Electronic Exchange Systems
1 (877) 865-7744
Register Now for EXS


A chargeback is a previous transaction that is being disputed by the cardholder or their issuing institution. A chargeback occurs when a cardholder disputes a charge or when proper bankcard acceptance and authorization procedures were not followed. If you receive a chargeback, your deposit account is debited for the indicated amount. In addition to the chargeback, you may incur a $50.00 fee if you failed to follow card acceptance and authorization procedures. Reasons for chargebacks include a cardholder dispute or an error in handling on the part of a merchant’s staff. Chargebacks are rare if proper authorizations and processing procedures are followed.

Some Do’s and Don’ts of Chargebacks

You can significantly reduce the chance of receiving a chargeback notification by taking the following precautions:

  • Do not charge a cardholder before shipping the merchandise
  • Do not accept sales that are not authorized for the exact amount
  • Do not accept sales that are declined, and if a sale is declined, do not attempt authorization a second time on a declined sale. The cardholder bank may collect a $50.00 fee if you fail to follow card acceptance and authorization procedures.
  • Do not accept an expired card
  • Do not accept a card before the effective date on adual dated card
  • Do not process a credit as a sale
  • Do not deposit the sales draft more than once
  • Do not deposit an incomplete sales draft
  • Do not accept a sales draft without a cardholder signature
  • Do not participate in a suspicious transaction
  • Do not obtain an authorization by using multiple transaction/split sales drafts
  • Do not accept a card where the account number obtained off the magnetic stripe does not match the account number on the draft
  • Do understand that you assume all responsibility for the identity of the cardholder for all fax, Internet, mail order and telephone order sales
  • Do prepare and submit a written rebuttal within the time specified on the chargeback notification
  • Do accept cards where the cardholder account number is valid
  • Do authorize all sales
  • Do verify arithmetic on sales drafts
  • Do charge the cardholder for the correct amount
  • Do deposit the sales draft before the contractual time limit
  • Do credit the cardholder for the returned merchandise
  • Do credit the cardholder for a canceled order
  • Do verify that the signature on the sales draft matches the signature on the card
  • Do verify the authorization code
  • Do obtain a manual imprint, if unable to capture from magnetic stripe.

Note: Association Chargeback Fees: The card associations permit the cardholder bank to collect additional fees for items that result in a chargeback. You may be subject to these Association Chargeback Fees if you failed to follow card acceptance and authorization procedures and the card issuer has a valid chargeback.

Effective April 2005, a special Visa program is being launched for registered Utility MCC 4900 merchants who affirm they will abstain from charging convenience fees associated with bill payments.

A percentage-based fee is permitted ONLY for consumer tax payments. This is a pilot program available at this time for registered merchants only if the merchant or their third party servicer has demonstrated compliance with Payment Card Industry Data Security Standards (PCI DSS).

In the normal course of business, the card associations do not monitor other merchant fees that are uniformly applied to all payment types, such as shipping and handling fees or student registration fees, since they do not discriminate or limit card acceptance.

Some merchants, such as ticket sellers and travel agents, may charge consumers for costs associated with the value-added services they provide and the merchant name and other transaction data must indicate the merchant of record. Businesses that facilitate credit card payments for other merchants are subject to additional requirements and require registration and interaction between EXS and the Card Association.

Note: The requirement for an alternate payment channel means that MOTO and electronic commerce merchants whose payment channels are exclusively non face-to-face may NOT impose a Convenience Fee. A merchant who accepts face-to-face payments is not required to accept cards through this payment channel to meet the above requirement.

Take Charge of Chargebacks

Chargebacks are one of the most common - and costly - ways that fraudsters take advantage of merchants. For example, some fraudsters, appearing to be legitimate customers, will take both the “merchant copy” and “customer copy” of the sales slip after they have signed it. When they receive their credit card statement, they dispute the charge. And, since your company has no record of the transaction, the full amount is credited back to the consumer, and you face a loss.

There are steps you can take to prevent chargebacks based on fraud from occurring. Here are some examples based on the card processing method used:

Processing Transactions Manually with an Imprinter

  • If you process transactions manually, be sure to take an imprint of the card every time a purchase is made with a credit card
  • Use the appropriate draft for the appropriate card (i.e. only use a Visa sales draft for a Visa card)
  • Be sure to call in for authorization for every credit card transaction
  • Make sure you neatly print the sales draft so that it is clear and easy to read
  • Don’t forget to write your merchant number on the draft
  • Have the customer sign the receipt while you watch and verify that this signature matches the one on the back of the card
  • Don’t divide one purchase on to more than one sales draft
  • Do not change or alter the sales draft after the customer has signed it - if there is a dispute, the customer’s copy is treated as correct
  • If a transaction has been cancelled by the customer, take the required steps to stop, reverse, or stop the billing immediately
  • Be sure to display your return policy at the point of sale - remember, it is your responsibility to inform customers of this policy
  • Maintain a well-trained staff and ensure that they follow check-out procedures correctly
  • Save all copies of your sales draft in case of future disputes.

Processing Through Electronic Point-of-Sale Terminal

  • Be sure to always swipe the card through an electronic point-of-sale device whenever possible – keying in transactions increases your exposure to chargebacks
  • Be certain your return policy is stated clearly on all of your materials or receipts
  • Keep your point-of-sale equipment clean and operating efficiently.
    Mail and Telephone Orders:
  • If possible, establish the customer’s identity by writing their name, address, credit card number, and expiration date on the sales draft (also include name of issuing institution)
  • Be sure to call in for authorization for every credit card transaction
  • If you are taking an order over the phone, fax, Internet, or by mail, only ship items to permanent addresses – steer clear of post office boxes or hotel lobbies or freight forwarders
  • Always send a copy of the sales draft and order form to the customer either when the product is ordered or when it is shipped.

Protecting your e-Business

Internet merchants should be just as aware of the risks of fraud as traditional merchants, and should consider ways to prevent fraud. If you are creating or operating an online store, be sure to learn about security risks by assessing your shopping cart procedures, securing your online transactions, and letting your customers know that your Web site transactions are safe.

In addition, here are some key ways you can prevent Internet fraud:

  • Post your purchase policies on your Web site where your customers can see them clearly
  • Start by taking a few extra steps to confirm each order, and reject orders that leave out important information
  • Be careful when dealing with orders that have different “ship to” and “bill to” addresses
  • Avoid shipping to post office boxes, hotel lobbies or other addresses that are not permanent, as these addresses can be harder to trace later
  • Pay extra attention to orders that are larger than your usual orders, as well as international orders, especially if express shipping is requested
  • Note the customer’s e-mail address and make sure it is valid and matches the cardholder’s name
  • Be sure that each transaction is authorized correctly and that proper procedures are followed
  • Do not accept other merchants’ requests to deposit their receipts through your account – if any items are charged back, you will be responsible for them
  • If you are skeptical of an order, call the customer to confirm.

Your Right to a Rebuttal

If you receive notification of a chargeback, you have the right to request a rebuttal. A rebuttal is a merchant’s written reply to a chargeback that provides documentation proving that the sale was valid and that proper merchant procedures were followed. Rebuttals must be completed within the number of days indicated on the chargeback notification. Contact Customer Service for more information on rebuttal procedures.




CONTACT US |  EXS is a registered ISO of Wells Fargo Bank, N.A., Walnut Creek, CA