Chargebacks and Selling Over the Phone or Online – What you Need to Know!

What is a Chargeback?

Business owners work hard to build and grow their business.  At the same time, there are those looking to steal from them, not necessarily by physically taking merchandise but, by disputing a charge on their credit card. It is important to note that sales made over the phone or via a website are deemed risker than a sale made in person per the Card Brands. As a result, card not present transactions tend to have a higher chargeback ratio.

So, what is a Chargeback? A chargeback is the result of a cardholder disputing a charge on their credit card and having the original funds returned to them by the bank that issued the card. To be clear, the bank that issued the credit card to the customer is the bank that originally paid the business owner when the sale was made. When a dispute is made, the same bank is the sole arbitrator in the process to determine who is right and the bank that withdraws the funds from the business.

The fact of the matter is that any customer can file a dispute and banks are more inclined to take their customer’s side. The key for business owners is to ensure they have the right processes and protections in place to not only avoid a dispute and the resulting chargeback but also to win them when they occur.

Why are Disputes/Chargeback’s Filed?

The following are some of the common reason cardholders dispute a charge on their credit card and start the chargeback process.

  • Stolen Cards – a credit card is stolen and is used to buy a product or service. Since the true cardholder did not authorize the sale they initiate a chargeback
  • Merchant Error – a credit for a return is not issued, the cancellation of a service or product is not made, failing to deliver a product or service or any technical issue related to a payment.
  • Unauthorized Usage – a credit card is used by an unauthorized individual such as a family member or friend.
  • Fraud – an individual takes advantage of the chargeback process even though they have authorized the sale and even received the goods or services.

Protecting Against Chargebacks

When a business takes payment for goods or services over the phone or online, the business assumes 100% liability for that transaction. As noted earlier, the card issuing bank will decide if the transaction is legitimate. Therefore, it is vital that as much accurate information is collected for a business owner to plead their case. Business owners do not get the opportunity to speak with anyone once a dispute is initiated.

To protect against losses due to chargebacks there are certain steps that can be followed prior to and after the sale is made.

  • Address Verification – Confirm the billing address provided matches the billing address on file with the bank. A response code is provided letting the you know if there is an address match.
  • Proof of Delivery – Signature proving delivery to the customers shipping address
  • Communication – Emails or text message confirmations from the information provided on the order
  • Documentation – Purchase agreements or documents outlining the terms of the sale and signed or accepted by the customer
  • Purchase History – Confirmation of previous legitimate purchases made with the same billing address and identity provided that were not disputed or charged back
  • Email Match – Confirm the email provided matches the same name provided in the billing and shipping details
  • Customer Contact – Speak with the customer to learn why they are disputing the charge and what make good can be offered for them to drop the dispute


Losing a chargeback is a hard pill to swallow as not only does a business lose income, but they are also assessed a chargeback fee from the processor to help cover the dispute process. It is imperative for businesses that take transactions over the phone or via a website to understand their rights as it relates to chargebacks. Visa, MasterCard, Discover and American Express provide guidelines helping to educate business owners.

The following links will provide the guidelines set by each of the brands.





American Express

About Clarity EPS

Clarity EPS is a leading provider of payment processing and technology solutions, helping business owners navigate the world of credit card processing. We understand not every business is the same and create custom programs using added value solutions and cutting edge technology. Our focus is on helping businesses process payments in a more efficient, secure and affordable manner. We eliminate the guesswork and provide clear, concise and understandable solutions. Our core values are rooted in honesty, fairness and transparency.

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