Fraud Protection: Tips to Prevent and Avoid Chargebacks

As a merchant you know that chargebacks can happen for several reasons. Some of these include fraud, authorization issues, or customer disputes. Chargebacks aren’t always due to an error of the merchant, but the more information you have about the payment processing procedure the better equipped you will be to prevent this from occurring. Besides suffering a financial loss from chargebacks, getting too many chargebacks increases the possibility of losing your merchant account! offers the following steps to consider:

For Card-Present (Mobile or Retail) Merchants:

1. While processing the transaction be sure to continue to hold onto the card. During this time look the card over and check out the expiration date. Also compare signatures from the back of the card with the receipt the customer signs.

2.Remember not to process the payment transaction if the request for authorization has been declined.

3. Don’t process an expired card.

For Card-Not-Present (eCommerce or MoTo) Merchants:

4. After the completed sale, on the confirmation page, make sure the customer has your company name and phone number that will appear on their credit card statement, so they can easily recognize their purchase. Unrecognized transactions are the #1 reason for a chargeback from the customer.

5. If a person uses a stolen credit card the chances of them using the correct billing address of the card holder is low. By using AVS (Address Verification System settings) to verify the billing address you may be able to prevent a fraudulent sale.

6. Always be sure to examine all foreign purchases. A stolen card will always result in a chargeback by the original card holder.

7. Require the 3 digit CVV number on the back of the card for every transaction (and setup your payment gateway to require the CVV code to match). Having a CVV match on transactions is important if you need to fight a dispute. Here is a screenshot of the CVV settings available within’s gateway:DMS 2011.12.14 22.16.16 030 resized 600
8. Make sure you have a warning message on the order page about IP addresses being logged. This can cut down on fraudulent orders.

9. Review transactions with different “Ship To” and “Bill To” addresses (if you decide to accept a transaction with different billing & shipping addresses, you cannot dispute a chargeback, even if the billing AVS matches).

10. Be mindful of any order that appears suspicious or “too good to be true,” or where a 1st time customer seems to be in an extreme rush. Do your due diligence by attempting to contact the customer by email or phone to investigate.

11. And it’s always good practice to plainly post all refund and return policies. This can prevent misunderstandings and disputes which in turn may keep the level of chargebacks at a lower level.

12. Utilizing Verified by Visa and MasterCard SecureCode is another great security feature available to merchants which can dramatically reduce your chargeback liability (see our Fraud Protection page).

Merchants can help to protect themselves, by using as many of the steps provided above, to prevent the occurrence of a chargeback.


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