Chargeback & Retrieval Information
What is a chargeback?
A chargeback is the reversal of a previous sales transaction. When this occurs, the amount of the chargeback is debited from your deposit account. Reasons for chargebacks include a cardholder dispute or a processing error by the merchant's staff. Merchants can reduce chargebacks by following proper authorization and processing procedures.
Be aware of the most common reasons for chargebacks and take every precaution to guard against them.
- A card imprint does not appear on a manual-entry transaction.
- The cardholder claims that the merchandise or services for which they are being charged have not been received.
- The cardholder claims that the merchandise or services received were not as initially described or were received in defective condition.
- The cardholder claims that the transaction was cancelled and/or the merchandise w as returned.
- The signature on the draft is not a reasonable facsimile of the signature on the card.
- Splitting the sales between two or more sales drafts.
- Sales drafts and credit vouchers transmitted past the allowable time limits.
- Duplicate processing.
- Non-receipt of sales draft copy or original within the specified time on the retrieval request.
- Not preparing and submitting a rebuttal to a customer dispute within the specified time.
MC/Visa process thousands of chargebacks and it is impossible to notify the merchant before each one is initiated. If you wish to challenge a chargeback, you must do so within the specified time frame. There is strict time limitations instituted by Visa / MasterCard and you must respond within ten (10) days from the date of the debit to your checking account. Failure to do so may forfeit your right to receive credit to your account.
A chargeback is generated directly from the cardholder's bank. Your bank is unaware that a dispute has been initiated by the cardholder until the chargeback is processed. The cardholder is not always required to notify the merchant of their dispute prior to contacting their bank, nor is a retrieval request required prior to the processing of a chargeback.
If you have received a chargeback, DO NOT issue credit to the cardholder. The cardholder has received credit from their bank upon the processing of the chargeback.
There is a chargeback fee assessed to your account. This will be charged to you even if you have evidence to support that the chargeback is invalid. This is a processing fee that is charged upon receipt of a chargeback, regardless of the outcome.
What is a Retrieval Request?
Because of occasional billing questions, there may be instances when a copy of the sales draft is required by the cardholder's issuing institution. Visa requires that merchants retain sales drafts on or off premises for three (3) years. MasterCard requires 180-day storage. For tax purposes, however, you may wish to retain drafts for seven years.
When a sales draft is required from your records, you will receive a retrieval request listing the cardholder's account number, the reference number, the dollar amount and date of the transaction. Therefore, a storage system that is sorted by date can provide the speediest retrieval. Forward a copy of the draft along with the retrieval request form to the appropriate processing center. To avoid chargebacks for "copy not received" you should always mail the sales draft copy within the ten (10) day time frame. If you fail to respond to a retrieval request you may receive a chargeback for the transaction in question. There is no recourse available to the merchant for chargebacks received due to failure to respond to a retrieval request.
- Obtain a card imprint (either manual or electronic) and the cardholder's signature for every transaction, if possible. This is the only proof accepted by MasterCard and Visa that the authorized owner of the account number being provided engaged the transaction. The card imprint and the cardholder signature prove that both the physical credit card and the cardholder w ere present during the transaction. All non-face-to-face transactions such as mail order, telephone order, and electronic commerce transactions present a high risk of chargebacks for which there is minimal recourse available to the merchant.
- Utilize Address Verification Service (AVS) for all non-face-to-face transactions. AVS will verify that the address the customer is providing is also the billing address of the account number being used. Although this is not a guarantee against chargebacks received for unauthorized usage, it will prevent much fraudulent activity. AVS is also a requirement for all non-face-to-face transactions to obtain the best possible discount rate for the transaction.
- Check all security features on the credit card as well as the cardholder's signature on the back panel against the signature on the sales draft. If the transaction involves suspicious or unusual circumstances, call the voice authorization center and request a "Code 10" authorization. Do not complete a transaction if you suspect that the card is fraudulent and/or the customer is not the authorized owner of the card.
- Document any return/cancellation policy on the sales draft or other sales documentation that is signed by the cardholder. All return/cancellation policies must be in writing on the sales documentation that is signed by the cardholder to be considered valid notification by MasterCard and Visa. This includes any restocking and/or cancellation fees. Policies posted on Internet sites, distributed in shipment boxes, verbally delivered during telephone orders, and/or sign posted in retail locations are not considered valid notification and are subject to chargeback.
- Do not process a transaction for billing to the cardholder's account until the merchandise has been shipped and/or services have been received. You may obtain an authorization number only to ensure that the account number is valid and funds are available.
- Obtain signed proof of delivery for merchandise that is shipped to the customer. Should a customer dispute a transaction claiming that the merchandise was not received, only shipment tracers that are signed by the customer are considered to be valid evidence that a customer did receive the merchandise in question.
- Obtain a positive authorization response for all transactions. Do not complete transactions when a "decline" response is received or a no authorization request has been completed. This may result in a chargeback for which you have no recourse.
- Process all transactions for billing within seven (7) days from the date a positive authorization response is received. After this time period the authorization number is no longer valid.
- Do not ever run your personal credit card through your machine to obtain cash for yourself or any other person. This is considered fraudulent card activity and can result in the closing of y our merchant account with MasterCard and Visa.
- Lastly, please refer to you Merchant Agreement for complete information on accepting credit card transactions.