WHAT IS A CHARGEBACK?
Per Card Association rules, a cardholder has the right to dispute any charge made with their debit or credit card (a “chargeback”). The best way to deal with chargebacks is to defend against them before they occur. Being prepared in advance can also help reduce the risk of future chargebacks. So how does a business accept online payments and mitigate the risk of chargebacks?
TYPES OF CHARGEBACKS
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“FRAUDULENT” CHARGEBACK |
“NON FRAUDULENT” CHARGEBACK |
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The cardholder was a true victim of fraud (and rightfully) worked with their credit card issuer to get their money back, or the cardholder is trying to avoid paying claiming (wrongly) that he or she was a victim of fraud. |
The cardholder acknowledges they engaged in a transaction yet is unhappy and dissatisfied with the experience or tried to cancel in advance and is attempting |
In either case, the merchant (the business) is still responsible and must address the chargeback claim in a timely manner. There is good news – chargebacks can be prevented.
HELPFUL TIPS TO REDUCE FRAUDULENT CHARGEBACKS
KEEP TRACK OF PAYMENT METHODS
It is a good idea to exercise care if your tenant is changing their payment method to a credit card or changing their card on file during their last month of rent. Once a tenant is no longer renting with you it is difficult to recover the funds.
We recommend that you verify contact details and forwarding address information if you notice that the payment method has changed within 90 days of a tenant leaving.
VERIFY APPLICATION FEES
If you require a prospective tenant to pay an application fee when applying to rent at your property, and the prospective tenant does not lease at your property, he or she may try and dispute the application fee. It is a good idea to have a signed application that clearly displays the fees and terms.
HELPFUL TIPS TO REDUCE NON-FRAUDULENT CHARGEBACKS*
DISPLAY ALL YOUR POLICIES CLEARLY
To do this, create a main menu item labeled “Policies” or “Terms & Conditions,” send the lease to the tenant to sign and return (this can and should be done in person) and have the tenant initial any important clauses in the agreement such as a cancellation policy reminder, or policies around pets or smoking. Send your tenants an email confirmation that contains your detailed policies.
PROVIDE EXCELLENT CUSTOMER SERVICE
If refunds are available, it is a good idea to include your refund policy in all applicable tenant agreements, and you should advise tenants of the refund policy.
Address tenant concerns quickly before they escalate into a dispute. For example, can a quick maintenance fix satisfy a tenant and prevent a chargeback for the full amount later? The faster a concern is addressed, the less likely the concern is to become a large issue.
* Please note, the examples listed are designed to help a property manager think of all aspects of the transaction. These alone will not protect in all cases, but they should be used as a guide to help set a variety of preventative measures in place.