How Hotel Owners Can Fight Back Against Chargebacks
By Robert Harrow, Head of Credit Cards and Payments at ValuePenguin
Chargebacks can be quite costly. When a customer reverses a charge on their card, not only are you slapped with a $25 fee but you may have also lost revenue for a particular room if no one else books it in time. If your property becomes a hotspot for fraud-related chargebacks, you may even run the risk of losing the privilege of accepting card payments.
According to Kirsten Rebello, a chargeback manager for Chase Paymentech, "many properties are finding it increasingly difficult to protect themselves against chargebacks." It's easier than ever before for consumers to dispute credit card charges. Banks are automating the process, allowing them to keep up with more claims. Many mobile banking apps enable consumers to file chargebacks by pressing a few buttons.
1) Make sure you're using a clear payment descriptor. When your guest looks over their credit card statement they should immediately recognize the purchase they made. Avoid using shorthand or code that only makes sense to you. For example, instead of coding something as "P BB", have the charge show up as "Paradise Bed & Breakfast". That'll reduce the likelihood of a customer filing a chargeback because they fail to recognize the charge, and so assume that their credit card has been stolen and used fraudulently. According to Rick Lynch, Senior Vice President of Business Development at Verifi, a the majority of chargebacks they handle originate with an unclear payment descriptor.
2) Respond to a chargeback sooner rather than later. Merchants are typically given just 39 days to respond to a chargeback. The clock starts ticking from the moment the dispute is filed. You need to send in your counterclaim through the proper channels, along with any supporting documentation that proves you were in the right. When you're notified of a chargeback, you should be given information on whom you need to contact in order to dispute it. If that information is missing, contact your credit card processor for assistance.
3) Make your payment and refund policies easily accessible to customers. If a customer argues ignorance about your refund policy or anything else for which they may have been charged, your best line of defense is to show not only that they were given all appropriate information, but that they also agreed to it. That means the online page on which your customers check out should include the requirement that guests accept all your terms and conditions, and that those be written so as to be clear and unambiguous.
4) Imprint—don't photocopy—your guest's credit card. Some hotel owners who lack an electronic reader try to prepare for unfounded chargebacks by photocopying their guests' payment information. That allows them to show proof that the card was present at the time of the transaction.
However, a photocopy isn't enough to file a dispute. Instead, you must use an imprint machine to capture the card. According to Visa, "a chargeback is invalid if a legible imprint is obtained or the card was electronically read." Imprint machines are inexpensive, typically costing between $15 and $40, and would pay for themselves if they helped prevent just one or two chargebacks.
5) Adhere to PCI and processor standards. When you sign on with a payment processor they will typically provide you with a handbook for how you should handle payments at your establishment. Don't disregard this information. Rather, study it to ensure you're capturing all the required information from your guests, since verifying that you did will be one of your bank's first steps when investigating chargebacks. In some cases, for example, you may be required to log the IP addresses of customers who book their stay online. Make sure any employee handling payments is also aware of the relevant requirements.
6) Look for card processors with fraud detection services. One of the best ways to prevent chargebacks is to combat fraudulent purchases at your property. When choosing a credit card processor, look for those who can provide special services that can turn away or prevent fraudulent transactions. Some can analyze a transaction for risk level even before it goes through. As the business owner, you then can evaluate any transactions found to be risky and take additional security precautions such as contacting the customer to obtain additional information.
Robert is the head of Credit Cards and Payments at ValuePenguin.com, a NYC-based financial research site. In his role, Robert oversees growth, consumer research and the production of reviews, guides and applications that help thousands of readers make smarter decisions. Robert is also a regular contributor to Forbes, Nasdaq and The Huffington Post.More from Robert Harrow