Per Card Association rules, a cardholder has the right to dispute any charge made with their debit or credit card. The best way to deal with chargebacks is to defend against them before they occur. Being prepared in advance can also help reduce the risk of future chargebacks. So how does a business accept online payments and mitigate the risk of chargebacks?
What is a chargeback?
A customer makes an online transaction then later initiates a dispute of the charge with their credit card company or financial institution. The dispute will fall into either one of two categories.
Types of Chargebacks
In either case, the merchant (the business) is still responsible and must address the chargeback claim.
There is good news – chargebacks can be prevented. Here’s how:
Helpful Tips to Reduce Non-Fraudulent Chargebacks*
Provide accurate property descriptions
Views, parking, size of space, neighborhood, and location are examples of pertinent details – make sure you are giving accurate information to your potential renters.
Disclose cancellation policies at checkout
Provide “click to accept” or other acknowledgement button, checkbox, or location for an Electronic Signature. This provides a safeguard confirming that your cancellation policy was disclosed and acknowledged by your customer. A copy of the completed transaction that includes the cancellation policy and the date and time that your guest clicked to accept is best.
Maintain a clear cancellation policy to cover all scenarios.
For example, if a reservation is cancelled between 0-15 days, no refund is available, if 16-30 days, a refund of 50 percent will be given; if 30-45 days, a full refund will be given. All refunds will be given back in the form of the payment received, within 7-10 business days of being processed.
Display all your policies clearly
To do this, create a main menu item labeled “Policies” or “Terms & Conditions,” send the rental agreement to the guest to sign and return (this can and should be done at check-in) and have the guest initial any important clauses in the agreement such as a cancellation policy reminder, or policies around pets or smoking. Send your customers an e-mail confirmation that contains your detailed policies with every reservation.
Keep a check-in procedure
We recommend having a standard procedure for verifying your guest and their payment.
In-person check-in (safest method):
- Visually verify cardholder’s ID and payment card processed at the time of booking. Confirm the following pieces of information:
- The last 4 digits match the card processed at the time of booking
- The card network symbol matches the card processed at the time of booking (Visa, MasterCard, Discover, American Express)
- The name on the card matches the ID that was provided at check-in
- Require cardholder’s signature in the registry or guestbook
- Require cardholder’s signature to confirm in-person receipt of your policies
If an in-person check-in is not possible, use Apple FaceTime, Skype, or similar video chat technology to confirm your guest. Follow the same ID and payment card verifications and policy overview procedure as in-person check-in. Consider requiring that your guest send a picture of themselves at the property in front of the house/unit number as proof of stay.
Provide excellent customer service
Providing refunds (Refundable Deposits, RDD, Cancellation Refund, Pet Deposit) in a fast and timely manner, keep guests happy and issues small. It is a good idea to include a refunds in your policy and advise the customer of the refund policy.
Address guest concerns quickly before they escalate into a dispute:
Can a small discount satisfy a guest and prevent a chargeback for the full amount later? The faster a concern is addressed, the less likely the concern is to become a large issue.
Helpful Tips to Reduce Fraudulent Chargebacks
Follow the steps outlined above and then some!
Check-in procedures are particularly vital to discourage fraudsters from using your property.
Check for suspicious activity
Exercise extreme caution with last-minute reservations (best defined as reservations that are made less than a week before a scheduled stay) or reservations for unusually lengthy or continuous/prolonged stays. Look for email addresses that seem fake, unusual, or are undeliverable.
Use caution with guests that actively avoid or decline to follow your check-in policy, especially in regard to visual verification of ID and payment card.
If your guest is using another person’s card, confirm that the cardholder is present at check-in and is subject to in-person ID and payment card verification.
Refunds should be issued using the original payment method. Even if the guest offers to accept less than a full refund, do not process card refunds via alternative payment methods (like bank wires or checks).
Verify customer information
Use a reverse phone look-up or third party data supplier to verify customer’s name and address (Example of reverse phone look-ups at www.whitepages.com), check ID at check-in to confirm that it is a real person. And call the guest to confirm the phone number is real and ask questions to make sure everything checks out. You can also use a search engine or social networking site to verify the name and/or address from the receipt.
* Please note, the examples listed are designed to help a property owner think of all aspects of the transaction. These alone will not protect in all cases, but they should be used as a guide to help set a variety of preventative measures in place.
Please visit the Card Association links below to learn more about the guidelines around the chargeback process.