How to Prevent & Fight a Chargeback at Your Facility

How to Prevent Chargebacks at Your Facility

Rebecca Twomey
Apr 22, 2021 6:15 AM

Difficulties with customers are never fun, and this is especially true when it comes to chargebacks. 

As a business owner, chargebacks can be a headache. But the good news is that there are processes and procedures that can be put in place to help avoid situations where a chargeback might occur.

In this post, we'll discuss how you can prevent and avoid chargebacks from occurring at your facility. Next week, we will publish a post on how to fight a chargeback. But first, let's go over what a chargeback is.

What is a Chargeback?

A chargeback, or a payment dispute, is when a cardholder questions a transaction and makes a request to reverse it with their issuing bank. 

The option to dispute a payment is intended to protect consumers against unauthorized transactions. It certainly comes in handy in fraud situations like credit card theft. But, it can also become a big roadblock or problem for your business

There are a number of chargeback types, causes, or reasons. 

Chargeback Reasons & Tips to Avoid Them in the Future

When a chargeback is initiated, a chargeback reason is stated. Here are some common causes.

1. Chargeback Reason: Fraudulent Transactions

If you’ve ever seen a charge on your credit card statement that you didn’t recognize, this chargeback reason might sound familiar. This reason is cited in situations where a cardholder does not recognize a transaction and they decide to file a dispute. It can also include actual fraud, a stolen credit card, friendly fraud, a family member using a credit card without permission, scam artists, and more.

As an FEC owner, it’s important to do what you can to try to protect your business from fraudulent transactions. While you can’t avoid every possible scenario, there are a few things you can do to spot fraud and stop a potential chargeback.

Tips to avoid potential fraud-based chargebacks:

  • Require Name Matching

If a customer is booking a birthday party, consider requiring a name match across the contract and credit card.

Customers requesting to pay with a credit card that does not have their name on it could end up being a huge red flag and potential future chargeback. Save your sanity and avoid taking any credit card without proof of identification.

To protect yourself in transactions like online deposits, require a name match on the contract and credit card, along with an address and zip code match. When the customer visits your facility, ask them to use the same credit card they used online (and be sure to have them insert it in the EMV chip reader). To add an additional level of protection, consider snapping a photo of their driver’s license.

  • Train Your Staff to Spot Potential Fraudulent Behavior

Fraud can happen at any time and it often takes a keen eye to spot it. Training your staff on how to spot potential fraud is key to helping protect your business. What are some things your staff can watch out for?

Hesitation, followed by the person using a credit card with someone else’s name on it during an over-the-phone transaction.

This one might seem obvious, but it happens frequently. Your FEC is packed and someone calls in to book a birthday party. Your staff member is excited to snag this $500 party plus food add-ons and they’re busy selecting options on the screen. The next thing they know, they’re typing in a credit card number, followed by a different name than the name making the reservation. “Oh, it’s my mom’s card, she’s paying for the party.”

Watch out! This has the potential to be a future chargeback.

  • Excitement to book a party, followed by the person using multiple credit cards. 

“Can you split this between these three cards please?” It might seem like a simple request. You might even feel like you’re doing your customers a favor. But this move could end up resulting in a chargeback later. Be cautious!

  • A transaction is taking place, but something seems off.

Your staff member asks the customer to insert their EMV chip card into the reader. Instead, they start shifting around with the machine and you realize they’re typing the card number in. You ask why, and they say the EMV doesn’t work. Be careful, something might be off. In this situation, coach your staff member to state that you have a policy requiring ID for any non-EMV transactions.

2. Chargeback Reason: Credit (Refund) Not Processed

Sometimes customers are quick to jump the gun. You both agree that they will receive a refund, but they don’t see the refund immediately so they decide to process a chargeback to get their money back.

In situations like this, be cautious not to provide another refund until your case has been reviewed to avoid a duplicate refund.

Tips to avoid potential refund-based chargebacks:

  • Communicate Clearly

This chargeback reason is often the easiest one to solve as it’s simply a result of a misunderstanding about the refund process.

To avoid this in the future, be clear about how the refund will work. “Susan, I am refunding your party deposit in the amount of $150 right now. Please know that it could take anywhere from 7-15 days to appear back in your account. If you have any issues at all, please call me first.” 

3. Chargeback Reason: Dissatisfaction with Service Provided

This chargeback reason is a very tough one in the Family Entertainment Center industry with party transactions being so large. If a guest decides that they were not satisfied with the services you provided, or they felt that you did not provide the services you promised, they might file a dispute against the transaction.

Why might a guest be dissatisfied? This is an unanswerable question as the reasons are endless! Your guest might have felt like they were ignored by your staff, their food might have arrived late or was too cold, an altercation might have taken place, the guest of honor might have had an allergic reaction to something. The list can go on.

4. Chargeback Reason: Pricing Issue (or Shipping/Delivery Error)

Mistakes happen. And sometimes customers are mistakenly overcharged. If you offer shipping or delivery services, you might also experience this reason type for chargebacks.

If a pricing issue is the reason for your customer’s chargeback, do some quick digging to ensure that everything was correct. You’ll also want to make sure that you did not already provide a refund--sometimes customers jump the gun and report a chargeback while simultaneously communicating about the refund with you.

If a customer was mistakenly overcharged for an item, this can also be a simple fix. 

5. Chargeback Reason: Business Name Not Recognized

Have you ever looked at your credit card statement and noticed a purchase by “XYZ Incorporated” or something that looked off? 

Sometimes business names appear strange on bank statements. Because of this, you might see this as a reason code on a chargeback. 

This is often just a simple misunderstanding and once the information has been clarified, the case can be closed and everyone can move forward.

NEW RESOURCE

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In our eBook, you'll discover:

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  3. Current state laws and statutes on pre-event waivers, releases, and electronic agreements. 

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Digital Waivers eBook - CTA - Blog

What Are Chargeback Reason Codes?

To recap, chargeback reasons are the causes associated with a transaction being charged back. And while chargeback reasons are helpful, it can be tough to encapsulate every single chargeback situation in a simple description.

To help clarify descriptions, each card company has developed their own list of chargeback reason codes to indicate the specific reason why a cardholder has initiated a chargeback dispute.

Below is a list of links to each major credit card's reason codes and descriptions. 

What More Can I Do to Avoid Chargebacks?

With the average win rate of chargebacks at around 27%, it is wise to focus some energy on avoiding chargebacks before they ever occur. 

The best way to do this is to think through your sales process and consider each touchpoint. If you accept payments over the phone, over the Internet, and in person, you’ll need to set up specific instructions for your staff to follow in each scenario.

1. Avoiding Chargebacks: Over-the-Phone Transactions

While likely the least common of the three types of transactions, this one is most important to highlight as it has a very high potential for fraud. 

With over-the-phone transactions, it is critical that you collect detailed information from the customer. Full name, address, phone number, email address, and any other information that you already require is a good place to start. When it comes time for the customer to share payment information, make sure the credit card matches the information the customer provided.

Once this transaction has been completed, it is critical that you send a receipt to the customer’s email address immediately. If you are a Party Center Software customer and send a receipt to the customer through PCS, this receipt will appear in the customer’s log history. In the event that you do experience a chargeback, this information is something that you would provide to show evidence of the transaction and that the customer was involved in the transaction.

To avoid potential issues altogether, we recommend using the Party Center Software Secure Payment Link rather than taking credit card information over the phone.

A Note on Voice or Call Recording

It is worth noting that while video and audio recordings are not permitted during a chargeback dispute, it is sometimes accepted in citations that escalate to arbitration. Beyond that, audio recording can be a tool to help you as a business owner. You might discover by listening back to the audio that your staff member accepted a credit card from someone other than the person booking and attending a party. You can use this as a learning opportunity for your staff, and it will also help you to understand what to avoid in the future.

If you’re a Party Center Software and Party Center Pay customer, we recommend using the Secure Payment Link feature. With this feature enabled, you are able to email a Secure Payment Link to the customer allowing them to pay online.

This will help with any potential issues that might arise from taking a payment over the phone. Payments taken online are more secure than those taken over the phone, especially when AVS is turned on. AVS validates the address associated with the credit card, and can help you to prevent potential fraud or other issues.

2. Avoiding Chargebacks: Over-the-Internet

If you do have guests that request to book parties and events, or make other purchases over the phone, you might consider coaching them on how to make that purchase online. Having the guest make the purchase over-the-internet will provide a few more checks and balances during the checkout process, especially if you require full-address authentication when AVS is activated.

To protect yourself further, consider taking a small deposit online and charge the remaining balance in-person the day of the event using an EMV device. Some merchants ask the customer to use the same card that they used to make the online deposit to create an additional layer of potential protection against fraud.

3. Avoiding Chargebacks: In-Person

While in-person transactions are typically the safest option, there is certainly room for potential fraud and other scenarios that might be cause for a chargeback.

Stolen or borrowed credit cards are certainly one of the biggest things to look for. Protect yourself by only allowing the use of your EMV device. Have customers insert their card rather than swiping or typing in the credit card number. Consider asking for ID and even making a copy of their ID, especially if the card they’re using does not have their name on it (however we recommend avoiding the practice of taking any card that does not belong to a cardholder).

Review the party order total with your customer and get a signature on the order. Anything you can do to create a history of purchase with your customers that aligns with their identity will help strengthen your business.

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