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How to Avoid Chargebacks

April 24th, 2008

Chargebacks are one of those unpleasant topics of conversation most people would rather not have to discuss. None the less, every day we receive new inquiries from business owners, like yourself, with one question:

“What your policies regarding chargebacks?”

We believe it is best to prevent chargebacks in the first place. Instruct your staff to follow the procedures listed on this page to help prevent losses due to chargebacks!


  • Swipe the card’s magnetic strip through the terminal.
  • Verify that the last 4 digits of the card number that prints on the receipt matches the last 4 digits embossed on the card.
  • If the magnetic strip does not read, take a manual imprint of the card. (Visa/MasterCard regulations require that you take a manual imprint of the card, and have the customer sign the imprinted slip as proof that the card was present for the sale. Take a complete imprint and do not tamper with or alter the numbers.)
  • Obtain an approval code for the total dollar amount of the sale.
  • Verify that the signature on the sales draft matches the signature on the back of the credit card.
  • Close-out your terminal daily. Failure to settle your batches can result in unwanted chargebacks, not to mention extra surcharges imposed by Visa and MasterCard.
  • Change printer ribbons frequently and store thermal receipts in a cool dry place. Faint or illegible copies of sales drafts will not help you in case of a retrieval request or dispute.
  • File sales drafts and batch reports by date so they are quick and easy to find. Keep these readily available for 1 year and on hand for 3 years.
  • Make sure your store’s return or refund policy appears on the sales drafts that your customers sign. Payex will customize your terminal programming to include your store’s return policy on your electronic receipts.

Many inquiries are resolved without the merchant’s involvement; however in some cases the Visa/MasterCard compliance center will issue a “Retrieval Request” for the merchant to submit a copy of the credit card sales draft.
It is vitally important to respond to retrieval requests promptly— within 5 days. Visa/MasterCard will issue an automatic chargeback if you do not respond to a retrieval request in time. Send a legible copy of the signed sales draft to the fax number or address noted on the request. Include your name, merchant number and telephone number on all pages of correspondence. The processing center must be able to contact you if pages get separated or are not legible. Save your fax confirmation or certified mail receipt.

At Payex we offer our clients a two-tiered approach of education and advocacy. Check with your processor to learn their policies regarding chargebacks and see if they offer advocacy in cases of compliance.

Entry Filed under: Advice,Rules and Regulations

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