How your business can avoid charge-backs, account problems


Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question Dear Your Business Credit,
I have a similar case as the auto repair shop you wrote about. American Express charged back $3,139.35. I provided all documents. Now my merchant services provider is holding the money on all credit cards that I accepted afterward on different clients. I am being told that the money is going to be on hold for 10 days. My bank account is in the red and bouncing checks. I had to ask a friend for money to cover all the bank fees. Do I have any rights? Should I contact an attorney? Please help me. – Mario

Answer Dear Mario,
You must be ready to scream, given this nightmare. Unfortunately, you will have to wait it out for the 10 days.

You don’t have legal recourse in this situation, according to Monica Eaton-Cardone, COO of Chargebacks911, which provides risk mitigation and charge-back management services. “The acquirer’s right to implement revenue holds was outlined in the merchant service agreement,” Eaton-Cardone said in an email.

Beyond the bounced checks, your real risk in the situation is that your account could be closed, according to Eaton-Cardone. The bank that processes and settles your firm’s daily credit card transactions and settles them with the card issuer is known as an acquirer. Acquirers, as businesses, want to limit their risk and liability, says Eaton-Cardone.

“You are currently perceived as a risk,” she says. “In order to reduce potential liability, the bank is retaining your revenue to cover expenses associated with any charge-backs you might receive in the future. If the bank thinks your risk is unmanageable, your account may be closed.”

So what do you to do to prevent that? Once you have regained payment processing capabilities, either through your current provider or another one, make it your top priority to prevent charge-backs in the future.

First, take a close look at your operations to make sure there isn’t something happening in the sales process that is leading to charge-backs. “Look for friction in the checkout or order fulfillment process that could be causing customer dissatisfaction,” says Eaton-Cardone.

Adding a no-strings-attached return and cancellation policy could reduce customers’ desire to ask their credit card issuer to intervene if they are not happy with a purchase. Maintaining good communication with customers about matters such as shipping delays can also prevent them from calling the card issuer to ask for a charge to be stopped.

Outside of buffing up your customer service, familiarize yourself with situations that commonly lead to charge-backs by reading the guidelines you have received from your merchant services firms and card issuers.

For instance, you may experience “duplicate transaction” charge-backs if you enter the same transaction into a terminal more than once, deposit both the merchant copy and bank copy of the sales receipt with your acquirer or deposit the same transaction with more than one merchant bank, according to Visa, which has published guidelines on how to avoid charge-backs.

To avoid problems, Visa encourages merchants to be very careful when logging in transactions and to void incorrect sales receipts so they don’t get entered in more than once.

Guidelines like these aren’t page-turners, but studying them beats dealing with a situation like the one you’re in now. Good luck! 

See related: Disputing an auto repair charge-back is possible, but time consuming, 8 tips for merchants to avoid credit card charge-backs

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Published: September 19, 2016

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Updated: 10-23-2016

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