When you set up shop and allow for payments via debit and credit cards, there are numerous advantages- including spontaneous shoppers, and people who will buy more when they can put it on a credit card, but there are also a few disadvantages as well. One issue many retailers discover when they first start accepting credit cards is not only will they be responsible for paying the various fees associated with accepting credit or debit cards as payment, but accepting credit cards means you also have to deal with the occasional credit card dispute.

One common dispute will result in what's called a charge back. Credit card charge backs happen when a customer disputes a charge made on their credit card, and your bank transfers the liability to you and requires that you pay the money back. There are two main reasons why a charge back occurs-

Fraud

Poor Customer Service

If a cardholder decides to dispute a transaction they find on their credit card statement because they say the card has been stolen or someone used the card without their permission, then the retailer is responsible to recover that money. The cardholder's credit card will be refunded and the retailer is out the money from that sale.

If your company is not providing quality customer service, a customer may not receive their ordered items or they might receive defective items- in which case they're going to dispute the purchase and you will be required to pay that money back when the bank submits the charge back to your business bank account.

There are many levels of protection provided to retailers who accept credit cards as payment. Technology provides us with a secure online environment that encrypts the credit card details and personal information of the cardholder as it's transmitted over the internet. Technology also provides various card verification methods that ensure that the person submitting the order has the card in hand- and hopefully, they're the owner of the credit card account.

Unfortunately though, there is no fool proof protection to avoid all types of credit card fraud, and a customer can submit a charge back up to six months after the date of purchase.

To minimize the number of charge backs you get hit with, be sure your online shopping cart or website takes the necessary steps to verify the identity of the person placing the order. There are many different ways to try and avoid fraudulent activity online, including address verification, security code checking and for internet transactions- you can use Verified by Visa and MasterCard's SecureCode.

Another step you can take to minimize the number of charge backs you receive is to ensure that you are providing high levels of customer service. Make sure each customer is getting the items they order, and use processes that ensure that only quality items are being shipped. Take time to make sure items are shipped in proper packaging as well, to minimize damages that could occur during transit of orders.

For in person transactions, you can help minimize the charge backs by requiring that customers sign their receipt and having your cashiers actually take the time to compare the signature with the signature on the back of the card. You may be surprised at the number of retailers that skip this step! If the signatures match, the customer will not be able to submit a dispute that results in a charge back at a later date, so it's well worth the extra thirty seconds or so to compare the signatures. If the cashier doesn't believe the signature's match, he or she can require that the customer use another form of payment.