds from the consumer (your client) via debit or credit forcibly returns the funds from the merchant (you) back to the consumer. This ability to ‘reverse a transfer’ was created through the Truth in Lending Act for credit cards and the Electronic Fund Transfer Act for debit cards, as methods of protecting consumers. It does so in a few ways, such as:
- Allowing a reversal of funds transfer in the case of identity theft.
- Allowing a reversal when an item is never received.
- Allowing a reversal when the item received is substantially different from what is advertised.
This protection can incentivize merchants to provide their customers with quality products/services and good customer service.
The consumer can begin the chargeback process by contacting their financial institution and filing a complaint regarding a specific charge/transfer. If the financial institution deems the complaint valid and reverses the charge, they will also likely charge the merchant an additional fee between $15-100. In addition, to losing the money originally paid and the chargeback fee, you may also lose the product and shipping and handling costs.
What to do When You are at the Merchant End of a Chargeback
If a financial institution has reason to believe that the chargeback is valid, then they will issue your client a temporary credit, which will be debited from your account. You will receive notification of the chargeback (e.g., phone call, email, online chargeback system). At this point you can submit documentation to challenge the chargeback and if successful you will have the money returned to you.
The exact process may vary slightly from financial institution to financial institution, but this information should be readily available. Make certain that you follow all of your financial institution’s rules in responding otherwise your challenge may be rejected.
Chargebacks are often the result of mistakes and can be avoided. Therefore, there are many ways that you can help protect your business from unnecessary chargebacks. Many of the major financial institutions have provided merchants with suggestions on how to avoid chargebacks. Some of these suggestions are:
Proper Swipe Process:
- Do not repeat a transaction that has received an ‘authorization request declined’ notice.
- If you run a transaction and receive the ‘call’ message, call the authorization center!
- If you do not have a magnetic-stripe reader, in addition to keying in the credit card number take an imprint of the card.
- Only swipe or make an imprint of a card once. Multiple swipes/imprints leads to possible duplicate deposits and thus chargebacks.
- Make sure that each transaction is only entered and deposited once.
- Void all incorrect recipes and re-start a transaction in the case of a mistake rather than processing twice.
- Get a signature.
Proper Deposit Process
- Deposit sales receipts with your bank ASAP otherwise a chargeback can result for ‘late presentment’.
- Deposit receipts with your acquirer ASAP to avoid chargebacks for ‘credit not issued’.
Good Customer Service
- Disclose all return/refund/cancellation policies at the time of transaction.
- If a customer has a recurring transaction and requests that it be cancelled, respond and process the cancellation ASAP.
- Keep your clients updated on the status of their order.
- Provide refunds if necessary, BUT only refund back to the original card number and do so individually for each transaction.
- Ship only after depositing transaction to avoid a chargeback for not receiving the item.
- If there is a delay notify your client in writing and include any new dates.
- If delivery will be delayed or you cannot provide the item, let your client know in writing and offer options, such as substitution of another item or cancellation.
- For online transactions, make sure transactions are performing AVV (automated address verification) and require a CVV/CVV2 (card verification value) or CID (card identification digits).