If you want to refute your customer's chargeback attempts, you'll need adequate documentation. Unfortunately, in some cases, you may not find out that your customer sought a chargeback until after the fact. Your bank is supposed to direct the dispute to you before a chargeback is initiated, but some banks don't follow the rules. If you find this happening, ask the bank to send the dispute to you first.
The documentation you need to rebut the claim will depend upon the reason your customer gives for the chargeback. If the reason is that the customer never purchased your goods, the best documentation you can have is the signed sales receipt. If the reason is that the goods were never delivered or were damaged, you need the receipt showing the method of shipment so you can trace it (and potentially collect from the shipping carrier).
You should keep all your records of sales. If you use the electronic terminal or the credit card software, the records will be kept for you automatically. If you don't, the best way to keep track is to develop a consistent approach to what you do with your records after the sale.
When You're Close to Your Chargeback Limit
It's a good idea to know what your chargeback rate is, as well as the chargeback rate limit set by the credit card company (it's usually about 1 percent of credit sales). If you're getting close to that limit on one of the credit cards you normally accept, you may want to consider asking some customers to pay their bill with one of the credit cards that isn't in danger.
The surest way to lose your merchant account forever is to get caught doing something that violates credit card company policy. Here's a look at two areas in particular that you should avoid at all costs.
When you're filling out your merchant account application, don't fudge on the numbers in order to improve your chances of getting the account. Don't misrepresent the nature of your business or the extent of your business experience. In short, don't intentionally misrepresent anything on the application. If you're caught, you may never get another chance to open an account.
But suppose you fill out your application honestly but business conditions change,rendering the information inaccurate. Do you have a duty to inform the bank? That depends upon what changed.
If you represented that you wouldn't be taking any credit card sales over the phone, but now you want to, you probably should tell the bank. On the other hand, if your annual sales drop slightly, you probably don't need to tell the bank. The dividing line for determining whether to tell the bank is whether you believe the information alters the credit risk the bank is taking. If you think it might, you should tell the bank. If you're in doubt, tell the bank.
A good policy for notifying the bank of business changes is to tell it before you want to make the change. Get the bank to agree to the change and document the agreement in writing (simply obtaining a letter from your banker).
In this context, factoring is the process of running the charges of another business through your merchant account in order to generate profits.
Don't do it. Period. It's wrong, and, in some cases, it's illegal. If you're not swayed by the moral or legal argument, don't do it because it's easy to get caught. All it takes is one customer initiating a chargeback, and you can lose your merchant account forever.