If you are reading this then you have probably experienced the chargeback problem. Over the last 6 months I have prided myself on not getting any chargebacks from a new Mini Site I created. In fact I did have one in that period and I won that dispute. Then May hit and I got slaughtered with 4 in a row.
How does a guy with a Mini Site get 4 in one month when he prides himself on not getting any? It happened for one reason – I should have walked away from these sales.
A chargeback occurs when the authorizing bank, that is the cardholder’s bank, the one that originally authorized the charge in the first place, decides that it was wrong and asks for the money back. They don’t actually ask. They actually reach into your bank account and take the money back.
They just reach in and take it. At this point you don’t even know who is charging you back. In a few days the chargeback material will come in the mail. It’s usually very sparse, not giving a lot of information. You then have to spend hours fighting the system trying to get your money back.
The object is to learn from your mistakes. To learn from your mistakes you need to know what is happening during a transaction.
When a bank is making an authorization it is checking AVS. AVS is the Address Verification System. The AVS checks the street and the zip code of the billing address. Newer systems also check the CVV2 (card verification value 2 – which is the last three digits on the back of a credit card). Notice how they are not checking the name. The name to a bank is fairly meaningless. They are just checking address information.
What to watch for on fraudulent transactions:
1. Does the product need to be shipped “next day air?” This is a big red flag. If you see “next day air” and it is not associated with a company you had better call to confirm the order.
2. Is the dollar amount well over your average sale? Fraudulent individuals placing orders typically do not purchase 20 items; they will purchase 3 or 4 expensive items. The order looks normal except for the dollar amount.
3. Does the “Bill To” AVS match the street and zip code? If they don’t match you had better call the customer.
4. Is the “Ship To” and “Bill To” the same? This is a very strong indicator when matched with the “Bill To” AVS. If they are the same and the AVS doesn’t match then call. Having the “Ship To” and Bill To” the same is actually very weak indicator if the AVS is negative since the card company in not checking the name. You could have a Freight Forwarding company on your hands.
5. Does the invoice email bounce? When your shopping cart completes an order it probably sends and invoice to the buyer. If that email bounces (which could be for a variety of reasons) then that warrants a call.
6. Do you have multiple orders from an individual within a few days? Repeat orders are wonderful. Just make sure you are using good customer service and calling the customers thanking them for their business. That is when you find out if that person actually exists.
How you can protect yourself.
Have a written policy on the subject of credit card transactions. This policy should cover:
1) When will you ship automatically?
2) What does a suspicious order look like?
3) What actions do you take with suspicious orders?
Also to protect yourself make sure that your name appearing on the buyer’s credit card statement is your company’s name. That will keep the confusion down and stop chargebacks of legitimate transactions. People forget they have made a charge and if they do not recognize the company name on their statement they will assume that it is fraudulent.
My chargebacks occurred because I should have walked away from some sales. You need to pay attention to who is buying from your store. Look over your written policy on accepting credit card payments. Do not deviate from that policy.
David Peterson is a Managing Partner with Proactive Sale. He has 20 years selling and sales management experience. During those 20 years he has been responsible for over 50 million in sales. Visit his site at http://www.proactivesale.com/
