Chargebacks are a common business headache. They happen when a customer decides to dispute the amount you charged to their credit card. You then have to defend the charge and if you lose will be out the money and a chargeback fee. Because of this, the best course of action is to avoid chargebacks as much as possible. Here are some tips:
1. Make sure that the payment descriptor on your merchant account is accurate and intuitive. For example, if it shows “Joe’s Burger Shack” that is less likely to attract a chargeback than “Store 47685.” The customer may not recognize the charge. It should also contain a working phone number.
2. Always ask for ID. Almost nobody does any more, and this makes it much easier for people to use stolen cards. Asking for ID and making it clear you will do so may save you from chargebacks that are a result of genuine fraud. Obviously, follow proper procedures when entering cards. Avoid manually entering cards.
3. Deal with complaints in a prompt and fair manner. You need to make sure that if a billing error happens it is properly corrected before the diner leaves the restaurant. It is much cheaper to provide a new meal or remove an item immediately than to end up paying a chargeback fee if they decide the best course of action is to dispute the charges. This is less of a risk for restaurants than online sellers, but it does happen.
4. Use digital receipts. This may not prevent a chargeback from occurring but will make fighting one a lot easier if it does happen.
5. Provide your contact info on physical and digital receipts so that if a customer has a problem that develops after leaving, they can contact you and talk to you about it rather than just disputing the charge. Have a clear policy on how you deal with complaints that appears favorable. It is always cheaper to issue a refund yourself, as this avoids the chargeback fee.
6. Track consistent problems and do something about them. If you are getting a lot of complaints about a specific thing, fix it. Overcooked food, wobbling tables, poor service, whatever.
7. Make sure your menu and specials are clear. Make sure that when wait staff describe the specials they do so accurately, and consider providing cards to make sure all details are given.
8. Use an EMV reader not magnetic stripe for all transactions, unless somebody only has a magstripe card (which is now rare).
9. Ensure you get a customer signature when receiving a tip. While signatures are not always necessary these days, they do provide a little insurance.
10. If you’re customers enter tips onto a paper receipt ensure you staff diligently enters these numbers into the POS. Not infrequently a customer will write illegibly or add the tip-in wrong. While it can be tempting to “select” the interpretation most favorable to your staff, this can open you up to a higher likelihood of receiving a chargeback.
Restaurants have one of the lowest rates of chargebacks, but they are still a concern. Follow these tips to reduce your risk and also help keep your customers happy.