How your business can avoid charge-backs, account problems
Ask a 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
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!
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Should I max out my credit card to finance my startup? – Maxing out your credit card to launch a startup can be risky; there are other ways to finance your business without incurring card deb ...
- Which business credit card should I use for office supplies? – These business credit cards can help you score more rewards if you purchase a lot of office supplies ...
- What are some low-cost options to process credit cards for my business? – Square, Clover and PayPal are three choices (among others), but each has unique features ...