5 ways to protect against ‘chargebacks’ due to credit card fraud

Customer and merchant alike battle credit card fraud. The consumer can try to recoup his or her money after detecting a fraudulent or errant transaction. The business owner, though, can take steps before the transaction occurs to ensure that he won’t face a chargeback from a disputed transaction.

A chargeback occurs when a customer makes a purchase at a restaurant and later he or his bank disputes the charge, usually due to alleged fraud, quality, service or processing errors. McDonald’s owner/operators in particular are experiencing a number of chargebacks due to fraudulent purchases of Arch cards.

If the restaurant employee has not taken the proper steps ahead of time, that transaction can be debited from the business’s deposit account. In the case of Arch cards, the sales are not credited to the restaurant’s sales line until the Arch card is actually redeemed.

McDonald’s has processes in place to try to protect owner/operators from excessive chargebacks. The first is a national program that provides signature waiver/chargeback protection for most transactions $50 and less, as long as the card was swiped (or tapped, in cases of RFID enabled cards) and authorized.

Those over $50 are also protected from most chargebacks as long as the transaction is electronically swiped or tapped, authorized and the signature verified to reasonably match the signature on the back of the card.

Below are some of the most common reasons for chargebacks and some tips for preventing them at the store level:

  1. Failure to obtain proper authorization

Make sure to get real-time authorization for all transactions at the time of the purchase. If the request for authorization is declined, do not attempt to reauthorize the transaction because a subsequent approval may not protect you from a chargeback. If you utilize a floor limit, you may be subject to chargebacks as these transactions may be declined after the sale is completed and the customer has left the restaurant.

  1. Fraud – cardholder claims sale was unauthorized or he did not make the transaction

Make sure all transactions are swiped or tapped in the case of RFID transactions or other contactless payment types. The sales slip must include both a cardholder signature for amounts over $50 and the last four digits of the card account number. Operators are protected for chargebacks under $50 for specific fraud reason codes when the proper procedures are followed.

  1. Non-receipt of requested information.

Retain all transaction receipts for transactions over $50 for a minimum of 13 months from the original sale date.

  1. Processing errors

Make sure that transactions are settled immediately after the transaction date. Reconcile daily and review the Cashless Summary Report to validate POS totals match your First Data totals. Do not issue a direct credit to a cardholder to resolve a duplicate processing error as the cardholder may have already been credited by their issuing bank.

  1. Arch card fraud

The recommended Arch card sale to any single customer in a single day should not exceed $250. Refer customers to McDonalds.com or the Corporate Sales Department for purchases larger than your policy allows. Just like other transactions, save receipts for purchases over $50.