Chargebacks can be costly for your business, but some simple steps can help reduce chargeback fees. A chargeback occurs when a cardholder successfully disputes a transaction processed by your business and has it reversed on their VISA or MasterCard account.

The chargeback process

When a cardholder or card issuer has any reason for concern regarding a credit card, VISA debit or debit MasterCard transaction, a dispute can be raised to authenticate the transaction.

If the cardholder advises that they didn’t make the transaction, or didn’t receive the goods or services purchased, the cardholder sends a formal advice of dispute to their card issuer. The card issuer then notifies us of the chargeback request. If further information is required, we'll send you a letter requesting supporting documentation, such as sales vouchers and/or tax invoices to send to the cardholder for validation. If the information you provide doesn’t validate the sale and/or delivery, your business will be charged the disputed amount and the chargeback fee.

Common causes for chargebacks

  • Key entered transactions occur when card details are manually entered into the terminal instead of tapping, inserting or swiping the card. This by-passes the card’s security features and greatly increases the likelihood of fraud. If a dispute is raised by the cardholder, the merchant will be liable and will be obliged to pay the funds back to the cardholder, as well as any applicable chargeback fees.
  • Requested transaction data not received.
  • Requested/required item illegible or missing.
  • Required authorisation not obtained.
  • Transaction amount differs to purchase.
  • Duplicate processing.
  • Card not valid or expired.
  • Cancelled recurring transaction.
  • Late presentment of manual vouchers.
  • Cardholder dispute – defective/not as described.
  • Non-receipt of merchandise or services.
  • Cardholder didn’t authorise the transaction – potential fraud.

Ways to avoid the chargeback

You can help to reduce chargebacks and protect your business from fraud with the following guidelines.

  • Processing – Always allow the terminal to read card details – don’t by-pass card security by manual key entry of card details. Never hand the terminal to the customer who may trigger key entry and complete fraudulent transactions (If the merchant has key entry enabled).
  • Refunds - Process refunds back to the credit card the original purchase was made from.
  • Delivery - Always deliver goods or services as advertised or promised.
  • Confirmation - Obtain and store signed delivery confirmation that goods were collected/received by the true cardholder.
  • Unusual transactions - Be wary of unusual or large purchase requests.
  • Fraud management - Leverage fraud and transaction management tools available through payment gateways.
  • Receipts - Use the business or company name most recognised by your customers on your transaction receipts.
  • Disputes and refunds - Promptly resolve customer disputes and refunds.
  • NAB requests - Provide transaction receipts when requested, without delay.
  • Resubmitting transactions - Understand your rights to resubmit unprocessed transactions to avoid unnecessary chargebacks.
  • Online protection - Use Visa Secure or MasterCard SecureCode for eCommerce transactions for additional protection and to reduce risk.
  • Educate - Ensure you and your staff also visit our website to learn how to minimise credit card fraud.

To find out how to register for our free Electronic Chargeback Reporting service, email

This article was originally published in Talking Shop August 2014

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